NVESTMENTS by leading British energy companies in Bolivia’s huge gas reserves are under threat from a popular movement clamouring for nationalisation of the country’s hydrocarbon resources.

Bolivia’s Congress is debating a new hydrocarbon law that would raise the royalty on gas production from 18 per cent to 50 per cent, a tax increase vigorously opposed by foreign multinationals, including BP and BG Group. The former international arm of British Gas has four trillion cubic feet of gas in the country and a stake in the $2 billion (£1.1 billion) Bolivia-Brazil pipeline that connects BG’s gas reserves in the Santos Basin with the city of São Paulo.

Lobbying against the proposed law has intensified in recent weeks and the Bolivian Government is under pressure from both Britain and the US to scrap the tax changes and a proposal to create a state monopoly over gas exports from Bolivia. A recent deputation from the Foreign Office told the Bolivian Government that a British promise to cancel Bolivia’s foreign debt could be at risk from the proposed hydrocarbon law.

The foreign investors, which also include France’s Total, Repsol of Spain and Petrobras of Brazil, are caught up in a popular backlash against foreign control of Bolivia’s energy industry, led by the so-called Cocaleros, the country’s indigenous coca farmers — mainly impoverished peasants who resent Bolivia’s co-operation with coca-eradication programmes promoted by the US to fight the drugs trade. A referendum in July gave President Carlos Mesa a mandate to increase taxation and state control over the gas industry, but he is opposed by Evo Morales, a socialist firebrand and former presidential candidate who wants full nationalisation. A coca farmer and the son of a llama shepherd, Señor Morales is one of a growing band of Latin American politicians who reject the neo-liberal reforms of the past decade. Like Hugo Chávez, the President of Venezuela, he attacks the International Monetary Fund, which has threatened to withdraw its support to Bolivia, and his leadership of the Cocaleros makes him a powerful force.

The Bolivian Hydrocarbon Chamber, which represents the energy companies, described the proposed fiscal regime as “discriminatory and confiscatory” and one that would discourage future investment. Of even greater concern to the foreign groups is a proposal that a new company, PetroBolivia, would acquire a monopoly over exports, forcing BP and other investors to hand export profits to the state entity. BP has a quarter share of 13 trillion cubic feet of gas in the Margarita discovery, but the oil company and BG Group are reluctant to comment, fearing it would raise the temperature of the debate.

The investors’ fears are dismissed by Bolivian campaign groups, such as Solón Foundation, which argues that the gas producers are undertaxed because the royalty applies only to the value of the gas at the well-head, a fraction of the price it fetches when sold to end-users. Pablo Solón, director of the foundation, said he believed that Bolivians were being threatened with diplomatic and trade isolation if they failed to water down the tax proposals.

The dispute led to the removal last year of the former President, Gonzalo Sánchez de Lozada. Proposals to export gas to the US through a planned liquefied natural gas scheme in Chile provoked an uprising, caused in part by longstanding popular resentment against Chile, which acquired territory linking Bolivia to the Pacific in a war between the two countries in the 19th century.