Brazil accepts Bolivian energy nationalization

by Helen Popper
LA PAZ, Bolivia
Brazilian energy chiefs agreed on Wednesday to start thrashing out new contracts with Bolivian officials in their first meeting since President Evo Morales nationalized Bolivia's energy industry.

Brazil's state oil company Petrobras -- the biggest investor in Bolivian oil and gas -- has talked tough over the government's sweeping nationalization which hands control of gas fields to state oil company YPFB and raises taxes.

But following a five-hour meeting in a La Paz hotel, Brazilian energy officials and Petrobras chiefs formally accepted Bolivia's May 1 nationalization decree and pledged to hold further negotiations.

"The Brazilian energy minister and the Petrobras president reiterate their absolute respect for the sovereign decisions of the Bolivian government and Bolivian people" manifested in the nationalization decree, a joint statement said.

Both sides said they would work to renegotiate Petrobras operating contracts. Under the May 1 decree, foreign companies that do not sign new contracts with the government within 180 days must leave Bolivia, which has South America's biggest natural gas reserves after Venezuela.

Compensation for two Petrobras oil refineries, which the government has seized control of, will also be discussed as will Bolivia's proposal to raise gas prices. Before the talks, YPFB President Jorge Alvarado said compensation would be paid, perhaps in natural gas instead of cash.

Petrobras, which has invested about $1.5 billion in Bolivia in the last decade, scrapped investment plans and threatened to seek international arbitration over the nationalization, though Brazilian President Luiz Inacio Lula da Silva has been more conciliatory.

Energy Minister Andres Soliz, soon before meeting his Brazilian counterpart, Silas Rondeau, and Petrobras President Jose Sergio Gabrielli, said the negotiation process would be government-to-government "so it doesn't have a strictly business character."

However, there have also been expressions of discontent within Lula's administration.

Rondeau initially described the decision as "unfriendly," while Foreign Minister Celso Amorim said Brazil was uncomfortable with the involvement of Venezuelan President Hugo Chavez, Washington's leading leftist antagonist in the region.

Responding to the comments, Bolivia's Vice-President Alvaro Garcia said on Wednesday Chavez had no involvement in the government's decision.

"The decision to nationalize the oil and gas reserves is a Bolivian government program," he was quoted as saying by state news agency ABI.

(Additional reporting by Carlos Quiroga)