Mr Morales said soldiers and engineers with Bolivia's state-owned oil company would be sent to installations operated by foreign petroleum companies.

Britain's BG Group and BP, as well as the US-based Exxon Mobil, are among those firms operating in Bolivia.

"The time has come, the awaited day, a historic day in which Bolivia retakes absolute control of our natural resources," Mr Morales said in a speech from the San Alberto petroleum field in southern Bolivia.

Bolivia has South America's second largest natural gas reserves after Venezuela. Within the next six months, all foreign companies must turn over most production control to Bolivia's cash-strapped, state-owned oil company, Yacimientos Petroliferos Fiscales Bolivianos (YPBF), Mr Morales said.

Mr Morales, a strident leftist, had pledged to exert greater state control over the industry since he won the presidency in December in a landslide, becoming Bolivia's first indigenous president.

Multinational companies that produced 100 million cubic feet of natural gas daily last year in Bolivia will be able to retain only 18 per cent of their production, with the rest being given to YPFB, he said.

Neil Burrows, a spokesman for BP Group, told The Scotsman last night: "The government has made a decree and told us we have 180 days to respond to its proposals. But the proposal has not been forthcoming so until we look at it in detail, we cannot comment."

He added: "We have less than 100 British workers in the country. The safety and security situation seems to be stable."

A spokeswoman for BP declined to comment on the announcement, but said the company had no British employees in the country.

In the past, YPFB produced Bolivia's natural gas, but it was reduced to an administrative role in the mid-1990s after the country's gas exploration and production business was privatised. Experts have warned that the company is incapable of becoming a producer again without a massive infusion of cash.

Mr Morales has been called "America's worst nightmare" by the US State Department because of his promises to expel foreign firms and his support for farmers of the coca plant, the raw material for cocaine.

He has repeatedly said the country's natural resources have been "looted" by foreign companies and must be nationalised so that Bolivians can benefit from the profits that are being sent overseas.

But he has also said that nationalisation will not mean a complete state takeover, because Bolivia lacks the ability to tap all its natural gas on its own.

Bolivia exports most of its natural gas to Argentina and Brazil, with whom the government is negotiating higher prices.

Last week, Mr Morales told Brazil's Valor Economico newspaper that Bolivia would have to "set up a new battalion, a new army of oil and gas specialists to exert the property right" for a complete state takeover of petroleum production.

Mr Morales also said the state would retake majority control of Bolivian hydrocarbons companies that were partially privatised in the 1990s.

Mr Morales symbolically chose yesterday, 1 May - International Workers' Day - to announce the nationalisation plan. Afterwards, a soldier unfurled a Bolivian flag from atop the natural gas installation.

Presidency marked by bizarre decisions

EVO Morales, the leftist Bolivian president, is renowned for a string of bizarre moves. Soon after taking power in January, Mr Morales, 46, cut his salary by more than half to a little over £1,000 per month. That meant a salary review for all public-sector staff, as no official can earn more than the president.

He then appointed a Marxist journalist to drive his energy policy and a street protest leader to lead the water ministry.

Mr Morales, a former llama herder and coca leaf farmer and Bolivia's first indigenous president, also promised to end American-financed schemes to eradicate the coca crop.

He endorsed comments by his foreign minister that coca leaves, from which cocaine is produced, have more calcium than milk and should be included on school breakfast menus.

In his first diplomatic spat with the United States, Mr Morales said he wanted the Bush administration to explain why it cancelled a visa for Senator Leonilda Zurita, who was planning a speaking tour.

Ms Zurita has led rallies with chants of "Long live coca!" and "Death to the Yankees!"