BP Warns Bolivia After Takeover of Aviation Fuel Unit
June 19, 2009 - Latin American Herald Tribune

LA PAZ – BP has warned the Bolivian government that it will launch arbitration proceedings unless an agreement is reached providing fair compensation for the nationalization of aviation fuel unit AirBP, local daily La Prensa reported Thursday.

The British oil major sent a letter on May 15 to socialist President Evo Morales informing him that if an agreement is not reached “within six months” either party could bring a claim before an international tribunal.

The government nationalized the aviation fuel supply company on May 1. Days later, it announced that it would negotiate fair compensation with AirBP’s parent company, BP, and hire an independent consulting company – which has not yet been contracted – to determine the value of the unit within a period of 120 days.

Once the consulting firm finishes its work, Bolivian state energy firm Yacimientos Petroliferos Fiscales Bolivianos and AirBP’s executives are to negotiate an agreement for the transfer of the company’s shares to the state.

After receiving BP’s letter, government lawyers took “coordinated action” with the Hydrocarbon Ministry and YPFB, La Prensa reported.

AirBP, which has a staff of six executives and 93 employees nationwide, supplies fuel to a dozen Bolivian airports.

Separately, YPFB President Carlos Villegas announced Tuesday that the company has agreed to assume the debts of Royal Dutch Shell and Britain’s Ashmore in nationalized natural-gas pipeline operator Transredes to avoid an arbitration process.

Under the fossil-fuel nationalization ordered by Morales in May 2006, YPFB, which owns Bolivia’s estimated 48 trillion cubic feet of natural gas and much smaller reserves of crude oil, has authority to participate in every phase of the hydrocarbons industry.

About a dozen private companies, including Brazil’s Petrobras, Spain’s Repsol YPF, Britain’s BG Group plc and France’s Total, continue to operate in Bolivia through minority partnerships with YPFB.