Morales caused controversy when he announced his intent to re-nationalize Bolivian hydrocarbon assets. While stating that the initiative would not be an expropriation, Morales sent Bolivian troops to occupy 56 gas installations simultaneously, including the two Petrobras-owned refineries which provide over 90% of Bolivia's refining-capacity. All foreign energy firms were required to sign new contracts within 180 days, giving Bolivia majority ownership and up to 82% of revenues for the largest natural gas fields. All such firms signed new contracts. Reports from the Bolivian government and the companies involved are contradictory as to plans for future investment.
By far the biggest customer for Bolivian hydrocarbons has been Brazil, which imports two-thirds of Bolivia's natural gas via pipelines operated by the semi-private Petrobras. Since gas can only be exported from landlocked Bolivia via Petrobras' large (and expensive) pipelines, the supplier and customer are strongly linked. Petrobras has announced plans to produce enough natural gas by 2011 to replace that now supplied by Bolivia. Bolivia's position is strengthened by the knowledge that hydrocarbon reserves are more highly valued now than at the times of previous nationalizations, and by the pledged support of leftist President Hugo Chávez of Venezuela.
Fulfilling a campaign promise, on 6 August 2006, Morales opened the Bolivian Constituent Assembly to begin writing a new constitution aimed at giving more power to the indigenous majority. Problems immediately arose when, unable to garner the two-thirds majority needed to include controversial provisions in the constitutional draft, Morales' party announced that only a simple majority would be needed to draft individual articles while a two-thirds majority would be needed to pass the document in full. Violent protests arose in December 2006 in parts of the country for both two-thirds and departmental autonomy, mostly in the eastern third of
