Chavez Claims State Control of Key Oil Projects
Venezuelan President Hugo Chavez claimed “total control” of four oil ventures run by foreign companies -- a move that would threaten investments in those projects by U.S. oil giants Chevron Corp., ConocoPhillips, Exxon Mobil Corp. and others.
“We have fixed it already,” Chavez told reporters Friday at a meeting of European Union and South American leaders in Vienna. “We have control over the Faja,” he said, referring to the region also known as the Orinoco Belt, where the ventures pump 600,000 barrels a day of the country’s extra-heavy, or viscous, oil.
As word of Chavez’s declaration spread, experts reacted with concern but not surprise.
“It looks like he’s doing the same thing that he did to several other joint ventures,” said James Williams, an energy economist based in London, Ark. “And if he said it’s a done deal, then it’s a done deal.”
The Venezuelan leader’s comments referred to four foreign-led partnerships in which U.S. oil companies have invested in developing the Orinoco fields and building the oil city called Jose, where the tarry sludge is “prerefined” and loaded for transport to offshore refineries.
A spokesman for Exxon Mobil said early in the day that the company had not been notified of any contractual changes. Later, spokeswoman Susan Reeves would say only: “Exxon Mobil takes a long-term view of its activities in Venezuela.”
San Ramon, Calif.-based Chevron is “monitoring the situation” in Venezuela, spokeswoman Stephanie Price said.
Chavez has vowed for years to recover “sovereignty” over Venezuela’s oil fields, which have become the third-largest source of crude imported by the United States. He took his first big step in March, when he assumed majority control of 32 smaller foreign-operated drilling projects.
There has long been an expectation that he would do the same to the foreign-controlled Orinoco projects. Experts believe Chavez would need the National Assembly’s assent for any takeover because the legislature approved the original Orinoco investments. It is widely believed that such approval would be forthcoming if Chavez sought it.
This month, the government raised oil royalties and income taxes to 30% and 50%, respectively, up from 16.7% and 34%.
Energy economist Williams summed up the situation for Chevron and others. “He’s taken a majority of the ownership, the taxes are higher, the royalties are higher, and he hasn’t given them any money. Now they have to decide whether they want to stay and play.”
If there is still money to be made, he added, some companies may well opt to “keep their mouth shut and stay.”
Douglass reported from San Diego and Kraul from Santa Marta, Colombia. Bloomberg News was used in compiling this report.