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Bolivia

Published on Wednesday 12th June 2019

    • Bolivia

      There are different levels of legislation applicable to oil and gas activities in Bolivia. However, the primary legislation is the Constitution, followed by the Hydrocarbons Law and its regulations related to oil and gas operations, which are national legislation.

      As a result of a national Referendum, the new Bolivian Constitution was passed and came into force on 7 February 2009 (the Constitution). Under the Constitution, Bolivia adopted the official name of Plurinational State of Bolivia, but it is a unitary state composed of nine departments, with a national central government and departmental governments, with some degree of autonomy, and division of powers in accordance with the Constitution.

      Pursuant to the Constitution, hydrocarbons are part of the privative competence of the national government of the state. Therefore, the legislation applicable to oil and gas is basically national legislation. However, there is also certain regional or departmental legislation and/or regulations relating to environmental and other aspects of the oil and gas industry. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      Oil and gas activities in Bolivia are carried out by Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), a state-owned company. Pursuant to the Constitution, YPFB is the only company authorised to carry out all activities of the whole hydrocarbons production chain and commercialisation in Bolivia. However, YPFB is authorised to execute services contracts with national and foreign, public, mixed or private companies, for the execution of certain activities of the productive chain, in exchange of a payment for the services. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      Oil and gas is a regulated business in Bolivia. Companies may only carry out oil and gas activities through different types of governmental authorisations. Depending on the segment of the petroleum supply chain (upstream and downstream), authorisation shall be granted by different authorities.

      As to the upstream segment, the oil and gas operations can only be carried out by YPFB or by the companies that have entered into Exploration and Production Services Contracts (Services Contracts) with YPFB.

      Downstream activities require licences and permits issued by the Hydrocarbons National Agency (ANH), which is the Bolivian regulatory authority for the hydrocarbons sector. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      In accordance with the Bolivian legislation, hydrocarbons are originally owned by the state. Article 359 of the Constitution states that “the hydrocarbons, regardless of the state in which they are found or the way in which they are presented, are inalienable and imprescriptible property of the Bolivian people. The state, in the name of the Bolivian people, exercises ownership of all the country's hydrocarbon production and is the only one authorised to sell it.” Therefore, the ownership of the hydrocarbons cannot be transferred to the oil and gas extractors or producers, and it is sold only by YPFB, on behalf of the Bolivian state, to the buyers.  

      Last verified on Monday 3rd June 2019

    • Bolivia

      According to article 34 of the Hydrocarbons Law, all areas of hydrocarbon interest, in both traditional and non-traditional zones, are reserved in favour of YPFB, in order for it to carry out exploration and production activities by itself or in association with public, private or mixed companies.

      Since the approval of the Hydrocarbons Law, several regulations have been issued to reserve areas of hydrocarbons interest for YPFB. In this sense, on 8 March 2017 a Supreme Decree 3107 was enacted increasing the reserved areas from 99 to 100 in favour of YPFB in traditional and non-traditional zones, to carry out exploration and production activities by itself or in association with public, private or mixed companies.

      In the case of an association, companies must necessarily enter into services contracts with YPFB for the exploration and production activities. Pursuant to the Constitution, the service contracts for the exploration and production of hydrocarbons must be authorised and approved by the Plurinational Legislative Congress.

      The Ministry of Hydrocarbons has issued regulations providing the criteria that the companies should meet in order to execute exploration and production activities in the name and representation of YPFB. In this sense, companies interested in providing such services to YPFB under services contracts must fulfil at least one of the following conditions:

      • the companies are within the scope and framework of an energy cooperation agreement signed between the Bolivian state and the state of which they are nationals;
      • the companies have signed a technical evaluation agreement to carry out exploration operations in areas reserved for YPFB, and the results of such evaluations were positive according to YPFB;
      • the companies have won an international bidding process for the exploration and exploitation activities in reserved areas for YPFB; an
      • they must be companies in which YPFB has a majority shareholding.

      Last verified on Monday 3rd June 2019

    • Bolivia

      There are no minimum local content requirements related to international bidding processes. Supreme Decree 28398 dated 6 October 2005 approved the Regulation for Bidding Areas for the Exploration and Exploitation of Hydrocarbons. Pursuant to its article 23, the terms of reference of the bidding process should contain necessarily the following information:

      • the location and identification of the area;
      • the sample of the petroleum contract to be used;
      • the awarding assessment to be applied to each tender area;
      • the conditions in which proposals must be submitted;
      • the guarantees that the proponent must submit if his or her proposal is awarded;
      • the circumstances under which tenders may be disqualified;
      • the address where the offers must be submitted;
      • the closing date for the offer submission;
      • the legal conditions that the tenderer must fulfil to be able to sign petroleum contracts with YPFB and the necessary requirements to work in Bolivia.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Article 35 of the Hydrocarbons Law states that the Ministry of Hydrocarbons shall define for the bidding of each nominated area the award assessment procedure, taking into consideration one or more of the following criteria:

      • working units for the first mandatory phase of the exploration period, in addition to the minimum number of units determined by the Working Units Supreme Decree;
      • payment of a bonus at the closing of the contract, destined to the General Treasury of the Nation (TGN);
      • payment of an additional share to the one established in the Hydrocarbons Law, destined to the TGN;
      • payment of a profit share after taxes; and
      • percentage of the holder's participation in the production.

      Therefore, although there are no specific minimum capital or technical requirements, for each international bidding process for open areas within the areas of hydrocarbon interest, the working units proposed for the first mandatory phase of the exploration period in addition to the minimum number of units determined by the Working Units Supreme Decree would be one of the criteria, along with other requirements, for the awarding of a nominated area, which requires certain investment and technical capacities. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      There are no foreign participation restrictions in such rights or Services Contracts, or in companies holding any such rights, except for the constitutional restriction provided in article 262 of the Constitution, which establishes that in the international border security zone of 50 kilometres from the borders, foreign companies and persons cannot acquire any property, nor possess soil or underground rights under any title, without prior declaration of state necessity approved by the Plurinational Legislative Congress.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Contractors have the exclusive right to operate and exploit the corresponding oil and gas fields on behalf of YPFB. This exclusivity is structured in the services contracts.

      However, it is important to mention that, for new service contracts, once the commercial declaration of the field has been approved by YPFB, the contractors (holders) have the obligation to assign 100 per cent of the rights and obligations of the services contracts to a mixed-capital corporation (SAM) set up with majority participation of YPFB (at least 51 per cent) and the remaining participation for the contractors (holders) in the shareholding.

      Last verified on Monday 3rd June 2019

    • Bolivia

      The contractor or holder of the services contracts with YPFB, has mainly the following rights:

      • to recover costs incurred during the exploration phase, once the commercial declaration of the field is approved by YPFB; and
      • to have a share of the profits, according to the margins stated in the services contracts.

      On 9 August 2017, the Bolivian government issued Supreme Decree 3278 to establish the conditions and requirements for the approval and publication of the recoverable costs and reported costs approved by YPFB, in accordance with current regulations and the services contracts. This new regulation introduces significant changes in relation to the previous regulation.

      One of the most relevant changes is the creation of a price band. Supreme Decree 3278 provides a series of requirements for the recognition and approval of recoverable costs or reported costs approved, among which it is stated that costs must be included within a price band, defined as the maximum and minimum range based on unit prices.

      YPFB must elaborate a band proposal considering a series of data related to oil operations, including, among others, historical and current price records on the national and international oil industry. YPFB may also require the holders of the services contracts to provide all historical and up-to-date information on their suppliers, operations and investments.

      The ANH will approve the price band, considering the proposal submitted by YPFB, and ultimately YPFB will establish the corresponding parameters based on the price band approved by the ANH, which will be used for the approval of recoverable costs and costs reported approved.

      In this sense, on 30 July 2018 the Administrative Resolution RA-ANH-DJ 0154/2018 was issued by the ANH approving the price band based in which YPFB will define the parameters that will be applied in 2019 for the approval of recoverable costs and costs reported approved.  

      Last verified on Monday 3rd June 2019

    • Bolivia

      A holder of the services contract may transfer such rights subject to the approval by YPFB and the Ministry of Hydrocarbons, and legislative approval.

      In fact, the model services contract provides that neither YPFB nor the holder may assign or transfer, its rights or obligations arising from the contracts, without the prior written consent of YPFB and the Ministry of Hydrocarbons, except the right of the holder to assign or transfer the contract to any company that is directly or indirectly owned by it, provided that it will guarantee jointly and severally the fulfilment of the commitments assumed by the assignee. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      National central government, departmental and municipal governments are recompensed basically by the collection of royalties, direct tax on hydrocarbons and patents for granting companies rights to conduct oil and gas exploration and production under service contracts.

      After the nationalisation of hydrocarbons executed by means of Supreme Decree No. 28701 (the Nationalisation Decree) approved on 1 May 2006, and the promulgation of the Hydrocarbons Law, Bolivia’s revenue plan was changed. The state maintained the 18 per cent royalty rate and oil patents, and added a 32 per cent direct tax on hydrocarbons (DTH) over supervised production.

      As a result, the revenue share of the hydrocarbon sector between the state and local governments is basically as follows:

      • 11 per cent royalty allocated to the producer department, which means the place where the exploitation and production area is located;
      • 1 per cent compensatory royalty assigned to two departments (Beni and Pando) with depressed local economies; and
      • 6 per cent of royalty participation to be paid to the TGN.

      The DTH is also allocated among the central government and the departmental governments, Universities, Municipalities, etc, according to specific regulations in the subject.

      The oil patents are distributed between municipalities and the national government for the development of programs and projects of public investment or environmental management, according to the Hydrocarbons Law and its regulations.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Petroleum companies that hold oil and gas exploration and production rights may acquire property or rights of way to carry out exploration and production activities. However, this acquisition of title may not necessarily be compulsory.

      The Hydrocarbons Law privileges exploration and production activities over any land use. It establishes a process in which the owners of the land or holders on possession of the land shall enter into negotiations with the holder of oil and gas exploration and production rights. The Hydrocarbons Law provides a set of rules for regulating the process of compensation and rights of way.

      Such set of rules provides, among other matters, procedures for compensation, valuation of the land, remedies, and enforcement of the terms and conditions agreed upon. If no agreement could be reached, for example, for right of way, pursuant to article 128 of the Hydrocarbons Law, the civil procedures shall be applied. Pursuant to article 260 of the Civil Code, if no agreement is reached between the parties, right of way can be established by judicial resolution. 

      However, according to the Constitution, extraction of natural resources in certain regions may be subject to a prior process of popular consultation with, and approval by, the inhabitants of such regions, set up by the state.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Foreign ownership restrictions apply to the oil and gas sector in the international border security zone of 50 kilometres from the borders. Pursuant to article 262 of the Constitution, within such international border security zone, foreign companies and persons cannot acquire any property, nor possess soil or underground rights under any title, without prior declaration of state necessity approved by the legislative power.

      Besides the constitutional restriction mentioned above, there is no specific foreign ownership restrictions. As a general rule of private property, applicable to national and foreign companies and persons, article 56 of the Constitution recognises and guarantees the right to private individual or collective property, provided that it fulfils a social function and that its use is not detrimental to the collective interest.

      A general restriction to private ownership in the oil and gas sector is established by article 363 of the Constitution. It provides that YPFB may set up partnerships or mixed-capital corporations to carry out exploration, exploitation, refining, industrialisation, transportation and commercialisation of hydrocarbons, but YPFB will necessarily have an equity interest of not less than 51 per cent of the total share capital. 

      Therefore, according to the above-mentioned constitutional provision, national and foreign oil companies that want to carry out petroleum activities in Bolivia, will have a 49 per cent investment limit in the partnerships and mixed-capital corporations with YPFB.

      Last verified on Monday 3rd June 2019

    • Bolivia

      According to article 361 of the Constitution, the state-owned YPFB is the only company in Bolivia authorised to carry on activities of the whole hydrocarbons productive chain and commercialisation. Consequently, no company other than YPFB may carry out hydrocarbons activities in vertical integration in the Bolivian oil and gas industry.  

      In addition, the oil and gas activities are subject to Title V of SIRESE Law enacted on 28 October 1994, which establishes general provisions related to anticompetitive practices and defence of competition on public utilities sectors, including hydrocarbons. Title V includes provisions connected with anticompetitive agreements, abuse of dominant position in the market and the prohibition of mergers between competitors. 

      In the same context, article 90 of the Hydrocarbons Law provides that the Superintendency of Hydrocarbons (currently the ANH) will regulate competition for and in the hydrocarbons market, based on Title V of SIRESE Law, stating, additionally, that the regulatory entity will not allow economic concentrations that limit competition and result in positions of dominance in the market.

      Moreover, article 12 of the Constitution declares that all economic activity must contribute to the strengthening of the country’s economic sovereignty. Private accumulation of economic power in such a degree to endanger the economic sovereignty of the state shall not be allowed.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Oil and gas activities in Bolivia can be carried out through incorporated entities with limited liability or consortia. The members of a consortium are jointly and severally liable for the obligations undertaken related to such activities under the relevant exploration and production contract.

      In fact, the service contracts provide that each of the holders that are members of a consortium shall be jointly and severally liable to YPFB for the performance of each and every one of the obligations of the holder pursuant to the mentioned contract.  

      Last verified on Monday 3rd June 2019

    • Bolivia

      Oil and gas reserves may not be pledged or encumbered to secure repayment of debt. First of all, article 357 of the Constitution provides that no person or foreign company, nor any Bolivian private person or company, may register ownership of Bolivian natural resources in securities markets, nor may it be used as a means of securitisation or security for financial transactions. The annotation and recording of reserves is an exclusive right of the Bolivian state.

      Secondly, as companies with exploration and production rights under services contracts shall act on behalf of YPFB, they shall never get rights over the hydrocarbons found in the exploration activities or extracted in the production operations, and therefore they shall never get any property rights, and therefore any rights to pledge or encumber.    

      Last verified on Monday 3rd June 2019

    • Bolivia

      The oil and gas output is not freely exportable. In fact, article 359 of the Constitution provides that hydrocarbons, regardless of the state in which they are found or the way in which they are presented, are an inalienable and imprescriptible property of the Bolivian people. The state, in the name of the Bolivian people, exercises ownership of all the country’s hydrocarbon production and is the only one authorised to sell it. Moreover, the Constitution provides that YPFB is the only one authorised to carry out the activities of the hydrocarbon production chain and its commercialisation, and therefore, it is the only entity allowed to commercialise and export natural gas in the name of the Plurinational State of Bolivia. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      According to article 89 of the Hydrocarbons Law, the ANH will fix the maximum prices and the respective parameters for updating them for the domestic market, in accordance with specific Regulations, for the following products, among others:

      • crude oil and liquefied petroleum gas, taking as reference the export parity of the reference product.
      • natural gas, considering the prices of existing contracts and market opportunities.

      Last verified on Monday 3rd June 2019

    • Bolivia

      The Environmental Law enacted on 27 April 1992 establishes general provisions for the protection and conservation of the environment and natural resources, which are also applicable to oil and gas exploration and production activities. Under the framework of the Environmental Law, there is a specific Environmental Regulation for the hydrocarbons sector in Bolivia, which was approved by Supreme Decree 24335 dated 19 July 1996. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      Environmental regulations in Bolivia are consistent with international standards. For instance, article 50 of Supreme Decree 24335 provides that the use of explosives, among others, in the operations of testing, will be carried out according to the American Petroleum Institute (API) norms.

      Moreover, article 61 of the same decree states that in order to carry out minor intervention activities without equipment, the person in charge must have the facilities for the storage, treatment and disposal of the intervention fluids, in addition to materials, additives and inputs specific for the activity, in accordance with the respective Regulations, the Environmental Law and the API standards.

      In addition, the Regulation of Technical and Safety Standards for Exploration and Exploitation in the Hydrocarbons Activities approved by Supreme Decree 24689 dated 2 July 1997, provides a set rules and standards that have to be applied in the hydrocarbons exploration and exploitation operations in Bolivia, including the API, the American Gas Association (AGA), the International Association of Geophysical Contractors (IAGC), the National Fire Protection Association (NFPA) of the United States.  

      Last verified on Monday 3rd June 2019

    • Bolivia

      The Regulation of Technical and Safety Standards for Hydrocarbons Exploration and Exploitation Activities approved by Supreme Decree 24689 provides technical and safety standards in order to carry out oil and gas exploration and production.

      In fact, article 1 of the mentioned Regulation establishes that its object is to regulate the activities of exploration and exploitation of hydrocarbons, to obtain the maximum efficient production of hydrocarbons, which allows the recovery of the reserves without technical economic detriment of its magnitude. For this purpose, the Regulation contains technical and safety provisions according to the specific phase of the oil and gas operations.

      In addition, it is worthy to mention that many petroleum companies in Bolivia have adopted the OHSAS 18001, Occupational Health and Safety Assessment Series of the International Organization for Standardization (ISO), to carry out their operations according to these health and safety standards.

      Last verified on Monday 3rd June 2019

    • Bolivia

      In order to carry out oil and gas exploration and production activities, companies must obtain the respective environmental licences and permits, according to each operation. The procedures and requirements are provided by the Environmental Law, the Supreme Decree 24335, and mainly in the Regulation of Environmental Prevention and Control approved by Supreme Decree 24176 of 8 December 1995.

      During 2018, Supreme Decree 3549 dated 2 May 2018 has modified, complemented and added certain provisions to the Supreme Decree 24176, in order to optimise the environmental management adjusting the mechanisms of regulation by technical-administrative procedures.

      In relation to the hydrocarbons sector, the Annex A of the mentioned Supreme Decree 3549 identifies the categories of the petroleum activities, works and projects for their environmental impact evaluation, taking into account the effects on the ecosystem.    

      Last verified on Monday 3rd June 2019

    • Bolivia

      The Promotion for Investments in the Hydrocarbons Exploitation and Exploitation Law enacted on 11 December 2015 provides a set of incentives for promoting investments, in order to increase the reserves and production of hydrocarbons in Bolivia.

      In fact, the above-mentioned law is applicable to national or foreign companies engaged in the oil and gas exploration or production operations. It provides different provisions related to incentives applicable, among others, to the production per barrel of crude oil and condensate associated with natural gas.

      Supreme Decree 3448 dated 3 January 2018 introduced an amendment to the Regulatory Decree 2830 of 7 July  2016 of the Promotion for Investments in the Hydrocarbons Exploitation and Exploitation Law establishing that the incentive to the production of crude oil from new reservoirs discovered in exploitation areas, non-commercial discovered accumulations and/or reactivated closed fields, and that were in the evaluation stage at the date of publication of the mentioned  Law, will benefit with an incentive of US$30 per barrel of crude oil granted through the Fund for the Promotion of Investment in Exploration and Exploitation of Hydrocarbons.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Under Bolivian legislation, there are no dispute resolution systems specific to oil and gas activities. Also, no state immunity applies in any kind of dispute resolution. However, article 366 of the Constitution provides that foreign companies in the hydrocarbon sector are subject to Bolivia’s jurisdiction, law and authorities and prevents these companies from invoking exceptional situations of international arbitration and from appealing to diplomatic protections.

      Additionally, article 67 of the Hydrocarbons Law, related to the obligatory clauses of host government contracts, states that petroleum contracts must contain certain provisions, under penalty of nullity, including the stipulation to waive all diplomatic claims. 

      In the same line, the Conciliation and Arbitration Law enacted on 25 June 2015 has reinforced local authorities’ jurisdiction, particularly over disputes involving the Bolivian state in investing. The Conciliation and Arbitration Law establishes special processes for arbitration and provides that those disputes with the state over investment will be subject to Bolivia’s jurisdiction, law and authorities.

      In 2013, the Bolivian Chamber of Hydrocarbons and Energy has created a Centre of Arbitration in Energy, which provides arbitration services specialised in the oil and gas, and energy industries.

      Last verified on Monday 3rd June 2019

    • Bolivia

      Anti-corruption and anti-money laundering rules apply to the oil and gas industry. There are no exceptions in favour of specific industries, such as the oil and gas industry, in the scope of the Anticorruption Law enacted on 31 March 2010, the Penal Code of Bolivia that includes corruption crimes, as well as money laundering related crimes, the United Nations Convention against Corruption, the 1988 United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, the Inter-American Convention against Corruption or any other anticorruption law applicable to the parties.

      Article 10 of the Hydrocarbons Law provides that oil and gas activities will be governed, among others, by the transparency principle. In fact, this principle obliges the authorities to conduct administrative procedures in a public way, ensuring access to information, as well as to observe and to enforce the Hydrocarbons Law by applying its principles, objectives and policies of the sector.

      In fact, the services contracts for oil and gas activities includes an anticorruption clause, which provides that each party of the contract agrees and declares that neither it, nor its representatives or affiliates have made or will carry out undue acts, such as payments, gifts, transfer of anything of value, undue advantage and other acts.

      The execution of such undue acts by any of the parties may constitute a violation to the Anticorruption Law enacted on 31 March 2010, the United Nations Convention against Corruption, the Inter-American Convention against Corruption or any other anticorruption law applicable to the parties.

      Apart from the criminal and civil penalties in case of breach of anti-corruption clause stated in the service contracts, there could be the possibility that these contracts may be terminated by YPFB. In fact, clause 23.4 determines if any of the participating companies fail to comply with their obligations established in the contract, YPFB may decide its termination only with respect to the participating company. 

      Last verified on Monday 3rd June 2019

    • Bolivia

      As of May 2018, there have been some relevant material amendments to the laws, rules and regulations governing the oil and gas sector. By means of the Administrative Resolution RA-ANH-DJ 0154/2018 dated 30 July 2018 the ANH approved the price band based on which YPFB will define the parameters that will be applied during 2019 for the approval of recoverable costs and costs reported approved. 

      The Ministerial Resolution 162-18 of 19 December 2018, issued by the Ministry of Hydrocarbons, approved the regulations for the Monitoring and Control Units (UTE) stated in the service contracts for the supervision of petroleum operations.

      The Ministerial Resolution 047-19 of 3 April 2019 issued by the Ministry of Hydrocarbons, adjusted the valuation of the Working Units in the amount of US$6,631.50 per UTE, in accordance with the provisions of article 5 of the Regulation of Working Units for Exploration approved by the Supreme Decree 28393 of 6 October 2005.

      Last verified on Monday 3rd June 2019

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