Bolivia issues ultimatum for oil companies to renegotiate contracts

Sep 20, 2006, 3:20 GMT

La Paz - The Bolivian government on Tuesday issued an ultimatum to oil companies, setting an October 31 deadline for them to sign new contracts following the nationalization of the country's energy resources.

'If by October 31 they have not agreed to the relevant contracts that benefit the company and benefit the country, we shall have to proceed according to the nationalization decree. Those companies will no longer be able to operate in the country,' Bolivia's Vice President Alvaro Garcia Linera said.

Garcia Linera said 'some oil companies' were trying to prolong negotiations in order to get an extension of the 180-day period established by the May 1 nationalization decree for them to establish new contracts.

'The dates are not going to change,' Garcia Linera said, before warning oil companies to negotiate, because time 'is running out.'

The country's authorities will be 'flexible, tolerant' and willing to make certain modifications when dealing with the companies, he said.

'Oil companies have to understand that there was a nationalization on May 1, that this is irreversible. We are willing to engage in dialogue, to hear reasons, but we will not change the dates nor the fundamentals and the philosophy of the total, absolute recovery of the energy chain,' Garcia Linera said.

Bolivia's energy minister Andres Soliz Rada, who was responsible for the controversial nationalization, resigned Friday along with a series of other officials in the department.

On Monday, the new Energy Minister Carlos Villegas said that the nationalization decree would remains in place.

The state company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) is scheduled to 'take charge of the operation of the fields held by companies which refuse to abide by or prevent the fulfilment' of the nationalization decree.

Bolivia is currently negotiating with the Brazilian company Petrobras, the Spanish-owned Repsol-YPF and the French-owned Total, among others. The state-owned Petrobras in particular has been reticent to accept changes in current conditions, leading to clashes between La Paz and the government of Luiz Inacio Lula da Silva.

Bolivia's authorities hope to claim a larger proportion of earnings derived from its energy resources.

Evo Morales has said he intends to use the increased funds to fight poverty. About 65 per cent of the country's citizens live below the poverty line.