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Energy Cooperation Agreements in Bolivia - International Law Office

International Law Office

Energy & Natural Resources - Bolivia

Energy Cooperation Agreements in Bolivia

October 01 2007

On January 23 2006 the presidents of Bolivia and Venezuela executed an agreement for cooperation in the energy sector which led to the incorporation of a mixed economy company between Bolivian state-owned oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) and Venezuelan state-owned oil company Petróleos de Venezuela SA (PDVSA). The new company's purpose was to develop within the Bolivian territory projects related to:

  • hydrocarbon exploration;

  • production;

  • refining;

  • distribution chains;

  • processing; and

  • industrialization.

Despite the nationalization process in the hydrocarbon sector (for further details please see "State Operations in the Hydrocarbons Sector"), PDVSA incorporated the Bolivian branch PDVSA Bolivia SA and on July 9 2007 executed an agreement with YPFB to incorporate the mixed economy company YPFB - Petroandina SAM, with the purpose of developing exploration and exploitation activities in Bolivia's hydrocarbon sector.

As a result of Supreme Decree 29189 (as modified by Supreme Decree 29217 on August 2 2007) the incorporation of Petroandina was authorized, therefore complying with the Bolivian Commercial Code.

Petroandina has a registered capital of Bol1.6 million (approximately $200,000). YPFB owns 60% of the company's shares and PDVSA Bolivia owns the remaining 40%.

On May 13 2007, prior to the incorporation of Petroandina, the Bolivian government enacted Supreme Decree 29130 which authorized YPFB to enter into partnership with other companies with the purpose of developing hydrocarbon exploration and exploitation activities in traditional and non-traditional areas.

Article 4 of Supreme Decree 29130 obliges YPFB to incorporate mixed economy companies with companies:

  • whose state of origin has signed an energy cooperation agreement in the hydrocarbon sector with Bolivia;

  • that are already in the country developing such exploration and exploitation activities; and

  • that have been awarded an international public concession over areas that have not been delivered to any other companies.

Thus, through Supreme Decree 29130 the Bolivian government opened the doors exclusively to PDVSA to access the Bolivian market. On the one hand, Venezuela and Bolivia have executed an agreement on energy cooperation, but on the other hand, the Venezuelan company was not previously operating in the country and therefore had not executed the necessary operation agreements granting it permission to develop those activities.

In this regard, Petroandina will start to operate in Bolivia in the coming months, undertaking exploration and exploitation activities in the hydrocarbon sector. It is likely that in the near future Bolivian and Venezuelan state-owned companies will incorporate new mixed economy companies to perform the rest of the sector's activities.

For further information on this topic please contact Rodrigo A Henriquez Essmann at Indacochea & Asociados, Abogados by telephone (+591 3 535 356) or by fax (+591 3 581 200) or by email (rhenriquez@indacochea.com.bo).

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