29 Dic The so-called «nationalizations» of hydrocarbons in Bolivia: 1937, 1969 and 2006
Almost three months after the last post in this old and forgotten blog, I want to write a few lines about the beloved hydrocarbons sector. In this opportunity I want to share the information that will be presented, very soon, in a joint publication with other colleagues about 100 years of the Bolivian economy, in this publication I’ll be in charge of the hydrocarbons section.
I would like to present some data about the 3 so-called nationalizations of hydrocarbons that happened in Bolivia in less than 100 years, naturally I don’t intend to carry out an exhaustive study about them (it would take time and space) on the contrary I just want to share with you some useful (I hope) data.
The first nationalization occurred in 1937, the Bolivia Resolution of March 13th declared «… the expiration of all properties of The Standard Oil Co of Bolivia …». There are several technical, political and economic reasons that would have led the Bolivian Government to «nationalize» the properties of the Standard Oil Co of Bolivia, interesting discussions are in Hoz de Vila (1988), Royuela (1996), Prada 1985 and Miranda (1999). The result was a US$ 1.8 million compensation from the Bolivian Government to the company agreed in January 1942, this compensation had the “form” of «acquisition of geological studies» by the Bolivian government. Using information from the Consumer Price Index of the Bureau of Labor Statistics of the United States of America, the present value of the compensation would be US$ 27.9 million. It’s useful to note that this value was equivalent to 2.7% of total Bolivian exports in 1942
The second «nationalization» happened in 1969, through Supreme Decree 08956 of October 17th , 1969, the Bolivian Government determined «the reversion to the State of all concessions granted to BOLIVIAN GULF OIL COMPANY, and the nationalization of all its Installations, furniture, means of transportation, studies, plans, projects and any other goods, without exception«, «the immediate control by Armed Forces of the Nation of all fields, installations and other belongings of BOLIVIAN GULF OIL (YPFB) will immediately intervene in the technical and administrative control of Bolivian Gulf Oil Company’s facilities and assets, under the supervision and supervision of the Ministry of Mines and Petroleum. «
According to Miranda (1999) and Hoz de Vila (1988) the final compensation to BOGOC was US$ 78.6 million. On the other hand, according the World Energy Council (1992), the total amount of compensation to BOGOC, paid with the export earnings to the Argentine Republic, was US $60.8 million, amount of money paid between 1973 and 1979. In present value, the total compensation reaches US$ 344.4 million.
It should be noted that the activity of the company Bolivian Gulf Co. was much larger than The Standard Oil Co. as shown in the following table, which presents the number of wells drilled by each company and the inefficiency (measured by ratio # Dry Wells / # Producing Wells) of both. These figures show that the cost to the country (in terms of technology transfer, markets, future investment, etc.) of the second «nationalization» was probably higher, because BOGOC apparently was a company wishing medium and long-term partnership with Bolivia, given the magnitude of the investment made.
Finally, on May 1st 2006, the Bolivian government approved the Supreme Decree No. 28701 «Heroes of the Chaco» or «Nationalization of Hydrocarbons. Unlike … yes, unlike the two previous «nationalizations», the one carried out in 2006 didn’t mean an expropriation of capital and expulsion of the operating private companies; What happened was the signing of new contracts with private operators with a moderate increase in the state participation. As a result of the signing of new exploration and exploitation contracts, approved in Hydrocarbons Law No. 3058 and implemented through the supreme decree called «nationalization», the State’s share of gross wellhead revenues increased between 10% and 15%; If we add these percentages to royalties, participations and tax created by Hydrocarbons Law No. 3058 by Hormando Vaca Diez (50%); The total participation of the Bolivian state in such wellhead revenues would be between 60% and 65%.
It’s useful to note that after the measure of 2006, the Bolivian State acquired participation in some private operators in the exploration and exploitation activities, repurchased the two most important refineries in the country, bought shares in pipeline transport systems and other facilities , A summary of these policies can be found in Zaratti (2009), in other words the rest of the so-called «nationalizations» were simply stock purchase transactions.
The hydrocarbons sector is characterized by projects of long maturity, in this sense, it’s not always possible to link the performance of this sector with a contemporary public policy. In fact, it’s possible to hypothesize that the impacts of public policy on the sector are asymmetrical, when this public policy seeks to build consensus on a particular project and/or activity, the results are medium and long term; However, when public policy damages the performance of the sector, the results are short- and medium-term. In this sense, it‘s necessary to be very cautious when correlating contemporary statistics with certain legal norms. In other words, the success of the hydrocarbons sector in recent years is not, from any point of view, due to the so-called «nationalization» of the hydrocarbons of the year 2006… seriously.
Well my friends and friends, maybe this text was less colloquial than previous ones, however, I found it interesting to present the legal regulations of these processes, as well as some figures about it. This last season in Kabul was hard and difficult, at the end of May we had one of the biggest attacks of the last years, unofficial figures speak of more than 100 dead and almost 400 wounded. I can’t wait to get home and hug my Santi and tell him how much I love him.
Mauricio Medinaceli Monrroy,
Kabul June 2017
Hoz de Vila, V. (1988). PETRÓLEO Referencias y su legislación en Bolivia. Editorial Los Amigos del Libro. Segunda Edición. La Paz – Cochabamba, Bolivia.
Medinaceli. (2006). “Aspectos Tributarios de la Ley de Hidrocarburos No. 3058 y del Decreto Supremo Nº 28701”. Boletín Económico: Análisis de Coyuntura. La Nacionalización Bajo la Lupa. Fundación Milenio.
Medinaceli, M. (2007). La Nacionalización del Nuevo Milenio: cuando el precio fue un aliado. Fundemos. Primera Edición. La Paz – Bolivia.
Miranda, C. (1999). «Petróleo – del descubrimiento petrolífero a la explosión del gas» en Bolivia en el siglo XX: La formación de la Bolivia contemporánea. Fernando Campero Prudencio compilador. Harvard Club de Bolivia.
Prada, R. (1985). Apuntes sobre el sector hidrocarburos. Wayar y Soux. Primera edición. La Paz, Bolivia.
Royuela, C. (1996). 100 años de hidrocarburos en Bolivia (1896-1996). Editorial Los Amigos del Libro. La Paz, Bolivia.
World Energy Council. (1992). Veinte Años de Exportación de Gas. Comité Boliviano del Consejo Mundial de Energía. Boletín Nº 3. La Paz, Bolivia.
Zaratti, F. (2009). «La descapitalización. Cómo se hizo y cuánto costó» en Nacionalización: los costos de una ilusión. Molina F. editor. Primera Edición. Cochabamba, Bolivia.