Bolivian Energy Plans Scare Investors

The British oil and gas company BG Group today said it would leave Bolivia if the risks are too great after the country's decision to nationalise its energy assets.

"If the conditions are not suitable, ie the risk is too great or the returns are inadequate, then we will not invest, and we will be making these points very clear to the Bolivian government," said BG's chief executive Frank Chapman.

On Monday, the Bolivian president Evo Morales ordered troops to occupy the country's natural gas fields, giving foreign energy companies 180 days to agree to new contracts. The move has sparked concern in the region and among foreign investors.

Mr Morales, Bolivia's first indigenous leader, defended his decision by saying that the country was seeking "partners, not owners" to extract its natural resources.

The Bolivian president, who came to power in Latin America's poorest country at the beginning of the year, said he would attend a summit tomorrow with the presidents of Argentina, Brazil and Venezuela to discuss his decision.

"We're not expelling any company, but they will not earn much - not like before," Mr Morales said late yesterday in an interview with Venezuela's Telesur TV network. "We hope they'll remain partners and if they don't respect these laws, we'll make them respect them with political force."

The Venezuelan president Hugo Chavez, a close ally of Mr Morales, said Bolivia's decision would help meet the needs of its poor.

Tomorrow's summit in Puerto Iguazu, Argentina will help "avoid all the alarmist news being put out by the world's media ... they are not going to sow discord among us, because that's what they want - to alarm the companies, alarm the people," Mr Chavez said.

At BG, which reported bumper first quarter profits of £578m, Mr Chapman said it was too early to say what would happen, as the exact terms of the new regime for foreign oil and gas companies were still unclear.

"We need to use the time that we've been given to understand more fully what the implications are for investment in the country," Mr Chapman said. Spain said it was sending a delegation to Bolivia for discussions as the Spanish-Argentine energy company Repsol, along with Brazil's Petrobras, is Bolivia's biggest foreign investor, having invested more than €1bn since 1997. By contrast less than 4% of BG's proved reserves are in Bolivia. Bolivia has the second largest gas reserves in Latin America after Venezuela. Mr Morales has decided that foreign companies should be reduced to simply operating the fields, with all oil and gas production turned over to the state energy company Yacimientos Petroliferos Fiscales Bolivianos.

His decision comes at a time of soaring energy prices. Bolivian officials say that if the foreign companies now in Bolivia want to leave, there are others from Russia and China ready to replace them.