12 May 2007 - 11:38
  • News Code: 104362

RIO DE JANEIRO-- After 5 days of tense negotiations between Brazil"s state-owned Petroleo Brasileiro SA (Petrobras) and the Bolivian government, Bolivia"s President Evo Morales announced that his country reached a deal to purchase the country"s two refineries from Petrobras.

Bolivia will pay $112 million to buy back the two refineries, which together provide 90% of Bolivia"s domestic products needs.


On May 6 Bolivia issued a decree that forbade Petrobras and other foreign companies from exporting certain oil products. Petrobras reacted strongly giving Bolivia 48 hr to buy all of the refineries (OGJ Online, May 8, 2007).


Brazil"s Mines and Energy Minister said Petrobras might accept payment in two installments or in natural gas.


Brazil currently buys about 25 million cu m/day of gas from the Andean country, representing about half of Brazil"s gas consumption, and more than two thirds of Bolivia"s gas output. Petrobras also has heavy exploration and production investments in Bolivia"s oil and gas sectors.


Bolivia had initially offered only $60 million for the refineries, while Petrobras had started as high as $200 million as compensation for the original price as well as investments since then to modernize the plants. Bolivian government sources have threatened to confiscate the refineries, which Petrobras bought in 1999 for $102 million and in which it has since invested another $100 million.


When Petrobras gave its purchase ultimatum, it said if an agreement was not reached, Petrobras would seek international arbitration.


"An agreement is always better than [going] to court," said Brazilian energy specialist Marco Tavares of the consulting company Gas Energy. "And what is the guarantee that Bolivia would abide by a judicial decision? Bolivia has a track record since the 2006 nationalization of the oil and gas sectors of breaching contracts," Tavares added.


Marco Aurelio Garcia, a top aide to Brazilian President Luiz Inácio Lula da Silva, told BBC there will be a period of transition in handing over the refineries to Bolivia"s state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB). During the transition period Petrobras will work with YPFB personnel, especially in implementing safety criteria.


"Brazil depends on gas from Bolivia, but Bolivia is completely dependent on the Brazilian market since Petrobras is Bolivia"s largest company," concluded Garcia.



News Code 104362

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