A FORMER coca farmer who was elected President of Bolivia yesterday is threatening BG Group with the nationalisation of its gas assets in the Andean states.

Evo Morales, who leads the Movement towards Socialism party and who describes himself as “Washington’s nightmare”, said that he would revoke the rights of natural gas producers at the well head.

Foreign control over Bolivia’s vast natural gas reserves was a key issue in the election, alongside coca farming, which is under pressure from Washington over concern that it fuels the drug trade. Señor Morales said that he wanted to change the terms on which foreign companies, such as Repsol, of Spain, Petrobras, of Brazil, and BG Group, of Britain, extract gas.

As exit polls put the socialist leader well ahead of rivals, Señor Morales said: “Property rights at the well head are over. That’s finished. We need partners, not owners.”

He said that his government would not expropriate but would exercise control over gas resources: “If (foreign oil companies) accept Bolivian rules, they are welcome as partners. But they cannot be the ones that have ownership control.”

Bolivia has lost two presidents since 2003 in a series of popular rebellions against foreign control of its natural resources. A new hydrocarbon law introduced in May raised the overall tax take on gas production to nearly 80 per cent, one of the highest in the world. It prompted the resignation of President Mesa.

Shares in Repsol dipped 2 per cent on news of the apparent victory for Señor Morales.

BG Group’s present output in Bolivia is not large, but the country accounts for 11 per cent of BG’s proven and probable oil and gas reserves. Moreover, BG controls Comgas, the monopoly gas distributor in São Paulo, and has a stake in the Bolivia-Brazil gas pipeline. Comgas sources about half its gas supplies from Bolivia.

A spokesman for BG said that the company was already paying the increased rate of tax and would not speculate about the risk of nationalisation. “There are fundamental issues that have to be resolved. We hope that potential future large investments are not jeopardised,” he said.

Bolivia’s gas reserves are estimated at more than 48 trillion cubic feet, but the country lacks an indigenous market for such a large fuel resource. Oil multinationals argue that high taxes are a deterrent to the huge investment needed to bring Bolivia’s gas to consumers.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats