The Shell oil company is under great pressure from the Bolivian government to reduce its presence in the country, or even to withdraw completely. President Evo Morales issued an ultimatum at the end of March, giving the company till 30 April to agree to sell off its activities to the Bolivian state.
The date is not a coincidence, as 1 May marks the second anniversary of the nationalisation of oil and gas concerns by the president soon after he came to office. Morales arranged for the oil platforms to be occupied by the military, which hung up banners with the text ‘Property of Bolivia'.
The international oil companies now have to inform the government exactly how much gas and oil they are pumping, and must pay more for it from now on. Bolivia has one of the biggest gas reserves in Latin America, but has hardly profited from it in the past.
A second measure taken by the president concerns the extraction, transport and distribution of gas and oil. Since 1 May 2006, the Bolivian state has striven for a majority share in all activities within the oil sector. Negotiations were started with three former subsidiaries of the state oil company YPFB that were privatised in the 1990s.
President Morales, a socialist, wants to buy back these companies, but has made little progress in the past two years. He claims that the oil companies are delaying talks. Morales hasn't said what will happen if no agreement is reached by 30 April.
One of the three companies that must hand over its activities by 1 May is Transredes, which is responsible for practically all gas and oil transportation in Bolivia. Shell holds 25 percent of the shares in Transredes. The Bolivian state oil company YPFB holds 34 percent, and wants to acquire Shell's share. Shell has known this for some time.
President Morales had direct talks with Shell management during a visit to the Netherlands in November 2006. According to Bolivian Energy Minister Carlos Villegas, Shell said at the time it was willing to sell off its shares.
Shell spokesman Wim van de Wiel confirms that negotiations are taking place, but denies any knowledge of the ultimatum. The outcome is crucial for Shell in Bolivia because Transredes is Shell's only activity in the country. Shell bought the shares in the 1990s when the Bolivian oil and gas sector was privatised. Their current value is estimated at around two billion euros.
Losing the shares would not be a commercial disaster, but certainly a strategic setback. Shell wants to remain in Bolivia and has its eye on eventual future investment in the gas sector.
Republished from RNW