ANALYSIS-Andes' energy reliance on Chavez could prove risky

CARACAS Aug 14 (Reuters) - Bolivia and Ecuador risk facing stagnant oil and gas production by relying on Venezuelan President Hugo Chavez to provide billions of dollars in investments that are unlikely to ever materialize.

The two countries have launched a wave of tax hikes and forced contract changes that have reduced private companies' interest in investing and left the Andean nations looking to the socialist leader the take up the slack.

But analysts say despite record oil prices, Venezuela will find it hard to deliver on its promises as it struggles with its own output and juggles an ambitious project portfolio, possibly disrupting South America's delicate energy balance.

"We see a huge capital investment vacuum in the region," said Jorge Pinon, Energy Fellow with the Center for Hemispheric Policy at the University of Miami.

"Multinational oil companies are not going to put substantial capital at risk, and we don't think Venezuela has the know-how to run these projects."

Bolivia's Evo Morales in 2006 nationalized the country's natural gas reserves and boosted the government's share of profits while Ecuador's Rafael Correa last year decreed a large windfall tax and ordered companies to change production sharing deals to service contracts.

The two presidents followed the lead of ideological ally Chavez, who sparked the Andean energy nationalizations with his own nationalization crusade started in 2004.

Companies such as Spain's Repsol (REP.MC) and Brazil's Petrobras (PETR4.SA) have agreed to stay on in Ecuador and Bolivia, which respectively produce around 500,000 barrels per day of oil and 41 million cubic meters of natural gas per day.

But they are expected to invest just enough to maintain operations rather than significantly expand production or reserves -- and Chavez is promising to fill in the gaps.

VENEZUELA TO THE RESCUE

Venezuelan state oil company PDVSA in 2007 took a 40 percent stake in Bolivia's newly created state energy company Petroandina Gas that will become a key Bolivian operator.

PDVSA has pledged to spend more than $350 million as part of Bolivia's campaign to increase natural gas reserves by 20 percent, and last month sent Bolivia a drilling rig at a time when such equipment is in scarce supply around the world.

Exploration will be crucial for Bolivia to meet its promise to boost natural gas exports to energy-deficient Argentina, while maintaining gas supplies for Brazil's booming economy.

"PDVSA has been promising for about three years ... but in terms of investment the only thing it has done is open an office in La Paz," said Carlos Alberto Lopez, an energy analyst and former Bolivian energy minister. "Regarding exploration and drilling it has done nothing whatsoever."

Chavez has promised at least $2.5 billion for a 49 percent stake in a new refinery on the Pacific coast of Ecuador, and delivered drilling rigs to state oil company Petroecuador.

PDVSA says it will help boost output at one of Ecuador's difficult-to-operate fields, and has created an oil-for-diesel swap deal to ease Ecuador's shortage of refining capacity.

REALITY CHECK

But analysts say the flurry of Andean agreements are strikingly similar to dozens of others penned with far-flung allies ranging from Fiji to Syria, including more than 10 refinery joint ventures that have shown little or no progress.

PDVSA, the financial engine of Chavez's self-styled socialist revolution, is already overstretched with social programs and its own oil production is noticeably lagging behind an expansion plan launched in 2005.

Chavez for years promoted the construction of a massive natural gas pipeline running from Venezuela to Argentina that critics passed off as ridiculous because it was economically unsustainable. The idea has been largely abandoned

Patrick Esteruelas, an analyst with the Eurasia Group in New York, said Chavez's reputation for making big promises without delivering means Bolivia and Ecuador will in the end have to rely on alliances with global multinationals.

"These two countries will be plagued by declining production unless they can offer more attractive terms that will persuade oil companies to make sizable investments," he said. (Additional reporting by Alonso Soto in Quito and Eduardo Garcia in La Paz; editing by Jim Marshall)