UPDATE 2-Spain's Repsol to invest $1.6 bln in Bolivia natgas

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By Carlos Quiroga

LA PAZ, Sept 16 (Reuters) - Spain's oil major Repsol (REP.MC) has pledged to invest nearly $1.6 billion to boost natural gas output in Bolivia over the next five years, the head of Bolivia's state-run energy company YPFB said on Wednesday.

"In the next five years, they (Repsol) have agreed to invest, on average, $300 million a year," YPFB President Carlos Villegas said in an audio recording released by the company.

After a meeting with Repsol officials in Madrid on Tuesday, leftist Bolivian President Evo Morales said Repsol had agreed to speed up investments in Bolivia.

"In early October, at the latest, Repsol executives will be in Bolivia to make an official announcement regarding this agreement ... which they are obliged to comply with it," said Villegas.

Bolivia's natural gas production has been stable at around 40 million cubic meters a day for at least three years, despite previous government announcements that foreign companies were planning to invest heavily to boost output.

The impoverished nation has been hard hit by falling natural gas prices and slacker demand from Brazil, which reduced its imports significantly earlier this year due to an economic slowdown.

Villegas did not specify what Repsol's production increase would be, only saying the Spanish firm has agreed to drill seven wells and increase the production capacity of a natural gas processing plant.

An increase in production will help Bolivia to boost natural gas exports to neighboring Argentina, Villegas said.

In 2006, Bolivia signed a deal to nearly quadruple natural gas exports to Argentina to 27.7 million cubic meters a day from the current daily maximum of 7.7 million cubic meters, but only if Argentina builds a new pipeline.

Bolivia has the second largest reserves of natural gas in South America after Venezuela, and it is the region's main exporter, supplying the fuel to Argentina and Brazil.

In a move that rattled foreign investors, Morales, an ally of Venezuelan President Hugo Chavez, nationalized the country's natural gas industry in 2006 and raised taxes on energy companies.

He has seized control of several energy companies, including the largest pipeline operator, previously controlled by Ashmore Energy International (ASHM.L), and Air BP, a division of British oil major BP Plc (BP.L).

His policies to increase state revenue from the energy sector prompted companies including Brazil's Petrobras (PETR4.SA) and France's Total (TOTF.PA) to freeze investments.

Last week, Bolivia's central bank signed a deal to give YPFB a $1 billion loan, which is part of the $7.5 billion YPFB plans to invest between 2009 and 2015.

Bolivia exported over $3 billion worth of natural gas to Argentina and Brazil in 2008. (Writing by Eduardo Garcia; Editing by Marguerita Choy)