Bolivia Offers Incentives for Oil and Gas Exploration

President Evo Morales’ government has offered to reimburse 100 percent of the cost of successful exploratory drilling in Bolivia by private oil and natural gas companies, state-owned energy company YPFB said on Wednesday. The president of Yacimientos Petroliferos Fiscales Bolivianos, Carlos Villegas, said most of the companies that operate in Bolivia have accepted the proposal, which is especially aimed at incentivizing the search for liquid hydrocarbons.

“The private company will cover the cost of exploration if the results are negative, all the losses will be assumed by the company and YPFB will have no obligations. If the results are positive, YPFB pledges through a mixed corporation to return 100 percent of the investment made in the exploration phase,” Villegas said. The executive described the offer as an “important benefit” for companies and said other incentives could be offered to boost gas and oil production. Another measure being studied by YPFB, Morales said Tuesday, would be to increase the amount that companies currently receive per-barrel, currently just $10 even though international market prices now stand at almost $90.

Morales, who nationalized the hydrocarbons sector in 2006, also stressed on Tuesday the importance of ensuring that private companies not only recoup their investment but also post a profit – something not possible at the $10-per-barrel rate. The president’s remarks contrast with earlier threats to take over the operations of companies that do not invest to bolster production. Foreign energy firms in Bolivia include Spain’s Repsol-YPF, which also partners with YPFB in a Bolivian state-controlled joint venture; Argentina’s Pluspetrol; Brazil’s Petrobras; French oil major Total; and British Gas. The measures to incentivize private investment are being analyzed a week after sometimes violent protests erupted over a Dec. 26 government decree that eliminated fuel subsidies and sent prices for liquid fuels soaring. Morales rescinded the decree five days later amid the threat of further upheaval.