Bolivia energy safe from turmoil, so far

By Carlos Alberto Quiroga

LA PAZ (Reuters) - Political conflict between President Evo Morales and opposition leaders has not affected oil and gas investment plans in Bolivia, a major natural gas supplier to Argentina and Brazil, an industry leader said on Thursday.

Jose Magela, president of the Bolivian Hydrocarbons Chamber, said the country can double its natural gas output in the short term if it can just put together the pieces of the puzzle after nationalizing its energy industry two years ago.

"The investment plans are not conditioned on Bolivia's current political situation, unless it affects contractual agreements with things such as blockages, lack of environmental permission and unilateral changes in the rules," Magela told the Latin America Investment Summit in e-mailed answers to interview questions.

"Execution of investment plans is conditioned on fulfilling the steps laid out in operating contracts signed between (state energy company) YPFB and oil companies, and on the laws," he said.

Political tensions have grown in recent months between leftist Morales and opposition provincial leaders who are opposed to his plans to overhaul the country's constitution.

But weeks of different regional protests have not significantly affected output in the energy industry, which was nationalized by decree in May 2006.

Bolivia, South America's poorest country, has huge natural gas reserves -- 48.7 trillion cubic feet as of 2005 -- but production has been flat since the nationalization.

Major players in production include Brazilian state-owned oil company Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz), Spain's Repsol-YPF (REP.MC: Quote, Profile, Research, Stock Buzz), France's Total (TOTF.PA: Quote, Profile, Research, Stock Buzz) and Britain's BG Group Plc (BG.L: Quote, Profile, Research, Stock Buzz).

Morales says investment in the sector will jump this year to $1.25 billion. The opposition has been skeptical of that number and of YPFB's forecast that investments will be even higher, $1.5 billion, or five times higher than the annual average over the last five years.

Magela was somewhat optimistic, saying Bolivia could see $7 billion in investment in the next five years and raise output to some 75 million cubic meters a day from 40 million now.

Some 90 percent of current production goes to Argentina and Brazil and Bolivia is not currently able to meet Argentine demand for its natural gas, partly because of booming domestic demand as the economy expands.

"This should be a year that investments take off. The market demand is there, the reserves are there, the investors are here, the contracts are signed," Magela said.

Bolivia signed 44 new operating contracts, substituting the pre-nationalization agreements, which went into effect since May 2007 and have been ratified by Congress.

Magela said the industry is lacking coordination and adequate planning to make it sustainable in the long term.

"We need a permanent technical coordination between all the actors in the production chain to make these new investments come about rapidly," he said.

(Translating by Fiona Ortiz; Editing by Braden Reddall)