President Evo Morales of Bolivia has ordered the military to seize 56 foreign-owned oil and gas fields in a nationalisation move that hit shares of companies operating in the Latin American country today.

Senor Morales called on the military to occupy the fields and gave warning he would throw out foreign companies who refused to recognise the nationalisation of the country’s oil and gas fields, which are the second largest reserves in the region after Venezuela.

The leftwing President, who came to power on a platform of re-nationalisation, warned of similar action in other sectors. "We are beginning by nationalising oil and gas. Tomorrow we will add mining, forestry and all natural resources – what our ancestors fought for," he said in a May Day speech at the San Alberto gas field in southern Bolivia.

Foreign investors were unable to assess the full impact of the decision, as details of the nationalisation policy were not readily available. The President has given the companies 180 days to renegotiate contracts.

The nationalisation policy would effectively downgrade the role of foreign companies from owners of the assets to simply operators. The Spanish Government swiftly declared its "profound worry" about the nationalisation, as shares in the Spanish energy group Repsol YPF took a hit.

The Bolivian Embassy in London told Times Online the President would issue a further statement on the details of the nationalisation policy in the coming week and denied the move would undermine foreign investment in the country, as investors take fright.

"In the end, the companies will understand these new rules help Bolivia and make it more stable. They should not be scared," said Pablo Ossio, the Charge d’Affairs at the embassy.

Asked whether the Bolivian Government would compensate foreign companies who lose their assets, he said there would be an audit of foreign energy assets over the coming six months. "But I don’t think they’ll be compensated," he said.

Analysts warned the move was bound to damage investor sentiment and returns of companies based in the country.

"Shareholders will no longer be able to see those oil and gas reserves on the company books. Also, the companies have gone from being owners of assets to a service provider to the Bolivian government. That is a more risky business," said Jason Kenney, senior oil and gas equity strategist at ING in Edinburgh.

"If you’re an energy company with $1 billion to spend, will you put it in Bolivia now or go elsewhere in the world?"

Total foreign investment in Bolivia’s oil and gas sector stands at $3.5 billion. All the world’s biggest energy giants are present in the market. Total reserves are 54 trillion cubic feet, according to the embassy.

Shares in international companies operating in the region suffered as investors digested the news. The biggest loser was Repsol, which opened 3 per cent lower in early trading.

The Madrid-based company has 18 per cent of its reserves based in the country that also accounts for nine percent of its production, according to analysts Citigroup.

"The news appears worrying for us, but we still do not have enough information and documents to draw any conclusions," said a spokeswoman for the Spanish company.

Britain’s BG and BP expect disruption to their regional operations following the nationalisation. However, the British companies’ exposure is limited. For example, BG only sources 3 per cent of its production from Bolivia. Neither company was prepared to comment at this stage.

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