Tuesday, October 31, 2006

Bolivia, Evo Win Big in Energy Deal

Agreements have been reached with foreign oil companies to provide Bolivia with up to 82% of effective taxes from the sale of Bolivian oil. The move basically signals acceptance of nationalization in the energy sector by major players like (Spain's) Reyspol and (Brazil's) Petrobras.

Reports suggest an interesting profit-sharing mechanism whereas Bolivia's take will be a 50% royalty tax on its output at the San Antonio and San Alberto fields. Petrobras will be able to use part of the other half of output revenue to meet production and investment costs, while the remainder will be divided as profit between Petrobras and Bolivia's state-energy firm YPFB (who will also gain a seat at the decision-making table). The contract envisions that as Petrobras invests more and growth ensues, it will receive more.

The fates of several refinaries and the natural gas sector have not yet been decided under the last minute deal. Still the deal means that billions of dollars will flow to the Bolivian people in coming years (possibly up to $4 billion a year soon - a 12% budgetary increase).

The deal is being praised on the streets of Bolivia, accepted by the Western world and even Petrobras' stock price went up. Not a bad deal it appears.


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3:24 PM  

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