Bolivia Charges Enron, Shell With Illegal Gas Deal

by Franz Chavez

(IPS) LA PAZ -- Bolivia is investigating companies belonging to Enron and the Dutch-British Shell for allegedly illegal sales of natural gas to the Brazilian city of Cuiaba.

If found guilty, the companies would be subject to hefty fines, and their offenses would provide grounds for revoking the concessions under which they operate in Bolivia.

Transredes, Gas TransBoliviano (GTB) and Gas Oriente Boliviano (GOB), which belong to the multinational oil companies, pumped natural gas from R’o Grande, in the eastern Bolivian department of Santa Cruz, to the town of San Mat’as, on the Brazilian border, at the request of Southern Cone Gas and Transborder Gas Service, firms that also belong to Enron and Shell.

Across the border, in Cuiaba, Brazil, Enron has been operating a gas-fired power plant since obtaining the concession in 1997.

Bolivia's Superintendency of Hydrocarbons is studying the case to determine whether it involves an infringement of the Law on Hydrocarbons, which prohibits companies from simultaneously transporting, distributing, buying or selling, and generating electricity.

GTB, a consortium made up of Transredes, Enron, Shell and Petrobras (Brazil's oil company), filed a plea with the Supreme Court, arguing that it is legally distinct from its Enron and Shell shareholders.

Brett Wiggs, the president of Transredes, a consortium in which Enron and Shell hold a majority stake, denied that the company had anything to do with the buying and selling of natural gas, and said the accusation was motivated by "political interests."

An investigation by local newspaper La Prensa also revealed that Southern Cone, a company that is not registered to operate in Bolivia, paid the National Tax Service $6.3 million to export gas to Cuiaba.

The unauthorized activity was detected when the Andina oil company demanded the right to pump natural gas through the pipeline administered by GTB.

After Andina filed its complaint, the General Superintendency of the System of Sectorial Regulation discovered that other companies were involved in the commercialization of fuel without being registered to do so.

A government source told IPS that the public prosecutor's office in the central Bolivian city of Santa Cruz found out about the unauthorized exports of natural gas to Cuiaba and asked the national customs office for a report on possible tax fraud by Andina.

Customs is now preparing an accusation against Andina, which declared that it sold 13.3 million British thermal units (BTUs) of gas to Southern Cone at a price of $14 million.

The charges would be smuggling and "clandestine operation," and if they are found guilty, the companies would be subject to a fine equivalent to the value of the illegally exported gas.

A spokesman for the Superintendency of Hydrocarbons told IPS that there would be no official information available on the investigation headed by the General Superintendency until it is completed.

Through agreements with Brazil, Bolivia legally exports 2.2 million cubic metres of natural gas to Cuiaba daily.

Bolivia, which has Latin America's second-largest gas reserves after Venezuela, exports a total of 13 million cubic metres of gas a day to Brazil, South America's giant.

According to a statement issued by Andina, the unauthorised exports of natural gas to Cuiaba took place from November 2001 to November 2002, and failed to pay the 18 percent tax on earnings to the Bolivian state, as stipulated by the Law on Hydrocarbons.

The scandal has further compounded the problems facing the natural gas industry, which was a central focus of the protests that forced president Gonzalo Sanchez de Lozada to resign last October.

The unrest was triggered by protests over the government's plans to export natural gas to Mexico and the United States through a pipeline that would run to a port in Chile, with which Bolivia has a longstanding territorial dispute over the loss of its access to the Pacific Ocean in the late 19th century.

The protesters were also demanding reforms of the Law on Hydrocarbons in order to increase the state's share of earnings on the natural gas exported by corporate oil giants from the current 18 percent.

Some sectors of society, especially the Central Obrera Boliviana (COB) central trade union, want to re-nationalise the country's natural gas.

But the government of President Carlos Mesa, who succeeded Sanchez de Lozada, has rejected demands for nationalization on the argument that it would have to pay around eight billion dollars to indemnify the transnational oil companies, which have invested some $3.5 billion since the privatization of the industry in 1997.

COB accuses Mesa of betraying the promises he made when he became president, because of an agreement he recently signed to export four million cubic metres of natural gas a day to Argentina, a country in the midst of an energy crisis.

The scandal over Enron's supposed links to unauthorized activities involving natural gas sales coincided with the start of an investigation promoted by parliamentary Deputy Wilson Magne, of the New Republican Force, into how the company gained access to a $150 million package of shares without allegedly investing any money.

Enron began to operate in Bolivia in July 1994, while sales of natural gas to Brazil were under negotiation, and the government of Gonzalo Sanchez de Lozada, in its first term, alleged that the country was in need of a "strategic ally" to help set prices and export volumes.

The U.S.-based transnational -- which went bankrupt in late 2001 amidst an enormous financial scandal -- claims that it invested in the construction of the pipeline to export gas to Brazil.

Until November 2001, when a new pipeline running to Cuiaba began to operate, the only means of pumping natural gas to Brazil was a pipeline running to the southern Brazilian state of Rio Grande do Sul.

The new pipeline cut through the Chiquitano forest, the world's largest remaining dry tropical jungle, which is home to a number of indigenous groups.

The project drew protests from environmental groups like the World Wildlife Fund, which urged Washington to cancel a $200 million loan.

Enron erroneously reported that the forest in question was not a primary forest, apparently in order to obtain the loan from the U.S. Overseas Private Investment Corporation (OPIC), which is prohibited from granting loans to infrastructure projects in "primary tropical forests."

Redlisted.com, an advisory web site for potential investors in international development projects that provides a compilation of the most environmentally controversial and financially risky projects in Latin America, reports that the pipeline and the power plant run by Enron in Cuiaba, in Brazil's Mato Grosso region, have caused irreparable damage to the Chiquitano forest.