WILL BOLIVIA'S NEW E&P CONTRACTS BRING INVESTMENT?

With the renegotiation of upstream operations contracts, under a new Operations Contract Model, with all exploration and production (E&P) operators in Bolivia completed on October 31, the Evo Morales Administration scored a political coup and restored some luster to its deteriorating domestic image. The subsequent confirmation of those contracts in a Senate session that was boycotted by the opposition, however, and the opposition's moves to challenge the legality of both the session and the contracts have undermined that achievement and highlighted the lingering uncertainty in Bolivia's upstream hydrocarbons sector.

* The E&P companies have hailed the agreements as supportive of their continued operations in Bolivia while quietly emphasizing, despite government insistence to the contrary, that the contracts do not necessarily imply or guarantee any major new investment commitments on their part.
* Although the contracts may provide upstream operators with the legal and financial framework to recover the US$3.5 billion they have invested in the country since 1997, profound doubts remain about whether the new terms and conditions will attract any major new investment in the sector.
* The contracts may signify that the government has already gotten as much as it wants of the existing hydrocarbons pie. The question now is whether, under the new framework, that pie will expand, stagnate, or gradually diminish.

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