SPAIN is to hold talks with the President of Bolivia after the decision in La Paz to nationalise its oil and gas resources.

European oil and gas companies, including Repsol-YPF of Spain and BG Group of Britain, were left in confusion yesterday over the impli- cations of Monday’s presidential decree, which ordered foreign companies to hand over control of gas production to the Bolivian state petroleum company, YPFB.

President Morales told the foreign companies to sign new operating contracts within 180 days or quit Bolivia.

Spain is concerned about the impact of the Bolivian nationalisation on Repsol, which has invested more than $1 billion (£680 million) in developing Bolivia’s considerable gas resources and of which Repsol accounts for a quarter of daily gas output.

“We are very concerned,” Bernardino León, the Secretary of State for Foreign Affairs, said. “What we know at this moment does not bode well.”

Repsol described the situation yesterday as “worrisome”. Uncertainty over the prospects for developing its Bolivian and Argentine assets prompted it to remove 1.25 billion barrels from its proven reserves in January.

BG Group said that Bolivia accounted for 4 per cent of its proven reserves.

Frank Chapman, BG’s chief executive, said that BG’s output in Bolivia was not material to the company overall but he suggested that Bolivia’s importance to BG lay in longer-term development prospects.

“We are early in this process. We are going to take time to find out what is in this decree. The only way things get done in this industry is for governments and companies to seek out common ground,” he said.

Mr Chapman said that Bolivia needed “tens of billions of dollars and a lot of technology and knowhow” to develop its gas reserves. “If they are going to attract the billions of dollars they need, they have to provide a framework of security to investors,” he said. “If returns are inadequate, [companies] will stop investing in Bolivia.”

Despite the Bolivian setback, BG revealed a surge in profits in its first quarter yesterday, more than doubling earnings to £563 million. Profits from liquefied natural gas rose almost 400 per cent to £138 million.

• Ofgem, the energy regulator, yesterday backed proposals to make the UK gas market more transparent in the wake of record high prices last month. The move, which will be welcomed by high energy users, is thought to have been opposed by gas companies.

  Ofgem said that in October the National Grid will start to publish more data on supplies from offshore fields and import terminals, after consumers demanded action as energy bills have soared.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts