LONDON: Bolivia’s startling seizure of its gas fields has intensified fears of “resource nationalism” tightening global energy supplies and inflating prices for years to come.

Producers have struggled to keep pace with explosive energy demand growth in Asia and the US that has fuelled oil’s four-year rally.

“The oil is in the ground waiting to be exploited,” said Wittner. “But how do we get access to what is left? At the end of the day the drill bit has to hit the ground.” For the multinationals, that may be easier said than done. Russia had been a prime investment play for Western oil companies until Moscow recently raised taxes and seized more state control. Disruption to Europe’s gas supplies due to a dispute between Russia’s state gas monopoly Gazprom and Ukraine over pricing deepened concern about producer power.

“Russia offers clear evidence of how resource nationalism can have a material impact on supply growth,” said Kevin Norrish of Barclays Capital. “Oil production growth has declined and a key factor is that private oil companies are having to operate in a very uncertain environment that raises the cost of doing business.”

That is also clearly the case in Latin America, where leftist governments are in the grip of “creeping nationalisation” and Hugo Chavez of Venezuela, the world’s fifth-largest oil exporter, is role model for many. Bolivian President Evo Morales, in nationalising South America’s second-biggest gas reserves after Venezuela, echoed the actions of his ally Chavez who forced foreign investors into new, tighter contracts and imposed retroactive tax increases.

Ecuador’s lawmakers approved a government-sponsored bill that will force oil firms to hand over at least 50% of profits resulting from oil revenues above benchmark prices.

And in Peru, analysts expect a shake-up in energy policy regardless of who wins the run-off for the presidency.

Critics say the nationalist strategy will backfire on producers, which are in desperate need of the technology and capital on offer from the multinationals. Many in Latin America learnt their lesson the hard way after the nationalisations in the 1950s and 1970s. “That’s why they are following the route of quasi- or creeping nationalisation,” said Agalliu. “They are making sure they still keep the oil companies around at significantly worse terms than the ones mutually agreed when the contracts were signed.”
Others say the threat of nationalism may be overstated.

http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=84674&version=1

[Edited on May 5, 2006 at 9:15 AM. Reason : link]

5/5/2006 9:14:43 AM

An economist pointed out for Bolivia's particular case, the seizures will probably hurt Bolivia more than it helps them. Bolivia does not have the capital, technology, nor expertise to exploit its natural gas reserves, something President Morales himself has admitted prior to the seizures. In addition, natural gas, unlike oil, is much more difficult to transport, especially out of a landlocked, mountainous region, and as a result, is only really accessible to it's neighboring countries. Nations like Brazil, who's companies have just had their assets seized. With the seizures of these assets, nine out of ten says that most of the foreign investors in Bolivia will probably just pull out and go to more easily accessible sources of natural gas, leaving Bolivia without any means of developing its own reserves. Maybe in the long run, they'll have to come back to Bolivia, but that will probably be long after Morales and his supporters are booted from office.

That's why Bolivia can't be directly compared to Venezuela in terms of leverage that their resources provide them with. Oil is much easier to ship, and Venezuela has the development in place to extract and ship it. Also, the value of Venezuela's oil reserves are much higher than Bolivia's natural gas reserves, large enough that international companies will put up with the nationalistic urges of President Chavez.

There were probably better ways for Bolivia to get their money out of the multinationals short of seizers such as higher fees and taxes as well as limits on foreign ownership. Sadly though, they've instead just blacklisted themselves in regards to foreign investments. That's why there will be no winners in Bolivia, and the ones who will suffer most are the very individuals that Morales is trying to help.

5/5/2006 10:20:11 AM

i like how people act like this is some international crisis. its just a growing trend.

did you know brazil is on the verge of a major fuel breakthrough? they'll be making out like bandits once ethanol hits big.

5/5/2006 8:19:08 PM

Well, we suspect it is an international crisis because this is not the first time this has happened, it all happened in the 1960s & 1970s and the result was in fact an international crisis. The all-time record for inflation adjusted oil was set in 1981, back when people were poorer and less able to pay.

Now, whether this time will be or not is debateable. But the causes of the price escallation was not entirely due to opec attempts at price fixing because after nearly all nations that attempted nationalization suffered a drop in oil production, even in non-OPEC members. Drops that persisted until the corporations, with their know-how and capital, were brought back in.

5/5/2006 10:01:20 PM

you would think with the use of magnets, we could totally eliminate our dependence on oil

5/6/2006 3:02:03 AM

we can, but we would cry the long cry of darkness and ignorance.

5/6/2006 10:09:12 AM