Bolivia expects $ 1.41 bn of investment in oil sector in 2010

The government of Bolivia has announced that it expects to see a combined total of $ 1.41 bn invested, by state-owned oil firm YPFB and a number of private companies, in the development of its national petroleum and gas industry in 2010.
Since the nationalisation of the energy sector in 2006, the government's spending targets have fallen far short of its expectations, leading to output stagnation. In light of the projections for 2010 however, there are tentative signs that international oil firms are beginning to unfreeze their projects as La Paz gradually softens its fiscal and operating terms.

In the past few years, private sector spending in the oil sector has been disheartening. In 2008, overseas oil firms spent only $ 349 mm in the South American country -- a long way below the government's $ 875.5 mm target for the year. Last year, although private investment rose significantly by 65 %, to $ 576 mm, even in spite of the economic downturn, it too fell short of its twelve-month $ 625.5 mm target.
The government's latest five-year plan, unveiled as recently as January 12, envisions $ 11 bn of investment in hydrocarbons over the next five years.

Following the nationalisation of the energy sector, the government of President Evo Morales has burdened overseas oil firms with high taxes, subsequently relegating them to the role of subcontractors. The result: A fall in private investment.
However, this drop was expected to be offset by a combination of more spending from YPFB and new investment from national oil companies from nations considered political allies to Bolivia. On the list are the likes of Petroleos de Venezuela (PdVSA) and Russia's Gazprom.

However, with investment from such firms still yet to materialise, there are signs of La Paz adopting a more pragmatic stance towards private investors. YPFB's monopoly on the provision of oil and gas services was abolished in October of last year, allowing foreign oil firms to act as independent contractors.
A string of initiatives designed at attracting foreign direct investment (FDI) into the energy sector have been launched since.

Interestingly, these moves are now beginning to bear fruit.
Repsol's Huacaya field would be the first new discovery to be developed in the country since nationalisation, while Petrobras's reported decision to begin investing in Bolivia once again is a bullish sign for the local industry.