Venezuela moved closer to nationalizing its oil-rich Orinoco River basin, after four foreign oil companies signed deals giving Venezuela the lion’s share of the profits and two US companies pulled out altogether.
“ExxonMobil and ConocoPhillips are ending their participation in the exploration ventures,” Oil and Energy Minister Rafael Ramirez said Tuesday at the signing ceremony with France’s Total, Norway’s Statoil, British Petroleum and US company Chevron.
The state-run oil company Petroleos de Venezuela (PDVSA) said it had raised its share in the exploration ventures from an average 39 percent to 78 percent in the deals.
The United States immediately issued a statement calling on Venezuela to abide by its international commitments, and demanded “fair and just” compensation for the two US companies’ interests.
The move to increase the state’s participation in the Orinoco ventures is part of a wide-ranging nationalization drive firebrand President Hugo Chavez launched in January that so far has included the telecommunications and electricity sectors, the takeover of idle land and tighter controls over the private health sector.
Venezuela, Latin America’s only member of the Organization of Petroleum Exporting Countries (OPEC), hopes to certify by 2008 that the Orinoco region has oil reserves of 1.3 trillion barrels, 20 percent of which can be extracted with current technology.
The fuel is a highly viscous, extra-heavy crude which needs special processing to turn it into synthetic oil before it can be refined.
In the past, the big oil companies paid only one percent in royalties for the Orinoco crude they extracted, adducing the high cost of processing the fuel. After Chavez was elected in 1998, royalties increased to 33.2 percent, while taxes went up from 34 percent to 50 percent.
US oil giant ConocoPhillips had an interest in the Petrozuata heavy-oil venture, and ExxonMobil had a concession in the Ceiba oil block.
“Based on the negotiations that were conducted, the (now-)extinct Petrozuata strategic association and the La Ceiba exploration block have come under the control of PDVSA,” the state-run oil company said.
US State Department spokesman Tom Casey said Venezuela “like any other government, has the right to make these kinds of decisions to change ownership rules or other kinds of regulations.”
However, he added, the United States expects Venezuela to comply with international agreements “in terms of providing fair and just compensation in accordance with international standards for any property that does come under government ownership or otherwise changes hands as a result of this.”
Ramirez said that PDVSA would not seek new partnerships to replace ExxonMobil and ConocoPhillips. “We really feel very comfortable with Venezuela taking over those concerns,” he said.
The Chavez administration had imposed a June 26 dateline for foreign oil companies with interests in Venezuela to agree to PDVSA’s terms.
Ramirez said, however, that under an informal agreement, negotiations with Exxonmobil and ConocoPhillips were continuing over the terms of their pullout.
Venezuela’s National Assembly is expected to ratify all Orinoco contracts on August 26.
Venezuela has offered payment in cash or oil for assets it takes over from the oil companies that are staying in Venezuela, a PDVSA source told AFP.
US market analysts predicted a drop in oil revenues for Venezuela as foreign companies pull out or reduce their investment in less-profitable ventures.
“If all the foreign oil companies leave, the Venezuelan oil industry will be in a shamble … this will be the beginning of the end of Hugo’s regime,” said Alaron market analyst Phil Flynn in New York.
Venezuela first nationalized its oil industry in 1976 under president Carlos Andres Perez (1974-1979), who then reversed the process in 1992 during his second term (1989-1993). After his reelection in 2000, Chavez began raising royalties and taxes on foreign oil companies
According to OPEC, Venezuela’s oil quota is 3.2 million barrels a day, but over the past few years it has dropped to 2.6 million barrels, of which 1.8 million is exported to the United States.