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Venezuela Suggests Control of Oil Projects

Posted on: Thursday, 11 May 2006, 18:02 CDT

By NATALIE OBIKO PEARSON

CARACAS, Venezuela - Venezuela's congress, dominated by supporters of President Hugo Chavez, released a report Thursday recommending the state assume majority control of key heavy oil projects run by companies like Chevron Corp. and Exxon Mobil Corp. in its oil-rich Orinoco River basin.

Such a move, which Chavez has yet to publicly endorse, would bring all active oil-producing operations run by foreign companies in Venezuela effectively under state control.

The development comes as Venezuela and Bolivia both advance a series of nationalist measures to increase state control over their oil and gas sectors. The moves, aimed at extracting a greater share of profits at a time of soaring oil prices, have rattled investors, strained some diplomatic ties and become a major issue at a summit of Latin American and European leaders this week in Austria.

Oil futures settled at $73.32 a barrel on Thursday.

Venezuela's pro-Chavez National Assembly wants state oil company Petroleos de Venezuela SA, or PDVSA, to take a majority stake in four projects in the Orinoco region just as it did earlier this year in 32 oil fields previously operated under contract by private companies. Those oil fields are now run as state-controlled joint ventures.

"The National Assembly does not accept that the (Orinoco oil) belt does not include majority state control over operations in the belt," said the congressional report.

Oil Minister Rafael Ramirez said earlier this week that while conditions were not in place for the government to make that move immediately, it was "evaluating" the situation and that eventually all oil operations would be brought under majority state control as required by a 2001 law. The comments had come as Venezuela announced a new tax targeting foreign companies.

While the tightening terms have sparked concerns, most foreign companies, including Norway's Statoil ASA, Royal Dutch Shell Plc and Chevron, have expressed willingness to continue their investments in Venezuela as there is little to indicate that Chavez plans to repeat a complete nationalization of the oil industry, which shut private companies out of the sector between 1975 and 1992.

Chavez, however, has called the sector's subsequent reopening during the 1990s a disguised privatization that handed over control and profits to foreign companies. While pledging to correct that, he says private companies are still welcome as long as they play by the new rules.

If the state assumes majority shares in the Orinoco projects, several oil fields would still remain in the hands of foreign companies under exploration contracts but none of those have yet to begin commercial production.

Chavez also has applauded Bolivian President Evo Morales for nationalizing his country's natural gas sector. Concerns over that move have threatened a rift with Brazil, a top buyer of Bolivian gas.

With European companies like Spanish-Argentine Repsol YPF and France's Total SA holding major investments in both Venezuela and Bolivia, Chavez and Morales were being closely watched for clues about their next moves as they attended the summit of Latin American and European leaders in Vienna.

Source: Associated Press/AP Online

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