The End of an Era? Nationalization of Bolivia's Oil and Gas Industry
Bolivia's nationalization of the oil and gas industry in early May shakes both the energy sector and the geopolitical balance in the region. The decree transfers the ownership of oil and gas resources and the control of key companies to the state-owned oil company and imposes a government take of up to 82 percent on oil and gas production in the major fields of the country. CERA's analysis indicates several key points, including
* Current players are entering a long negotiation period that will at best delay investment decisions and most likely freeze most of them for several years.
* Short-term gas deliverability to Brazil and Argentina should not be challenged, but limited supply capacity will constrain expansion of demand.
* Brazil is expected to further diversify its energy matrix away from Bolivian gas, ultimately limiting Bolivia's future opportunities for growth.
* The Bolivian nationalization could trigger further contract renegotiations in the region, but the pragmatic approach to energy security and economic growth of such countries as Brazil, Chile, and Colombia should contain the spread of this trend.
