By Mike Caggeso
Bolivia's state-run oil company, YPF Bolivianos, will get up to a $1 billion investment for local natural-gas projects from Brazil's state-run oil company, Petroleo Brazileiro SA (PBR), also called Petrobras.
The deal - signed by the presidents of both South American countries - calls for $750 million to $1 billion to be invested in YPF. The varying dollar amount is dependant on the results of new exploration. Bolivia has the second-largest natural-gas reserves in South America, after Venezuela home of the largest.
The deal makes Petrobras the first company to announce investments in Bolivia since Bolivian President Evo Morales nationalized refineries and much of the oil-and-gas infrastructure in May 2006.
Morales' move initially caused tensions between the two countries, because Petrobras previously controlled a 14% stake in Bolivia's gas reserves. But the countries' presidents both expressed confidence in the deal.
"Tensions will not affect our intention to maintain a permanent dialogue, to cooperate and to help Bolivia," Brazil President Luiz Inacio Lula da Silva told the Bolivian newspaper, La Razon, according to . "My visit here is clear proof of what I am saying."
The diplomacy may seem a bit forced, but Brazil's surging economy and its growing demand for energy is forcing the country to seek out new supply partners. Such high demand takes away some of Brazil's bargaining power, despite being the continent's largest country and the ninth-largest economy in the world.
Think of it this way: If you were the Brazilian president trying to keep pace with your country's ravenous energy consumption, would you rather buy natural gas from neighboring Bolivia or negotiate with Hugo Chavez in Venezuela?
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