Venezuela seizes control of oil fields

Posted in Other | 04-Apr-06 | Author: Juan Forero| Source: International Herald Tribune

Venezuelan Oil Minister and President of State oil company Petroleos de Venezuela, SA, or PDVSA, Rafael Ramirez gives a news conference at his office in Caracas, Venezuela, Monday, April 3, 2006.
LIMA Emboldened by the high price of oil, Venezuela's populist government said Monday that it had taken control over fields operated by two European oil giants after they challenged new rules that give the state extensive control over oil production that, until now, had been managed by foreign multinationals.

The seizure of a field from France's Total and the termination of a contract to operate a field with Italy's Eni came five days after Venezuela's energy minister, Rafael Ramírez, told ExxonMobil that it was not welcome in Venezuela.

To avoid new terms that make the state a partner in a marginal 15,000-barrel-a-day field, ExxonMobil sold its stake to Repsol of Spain, though the world's largest publicly traded oil company still holds a 42 percent stake in the much larger Cerro Negro heavy oil project.

Last week, Venezuela's National Assembly, which is completely controlled by President Hugo Chávez, approved long-awaited measures that give the state oil company, Petroleos de Venezuela, a majority stake in 32 projects that had been run by private companies. The measure, which converts to joint ventures projects in which oil companies were once paid fees, was signed by 16 companies that include Petrobras of Brazil, Chevron and Royal Dutch Shell.

But Total and Eni, the third- and fourth-largest European oil companies, were unable to reach deals with the government, prompting Venezuela to announce it had taken control of their

fields. The seizure of the Total field was the first time Chávez's government has taken control of a private oil field, matching government rhetoric that Venezuela would assert more control over the hemisphere's largest oil reserves.

Ramírez on Monday told reporters that Total had tried to present a new proposal that would give the company a bigger stake. Ramírez called it unacceptable and disrespectful.

"We didn't accept it because this country and this government does not allow itself to be blackmailed," said Ramírez. "We don't want companies that do not adjust themselves to our laws in our country."

Patricia Marie, a spokeswoman in Paris, confirmed by telephone that negotiations with the state were not completed and said employees from Petroleos de Venezuela were now on the Jusepin field. But she said that Total hoped to renew negotiations with Venezuela.

Eni said in a statement that its activities in the Dacion field had been "unilaterally terminated and all the management of the operations must be transferred" to control of Petroleos de Venezuela. Eni said it would comply but said that it believed the action was a violation of Eni's contract rights and that it expected to be compensated.

"In the event that an agreement cannot be reached, Eni will pursue legal action to claim its rights," the statement said.

The Dacion and Jusepin fields produce less than 100,000 barrels a day, a fraction of the 2.6 million barrels that oil analysts say Venezuela produces daily.

The switch to joint ventures is not a surprise. Ramirez announced the plan a year ago, saying Venezuela had decided to strike down contracts that were signed in the 1990s when the price of oil was far below its current levels.