Bolivia Seizes Pan American Energy’s Stake in Gas Field

By Alex Emery and Matthew Craze

Jan. 24 (Bloomberg) -- Bolivia seized Pan American Energy LLC’s stake in the $1.6 billion Caipipendi natural-gas project, saying the Argentine company failed to meet investment targets.

State oil company Yacimientos Petroliferos Fiscales Bolivianos, known as YPFB, will take over Pan American’s 25 percent stake in the field, Energy Minister Juan Jose Sosa said today. YPFB will evaluate Buenos Aires-based Pan American’s investment to date in a bid to conciliate, Sosa said.

“Pan American hasn’t contributed its percentage, so we’re carrying out an obligatory transfer of the contract to a YPFB subsidiary,” Sosa said in a broadcast by La Paz-based Radio Panamericana.

Oil and gas output has fallen in the Andean nation since President Evo Morales raised taxes and started seizing refineries and fields in 2006 to increase state control over Bolivia’s natural resources. Private investment in the industry plunged 69 percent to $271 million in 2009, the latest data available, from $865 million a decade earlier, according to YPFB.

“Bolivia has been very clear about a state-controlled model,” Moody’s analyst Gabriel Torres said in a telephone interview from New York. “But they need to move to the next level and not make it harder for investors.”

Moody’s rates Bolivia B1, four levels below investment grade.

Argentina Contract

Repsol YPF SA and BG Group Plc control the Caipipendi field, which is slated to begin production this year. Bolivia is counting on the field to help boost the country’s natural-gas output by 40 percent to 66 million cubic meters a day by 2014 to meet its supply contracts with Brazil and Argentina.

Bolivia agreed in 2010 to almost quadruple gas supply to Argentina to 27.7 million cubic meters per day by 2026. Bolivia currently exports 30 million cubic meters of gas a day to Brazil and 7.7 million cubic meters to Argentina, according to YPF.

Pan American won’t comment until it’s officially notified of the government’s decision, a company official who declined to be named citing company policy, said by telephone. Repsol spokesman Kristian Rix declined to comment in an e-mailed response to questions. BG didn’t immediately return telephone calls seeking comment.

Natural gas for February delivery rose 2.9 cents to $2.554 per million British thermal units on the New York Mercantile Exchange. Gas, which is down 44 percent from a year ago, fell to $2.231 on Jan. 23, the lowest price since February 2002.