A new energy Bill brought into force late on Tuesday by Bolivia’s Congress will introduce additional heavy taxes on oil and gas revenues, increasing the State’s take from 18 per cent to 50 per cent.

Opposed by multinationals, which have invested $3.5 billion (£1.9 billion) in developing Bolivia’s massive gas reserves, the Bill also extinguishes foreign ownership of oil and gas at the wellhead and forces the migration of their rights to new, as yet undetermined contracts.

Bolivia’s President, Carlos Mesa, who sought to moderate the tax increase, refused to sign the Bill, requiring the leader of Congress to promulgate the law. The President has been under siege from a popular movement demanding punitive taxes against foreign oil companies. Demonstrators took to the streets of the capital, La Paz, on Monday demanding nationalisation of the oil industry.

BG Group, which has 4 trillion cubic feet of gas in Bolivia and a stake in the $2 billion Bolivia-Brazil gas pipeline, would not comment on the impact of the new tax. Bolivia’s Hydrocarbon Chamber, which includes BP, Total and Repsol-YPF, the Spanish firm, as well as BG Group, condemned the new law which, it said, “undermines rights recognised by contract, laws, the constitution and international accords.”

In an effort to defuse the growing unrest over energy, President Mesa held a referendum last year in which Bolivians voted for greater control over gas resources but he has been unable to stem the call for stringent tax increases.

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