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Bolivia takes back its gas

Bolivian army military police stand guard May 1, 2006 in front of the Transredes oil and gas transport company's offices in Santa Cruz de la Sierra, Bolivia.


TEXT OF STORY

KAI RYSSDAL: Oil hit $73.70 a barrel in New York today. Gas up almost a dime . . . near three bucks a gallon for the national average. Natural gas was up 11-and-a-half cents today. And that's sort of surprising. Because it should have been more. The South American country of Bolivia sits on trillions of cubic feet of natural gas. American energy companies have billions of dollars invested there. But today president Evo Morales nationalized Bolivian natural gas fields and sent the army in to take over.

Marketplace's Scott Tong reports.


SCOTT TONG: President Evo Morales announced Bolivia was taking control of $80 billion of natural gas reserves. Foreign owned companies must turn over their gas fields to the government. And they have to renegotiate their contracts with Bolivia - for instance the selling price and the profit sharing.

Energy Consultant David Goldwyn says Bolivia has just changed the rules.

DAVID GOLDWYN: Imagine you take a 30-year mortage out on your house. And the bank calls you and says, "Oh, by the way, we've changed our minds. It's adjustable and interest rates are going up." That's the economic shock the companies who are producing are about to feel.

Analyst Jonathan Price of Infoamericas says the move won't affect gas prices on the world market since Bolivia sells mostly to its neighbors. But the long-term hope is for a pipeline to the Pacific.

JONATHAN PRICE: They could competitively place that product in places like northwest Mexico, which depends on imported gas as well as California.

Problem is, messy regional politics have made for a bad political climate for foreign investment. That just got worse.

PRICE: In today's climate I don't see it happening.

He says 23 energy companies now work in Bolivia. He expects the list to shrink to 10.

Wall Street analyst Bernard Picchi says the move raises another longterm question about energy supply.

BERNARD PICCHI: Bolivia is joining a long list of countries that are sort of going, or have gone that way. Venezuela has done everything but nationalize its oil industry. Russia has at least partially withdrawn its welcome mat.

He says Bolivia could have been in the catbird seat. More and more countries are burning natural gas as a cleaner alternative to oil.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.

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