President Evo Morales, whose leadership is the subject of Sunday's referendum, announced Bolivia's state-owned energy company YPFB and its Venezuelan counterpart PDVSA would explore proven natural gas reserves in hopes of capitalizing on more of the country's estimated 48 trillion cubic feet.

"We hope to add more than 10 trillion cubic feet to the reserves" at a cost of $888 million, said PDVSA Vice President Eulogio del Pino.

The deal struck this week falls under the auspices of Petroandina Gas, a joint venture formed by the two countries in 2006 when Morales nationalized Bolivia's energy sector.

While YPFB has a 60 percent majority interest in Petroandina, the majority of the funds for increased natural gas exploration will likely come from Venezuelan coffers.

Bolivia's gas sector has been the center of controversy in the poor South American nation for decades.

Earlier this year three eastern provinces, all with large gas deposits, voted in favor of greater autonomy from the central government, noting how their profits go largely to pay for Bolivian social programs that benefit the largest indigenous population in the west.

Morales denounced the vote, calling it illegal and vowing it would not be recognized by his government. He also called on governors from other provinces in eastern Bolivia to sit down to talks before carrying out their own autonomy votes.

However, Morales now faces a political challenge closer to home with a recall referendum on his remaining time in office scheduled for August. His term is set to expire in 2011.

In the meantime, leaders in the eastern provinces have expressed displeasure with Morales and his nationalization efforts, saying the country's wealthy are unfairly taxed to pay for his social programs. More than 80 percent of Santa Cruz residents voted for more autonomy for the province.

Morales is not the only Bolivian leader to feel the wrath of his country's citizenry over the handling of the gas industry. In 2003 President Gonzalo Sanchez de Lozada was forced from office during widespread violence that left dozens dead after he suggested Bolivia sell natural gas to its longstanding rival and neighbor Chile, to whom his country lost its coastline during a 19th-century war.

The gas issue was eventually the undoing of Carlos Mesa as well. In June 2005 the Bolivian leader faced a round of violent protests over how the gas revenue was being spent. Mesa eventually stepped down, opening the door for Morales' eventual victory and decision to nationalize the gas industry.

Hoping to avoid the same pitfalls, Morales in May demanded that foreign companies increase their investment in petroleum production or face the possibility of being taken over by the state, as they must be able to boost production capacity to meet growing domestic and foreign demand.

Despite his efforts, Morale faces an uphill battle in the days leading up to the referendum, though many analysts predict he will win the vote and retain the presidency.

"Morales looks likely to gain a larger share of votes than what his current 54 percent approval rating shows, given that polls usually under-represent rural areas, where his support is stronger," said Erasto Almeida, a Latin America analyst with Eurasia Group.

Projected wins aside, the increasing violence in Bolivia's eastern gas-rich provinces could prove problematic as the region continues its efforts to gain more autonomy from a central government that opponents of Morales say favors the poor western provinces and indigenous populace there.

Protesters against Morales clashed with police in the gas-rich province of Tarija, leaving two people dead and several injured, prompting both Argentine and Venezuelan leaders to cancel planned trips to the capital for talks with Morales.

Last month Tarija residents voted overwhelmingly in support of greater autonomy from the central government, drawing a further divide in a poor South American country over the gas issue, joining three others that had already done the same.

(e-mail: [email protected])

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