Governement by kleptocracy WaPo reports,
Venezuela has seized control of oil fields from France’s Total SA and Italy’s Eni SPA in a show of force against those resisting President Hugo Chavez’s efforts to pry more profits from the industry at a time of high oil prices.
The move signals that Chavez’s government is ready to send top oil companies packing unless they play by Caracas’ new rules, but experts say the tactic could backfire by spooking partners Venezuela needs to develop potentially some of the world’s largest untapped reserves.
Oil Minister Rafael Ramirez announced Monday that state oil company Petroleos de Venezuela SA, or PDVSA, had taken control of Total’s Jusepin field and Eni’s Dacion field, which together produced 115,000 barrels a day, after the two companies refused to turn operations over to state-controlled joint ventures.
In challenging the government, they join Exxon Mobil Corp., which earlier sold off its stake in the 15,000-barrel-a-day Quiamare-La Ceiba field rather than submit to tightened terms….
The seized properties were among 32 oil fields the government has reclaimed from private companies by voiding their oil-pumping contracts and replacing them with so-called “mixed companies” that give PDVSA a 60 percent to 80 percent stake and sharply raise royalties and taxes, among other measures.
Reclaimed? Appropriated or stolen would be better names. These companies won’t be getting their equipment back. The terms that President Chavez demanded is a 60% controlling stake.
Mr Chavez has decided to redefine the terms under which foreign companies can operate in Venezuela, which has the largest oil reserves outside of the Middle East.
The new terms state that the Venezuelan government must have a 60 per cent share in any venture. Sixteen companies have bowed to the demands by the president, among them BP and Shell, but Exxon Mobile, the world’s largest oil company, sold its interests instead.
Total and ENI, of Italy, have refused to sign accords, hence the seizure of Total’s concession. The Venezuelan government has said that both companies owe taxes and face being shut down.
Mr Chavez is using his oil windfall to promote a social reform programme, arms purchases and to engage in anti-US diplomacy, selling oil at below market rates to detach Latin American nations from Washington’s orbit.
Royal Dutch has the added inducement that Chavez has threatened the Dutch ABC islands just offshore of Venezuela.
From the Post article,
But Sosa [president of Grupo Petroleo YV, a Caracas-based energy consultant] warned Venezuela may lose on its gamble: “At the end of the day, it’s harmful. There will be no more additional investments.”
The impact on future investment could prove critical at a time when Venezuela is seeking to develop its vast reserves in the Orinoco tar belt….
But developing those deposits requires Big Oil’s expertise and technology.
Notably, Exxon Mobil, Total and Statoil are among those with investments upgrading about 330,000 barrels a day of heavy oil in the Orinoco region to lighter, more marketable crudes.
Having suddenly changed the rules of the game, Venezuela will find it difficult to get such companies to commit to future investments, Sosa said.
This is all about politics and populism. And maybe paranoia. President Chavez is continually accusing the USA of preparing to invade his paradise. UK Channel 4 recently prepared a 12-minute report on President Chavez, viewable here (broadband connection advisable). He plays to the fears of the Venezuelan people.
