Bolivia Seizes Gas Pipeline From Shell, Ashmore

June 2 (Bloomberg) -- Bolivian President Evo Morales nationalized Bolivia's main gas pipeline company, expanding his control over the Andean country's natural resources one day after losing two regional referendums on his rule.

Morales issued a decree seizing the majority stake in Transredes Transporte de Hidrocarburos SA owned by Europe's Royal Dutch Shell Plc and Ashmore Energy International. Bolivia's state energy company held 47 percent. Morales said Transredes ``conspired'' against his government and rejected talks aimed at giving Bolivia control of the company.

Today's move is the latest by Morales to fulfill campaign pledges to ``re-found'' Bolivia by taking over energy and mining companies and directing more tax revenue from provinces to the treasury. The government forced oil companies to renegotiate contracts in 2006 and last year seized Glencore International AG's tin smelter. The actions have helped fuel discontent among business groups and provincial leaders.

``Morales is under pressure,'' David Scott Palmer, a professor of Latin American politics at Boston University, said in an interview. ``This is an effort by Morales to lash out in a way that will deflect attention from his problems.''

Bolivia, the poorest country in South America, has the continent's second-largest reserves of natural gas, after Venezuela. Morales, 48, assumed the presidency in January 2006 after promising to take greater control of natural resources to help the country's largely poor, indigenous majority.

Majority Stake

``Despite having a series of meetings between the government's negotiating team and the executives of Transredes, the company insistently rejected the government's proposal,'' said a statement issued by Morales's office. ``We won't accept authorities or managers or companies that come to conspire against democracy or against the national government.''

Shell can't comment on the takeover until it has a chance to review and assess the action, said Eurwen Thomas, a spokesman in London. Kenny Juarez, an outside spokesman hired by Ashmore, declined to comment.

The move to nationalize Transredes, which operates 5,700 kilometers (3,500 miles) of pipelines in Bolivia, follows a May 1 announcement by Morales that the government would acquire a majority stake in the company. Terms of the takeover weren't disclosed.

Shell, Europe's largest oil producer, and Ashmore each owned 25 percent of the pipeline through a joint venture called TR Holdings Ltd, according to Transredes. TR Holdings named five of the seven members of the company's board of directors, with two representing Bolivia, according to the Transredes Web site.

Business Confidence

Opposition congressman Fernando Messmer said the move will ``increase uncertainty and doubts'' for companies in Bolivia, the official news agency ABI reported.

Investment in exploration and production in Bolivia's oil and gas industry fell to $149 million last year from $650 million in 2002, the lowest since 1996, according to the Santa Cruz-based Hydrocarbons Chamber. The chamber's members include Petroleo Brasileiro SA, Total SA, and BG Group Plc.

Voters in the northern provinces of Beni and Pando yesterday backed a referendum on autonomy from the central government in La Paz, which Morales called unconstitutional. Voters in Santa Cruz, where the country's energy companies are based, supported a similar referendum May 4.

Morales, a former coca grower, was the first president to receive more than 50 percent of the popular vote since democracy was restored to Bolivia in a 1952 revolution.

To contact the reporter on this story: Bill Faries in Buenos Aires at wfaries@bloomberg.net.

Last Updated: June 2, 2008 18:50 EDT

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