Gas showdown: so much hot air?

[WhiteTara]

http://observer.guardian.co.uk/business/story/0,,1769221,00.html

Gas showdown: so much hot air?

The Bolivian president's need for western expertise may force him to temper his renationalisation moves, writes Conal Walsh

Sunday May 7, 2006
The Observer


British gas group BG is gearing up this weekend for an unlikely and unwanted legal showdown with Evo Morales, president of Bolivia and one of Latin America's most popular and charismatic leaders.

The UK gas giant is one of several western energy firms whose assets in Bolivia could be confiscated following Morales's shock announcement last week that he is to renationalise the country's prized energy industry. An edgy period of brinkmanship looms, with western companies forced to consider action against Bolivia in the international arbitration courts while simultaneously hoping that Morales's plans are less threatening than they sound.

Some experts, such as Frank McGann, an energy analyst at Merrill Lynch, insist that the announcement actually 'means little'. He argues that Bolivia depends upon the technical know-how of western companies to extract its oil and gas, and that Morales will have to let them stay and make a reasonable profit: 'If not, a lack of investments could lead to lower levels of production and lower revenues for the Bolivian government.' Others are not quite so optimistic.

BG has spent around £100m on its Bolivian operations, but as well as finding this under threat, the company risks getting caught up in a diplomatic storm. Morales's move has drawn official expressions of dismay from Spain, whose leading energy firm, Repsol, has sunk more than $1bn into Bolivian gas production, and from Brazil, which depends on a steady supply from Bolivia for half of its annual gas consumption. American Secretary of State Condoleezza Rice accuses Morales of 'demagoguery'.

the oil conglomerates are betting that Bolivia can't do it without them. Should be interesting to see the next act in the play.