Argentina fears foreign energy firms may abandon Bolivia

May 20, 2005 02:00 AM

Argentina's government fears that foreign energy companies could stop their operations in Bolivia after a new hydrocarbons bill raising levies on oil and gas production became law in the Andean country.
The government of President Nestor Kirchner also is concerned that the new law will prompt companies to abandon plans to build an additional pipeline linking Bolivia to Argentina, but already has started to work on a plan "B" to secure Argentina's future gas supplies by exploring new fields in southern Patagonia and off Argentina's coast, according to an unnamed "high-ranking" source in Argentina's Energy Secretariat, Agencia Estado said.

Officials at Argentina's Energy Secretariat said it will make an announcement on incentives for oil and gas exploration soon. Bolivia's Senate President Hormando Vaca Diez signed the hydrocarbons bill into law as mandated by the constitution, after President Carlos Mesa refused to sign it and let a deadline pass to veto it.
Bolivia's congress earlier hadgiven final approval to the legislation that raises levies on oil and gas production at the wellhead to 50 % -- with 18 % as direct royalty and 32 % as a non-deductible tax -- from around 38 % now. The law also contains a provision making Bolivia's state-energy firm YPFB an intermediary between producers and buyers of oil and gas, and makes the Bolivian state the sole owner of oil and gas production, in effect scaling foreign energy companies down to mere operators.

In October, Kirchner and Mesa signed a letter of intent to build a new cross-border gas pipeline by 2007 that would increase transport capacity by an additional 20 mm cmpd. In an agreement extended through the end of 2005, Bolivia agreed to export up to 6.5 mm cm of gas to Argentina, which could face new gas shortages in the upcoming winter in the Southern Hemisphere.
The project for the additional pipeline has already faced delays, partly because private companies had been reluctant to begin construction until the Bolivian legislature passes the new hydrocarbons law.

Source: Dow Jones
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