Summit fails to resolve Bolivia gas uncertainty

A regional summit called to defuse tension over Bolivia’s plans to nationalise its natural gas industry ended in uncertainty on Thursday when the four leaders present failed to reach agreement on proposed price increases and instead announced the expansion of plans to build a controversial gas pipeline from Venezuela to Argentina.

The meeting followed Bolivia’s announcement on Monday that it would take control of all concessions and installations operated by foreign companies in the country. Hydrocarbons companies including Petrobras of Brazil, Repsol of Spain, Total of France and BG and BP of the UK have invested about $3.5bn in Bolivia and Petrobras has spent an additional $2bn on a pipeline delivering Bolivian gas to Brazil and Argentina.

The companies have been given 180 days to negotiate new contracts.

Following the meeting, President Néstor Kirchner of Argentina said the price of Bolivian natural gas would be discussed in a “rational” manner and set at a level that would make investments viable. Luiz Inácio Lula da Silva, president of Brazil, said prices would be discussed “in the most democratic manner possible”.

Bolivia has threatened to increase the price it charges for its natural gas by more than 50 per cent. Petrobras said it would take legal action to prevent any price rise and resort to international arbitration if necessary.

The statements left industry leaders in Brazil concerned that prices could soon be increased.

“We simply cannot accept higher prices,” said Saturnino Sérgio da Silva of Fiesp, the São Paulo state federation of industry. “Many industries migrated to natural gas to become more competitive and cannot afford an increase.” He said Brazil must get tough with Bolivia to keep prices down.

The four leaders also agreed to work together to make possible a so-called “Southern Pipeline” stretching more than 9,000km between Venezuela and Argentina. The project is as controversial because is expected to cost about $23bn and would cross some environmentally sensitive areas.

Hugo Chávez, president of Venezuela, who travelled to the meeting together with President Evo Morales of Bolivia, said Bolivia would join Venezuela, Brazil and Argentina in making the pipeline possible. Bolivia had previously dismissed the project as impracticable.

“The nationalisation of Bolivia’s hydrocarbons industry has allowed us to speed its entry into the project,” Mr Chávez said.