VZCZCXRO1449
PP RUEHLMC
DE RUEHLP #1492/01 1511355
ZNR UUUUU ZZH
P 311355Z MAY 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC PRIORITY 3759
INFO RUEHAC/AMEMBASSY ASUNCION 6819
RUEHBO/AMEMBASSY BOGOTA 4159
RUEHBR/AMEMBASSY BRASILIA 8046
RUEHBU/AMEMBASSY BUENOS AIRES 5292
RUEHCV/AMEMBASSY CARACAS 2530
RUEHPE/AMEMBASSY LIMA 2668
RUEHLO/AMEMBASSY LONDON 0111
RUEHMD/AMEMBASSY MADRID 3493
RUEHMN/AMEMBASSY MONTEVIDEO 4647
RUEHQT/AMEMBASSY QUITO 5160
RUEHSG/AMEMBASSY SANTIAGO 9757
RUEHTC/AMEMBASSY THE HAGUE 0751
RUEHLMC/MILLENNIUM CHALLENGE CORP
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUMIAAA/USCINCSO MIAMI FL
RUEHUB/USINT HAVANA 0343
RHEHNSC/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 LA PAZ 001492 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/AND 
TREASURY FOR SGOOCH 
MCC FOR AKIRSCHENBAUM 
 
E.O. 12958: N/A 
TAGS: ECON EINV ENRG EPET BL
SUBJECT: SHELL SALE INCREASES U.S. INVESTMENT IN BOLIVIAN 
HYDROCARBONS 
 
REF: A. 2006 LA PAZ 1936 
     ¶B. LA PAZ 1086 
 
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Summary 
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¶1. (SBU) Royal Dutch Shell plans to sell its shares in two 
Bolivian natural gas pipeline operators, Transredes and GTB, 
to the British firm Ashmore Energy, which is 40 percent 
U.S.-owned.  The sale will increase total U.S. investment in 
Bolivia's tumultuous hydrocarbons sector from approximately 
USD 400 million to around USD 540 million.  The GOB pledged 
in its May 2006 nationalization decree that it would gain 
majority ownership of Transredes, but negotiations have thus 
far not progressed.  Transredes is concerned about the safety 
of its workers following recent attacks on its facilities in 
southern Bolivia that cost the company USD 1.2 million (ref 
B).  End summary. 
 
----------------------------- 
Shell to Sell Bolivian Assets 
----------------------------- 
 
¶2. (SBU) Transredes (Bolivian natural gas pipeline operator) 
Vice President Oscar Serrate told the DCM on May 30 that 
Royal Dutch Shell plans to sell its shares in Transredes and 
pipeline operator GTB, as well as some Brazilian assets, to 
its partner, the British company Ashmore Energy (which is 40 
percent U.S.-owned).  The sales are pending approval by the 
Bolivian and Brazilian regulatory agencies.  Serrate said 
that President Morales, the minister of the presidency, and 
Transredes' workers are enthusiastic about the sale, as it 
demonstrates Ashmore's intentions of investing in Bolivia 
despite great political uncertainty.  Serrate added that the 
Transredes board recently approved USD 40 million of 
investments in pipeline construction and expansion.  Serrate 
explained that Shell wants to decrease its investments 
throughout Latin America, and focus on upstream business 
rather than services, while Ashmore is aggressively seeking 
to expand its Latin American presence. 
 
--------------------------------------------- --- 
Sale Will Increase U.S. Investment in Gas Sector 
--------------------------------------------- --- 
 
¶3. (SBU) The sale will increase total U.S. investment in 
Bolivia's tumultuous hydrocarbons industry from approximately 
USD 400 million to around USD 540 million.  Ashmore Energy 
will hold 50 percent of Transredes' shares (with 34 percent 
held by Bolivia's state oil company YPFB and 16 percent held 
by small shareholders) and 57.5 percent of GTB. 
 
---------------------------- 
No Progress on GOB Take-Over 
---------------------------- 
 
¶4. (SBU) The GOB pledged in its May 2006 gas nationalization 
decree that it would gain majority ownership of Transredes, 
but negotiations have thus far not progressed.  Following the 
May 2006 decree, the GOB seized 34 percent of Transredes' 
shares formerly held in trust by the Bolivian Pension Fund 
Administrators and named two YPFB members to the Transredes 
board.  Serrate explained that the YPFB members are afraid to 
vote without the backing of law or regulation for fear of 
being politically prosecuted later.  Serrate said that the 
 
LA PAZ 00001492  002 OF 002 
 
 
company is open to negotiating ownership, but would never 
agree to cede operating control to YPFB, in which even the 
GOB lacks confidence.  He said that the GOB plans to hire an 
independent consultant to value the Transredes shares that it 
wishes to acquire, which Serrate took as a positive signal 
that the GOB does not intend to expropriate Transredes' 
shares.  Serrate said he hoped that the sale would help 
Transredes work out the financing problems that it has faced 
since the GOB issued its nationalization decree.  (After the 
GOB announced its intentions to take over the company, the 
Inter-American Development Bank and the Andean Development 
Corporation froze loans to Transredes (ref A).) 
 
------------------------------------------ 
Transredes Concerned about Worker's Safety 
------------------------------------------ 
 
¶5. (SBU) Serrate expressed Transredes' concern about the 
safety of its workers following recent attacks on its 
facilities in southern Bolivia that cost the company USD 1.2 
million (ref B).  He said that after the attacks, workers 
found bullets in one of the fuel tanks, which could have 
caused a deadly explosion if fuel had been in the tank. 
Transredes has told its workers that, in the future, if their 
lives are threatened, they should turn off the valves and 
leave rather than risk their lives. 
 
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Comment 
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¶6. (SBU) Ashmore Energy's willingness to increase its 
exposure in Bolivia given the GOB's intentions of taking over 
Transredes is somewhat surprising.  We suspect Shell must 
have offered a cheap price to entice Ashmore into buying 
despite the risks.  Transredes' safety concern reflects the 
general lack of law and order in Bolivia.  The police and 
military are afraid to use force to maintain order due to 
fear of being subsequently persecuted for their actions.  The 
weakness of law enforcement has been reflected during many 
crises of the past year, including the mining conflict in 
Huanuni, the invasion of Madidi National Park by settlers, 
and the internal border dispute in the Chaco.  End comment. 
GOLDBERG