BP, Shell Agree to Oil Deal With Venezuela

BP and Royal Dutch Shell have agreed to form joint ventures with Venezuela’s state oil company, replacing contracts under which they pumped crude independently, Venezuela’s oil minister said Thursday.

BP and Royal Dutch Shell are among 15 companies that have signed transitional agreements to move toward the joint ventures, Oil Minister Rafael Ramirez said.

The government is requiring companies that operate 32 oil fields in the South American country to convert to joint ventures with Petroleos de Venezuela, known as PDVSA. Venezuela is the world’s fifth-largest oil exporter and a major supplier of fuel to the United States.

Companies running 26 of those oil fields have agreed to form the joint companies, and the remaining six are expected to sign next week, said Ramirez, who is also president of PDVSA.

“The operating agreements ... were a privatization of Petroleos de Venezuela on the margin of the law,” Ramirez told reporters. Ramirez said that although Venezuela still sought private capital in its petroleum industry, the new agreements ensured that oil production was carried out by companies majority-owned by the state as required under a 2001 law.

Ramirez has said the government could take as much as an 80% stake in the joint ventures, significantly reducing the oil companies’ control of operations and return on profits.

The companies are concerned that the changes could undermine the value of their assets.

PDVSA executives say output at the privately run fields has been about 550,000 barrels of Venezuela’s daily production of more than 3 million barrels. The contract changes are part of a wider strategy by Venezuelan President Hugo Chavez to exert more control over the oil industry.