Exploration, Exploitation and Commercialization
Hydrocarbon Transportation and Natural Gas Distribution
Refining and Industrialization
Mandatory Easements


On April 30 1996, the Bolivian Congress enacted the new Hydrocarbons Law, which identifies and regulates a number of oil-related activities, including:

  • exploration;

  • exploitation;

  • commercialization;

  • transportation;

  • refining and industrialization; and

  • natural gas distribution.

Exploration, exploitation, transportation, and refining and industrialization activities are under the protection of the state.

According to the new law, and consistent with the Constitution, hydrocarbon fields are under the original domain of the state and private entities may not own these fields. In order for a private entity (local or foreign) to carry out exploration, exploitation or commercialization activities in state owned hydrocarbon fields, the entity must enter into a joint venture agreement with YPFB (the state owned oil company).

Exploration, Exploitation and Commercialization

YPFB must conduct international public bids for the exploration and exploitation of hydrocarbons, separated into predetermined 'parcels'. Once a tender is awarded, YPFB (acting on behalf of the state) will enter into a joint venture agreement with the successful bidder for a maximum period of 40 years. YPFB must verify that the private company complies with the agreed investments for the exploration and/or exploitation in the area.

Furthermore, the private company must pay royalties to the central government, the local government and to YPFB. Royalties are calculated as a percentage of the production (and can vary between 18 and 31%, depending on the area). In addition, the private company must pay a fee for each parcel covered by the joint venture agreement, regardless of levels of production.

In general, the companies that execute joint venture agreement may freely trade with their production. However, there are several conditions and limitations regarding the commercialization of hydrocarbons, in place to ensure that (i) the local market is duly supplied, and (ii) the obligations of YPFB to export natural gas under the agreement with Petrobras (the Brazilian state controlled oil company) are complied with.

Hydrocarbon Transportation and Natural Gas Distribution

With respect to hydrocarbon transportation and natural gas distribution, private entities (local or foreign) may apply for an administrative concession to be granted by the regulatory authority (SIRESE) upon evaluation of the technical, administrative and financial capacity of the applicant. Administrative concessions may not exceed 40 years.

Under the Hydrocarbons Law, the 'free-access' principle is embraced. Any third party may request transportation services provided there is capacity available in the pipeline.

The regulatory authority shall approve the tariffs to be charged by the concessionaire. For the purposes of calculation, the regulatory authority must offer the lowest possible cost to the users, while at the same time ensuring the concessionaire will have a reasonable return rate on its investments.

The concessionaire cannot suspend transportation services except in cases of 'acts of God' or force majeure, or unless previously approved by the regulatory authority.

In general, transportation concessionaires cannot:

  • distribute natural gas;

  • buy or sell natural gas; or

  • participate in electricity generation activities.

Refining and Industrialization

Any person is free to carry out the refining, industrialization and commercialization of hydrocarbons. These activities are subject to registration with the SIRESE and compliance with applicable regulations.

Mandatory Easements

Any entity that executes a joint venture with YPFB for exploration, exploitation and commercialization of hydrocarbons (as well as concessionaires for hydrocarbons transportation or natural gas distribution) are entitled to request mandatory easements or expropriation of lands, when needed to carry out related activities. Because of the public utility qualification for these activities, the process is quicker than applying for ordinary easements or expropriation declarations. The owner of the affected land is entitled to fair compensation.

For further information on this topic, please contact Ricardo Indacochea S.M at Indacochea & Asociados, Abogados Sociedad Civil by telephone (591-3-535356) or by fax (591-3-581200) or by e-mail ([email protected]).

The materials contained on this web site are for general information purposes only and are subject to the disclaimer.