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Oregon Road Conditions & Cams Email Story to a Friend April 13, 2006 Chavez drives up world oil prices Venezuela president's plan to n ationalize its oil industry worries private investors By Chris Kraul Los Angeles Times CARACAS, Venezuela — In the uneasy world of petroleum politics, fears that Venezuela will nationalize its oil industry may not rank at the moment with possible war in Iran or civil unrest in Nigeria. But Venezuela's recent actions directed at foreign energy companies are contributing to oil's relentless march toward record prices, seen Tuesday in New York futures trading. Oil pushed past $69 on Tuesday before closing at $68.98 a barrel, up 24 cents and just shy of the all-time high of $69.81 reached in August as Hurricane Katrina slammed the Gulf Coast.Traders said the main driver was Iran's declaration that it had succeeded in enriching uranium for the first time, a prerequisite for developing a nuclear bomb. That raised concerns about a pre-emptive strike by the United States and its allies, which might threaten Iran's nearly 4 million barrels of daily oil production. But worries that Venezuelan President Hugo Chavez might seize control of some key fields containing large deposits of heavy oil in the eastern Orinoco Belt also is convulsing the market. Last month, Chavez grabbed majority control of 32 smaller foreign-operated oil drilling projects. Such a move might cause the departure of at least some of the companies adept at managing heavy oil, which in turn would threaten production levels. "There are a lot of coinciding events which are impacting global energy markets and causing people to question whether there will be enough oil supply," said Michelle Billig of PIRA Energy, a New York research firm. "Venezuela just adds another concern." Advertisement Venezuela exports an average 1.5 million barrels a day to the U.S., its third largest supplier after Canada and Saudi Arabia. Since he took power in 1999, Chavez has pledged to "recover the sovereignty" of Venezuela's oil industry which his predecessors opened up to foreign investment in the 1990s. The first targets were the 32 operating agreements that PDVSA signed giving foreign companies rights to take over aging oil fields. By 2004, the companies had raised the aggregate production of the fields to 550,000 barrels of crude a day, from 100,000 in 1997. Chavez set a March 31 deadline for a 60 percent stake in each of the projects be turned over to state-owed Petroleos de Venezuela, or PDVSA. All but two companies, Total of France and ENI of Italy complied. Exxon Mobil Corp. sold to partner Repsol of Spain rather than agree to relinquishing control, saying Chavez was bound by the contracts signed by his predecessors. Delegations led by Energy Minister Rafael Ramirez personally seized the Total and ENI operations on April 1. Chavez has promised to compensate the companies for their stakes, but the terms aren't known. It might be more difficult for Chavez to seize the four Orinoco projects, in which private companies have invested $12 billion, because Venezuela's National Assembly approved the deals. But Venezuela's relationship with foreign companies has grown increasingly unfriendly during Chavez's tenure. "Will Chavez nationalize the heavy oil? I think there will be a bigger role for PDVSA which might even include taking over operations," said Roger Tissot, an analyst with PFC Energy consultants in Washington. "Uncertainty is the name of the game." The four Orinoco ventures are: Petrozuata, controlled by Houston-based ConocoPhillips; Sincor, by Total and Norway's Statoil; Ameriven, by ConocoPhillips and Chevron Corp. of San Ramon, Calif., and Cerro Negro, by ExxonMobil and Britain's BP. PDVSA owns minority interests in each. The output has become important for Venezuela because production of lighter crude has been declining. The country's overall petroleum production has been hurt by the firing of hundreds of skilled employees in the aftermath of a strike in 2002. The Orinoco projects also are important for the companies. ConocoPhillips and Chevron derive about 10 percent and 9 percent, respectively, of their global oil production from Orinoco. Beginning in the early 1990s, the partners in the four projects sank billions into developing technology to extract oil as thick as tar and that was previously thought unusable. The companies built a set of "pre-refineries" in a new oil city called Jose on east Venezuela's Caribbean shore where the sludge was treated to make it more easily transportable by tanker. The Orinoco projects account for about 25 percent of Venezuela's 2.4 million barrels of daily oil production. Chavez has significantly raised royalties and taxes on foreign companies operating in the Orinoco. The royalty rate has gone to 16.6 percent from 1 percent and the tax rate to 50 percent from 34 percent. After the last tax hike, Chavez promised five years of tax stability. But Venezuelan deputy oil minister Bernard Mommer said in an interview Monday with the Financial Times that more tax hikes may be coming. "The only guarantee you have is political," the newspaper quoted Mommer as saying during a London visit. "The government can promise you whatever they want. It's not binding." Insiders say Chavez's efforts to control the projects will cause operators to leave, depressing Venezuela's output. "Not that many companies can do it, only a few in the world," said one Caracas oil analyst who asked not to be identified. Geopolitical factors were cited in an Energy Department report Tuesday that predicted oil prices remain high through the end of the year."With the market as tight as it is, any negative news puts upward pressure on prices," said Michael Lynch, president of Strategic Energy & Economic Research. i Mail Tribune Home | Local News | Sports | Business | Obituaries | Life | Opinion AP News | Archives | Site Map | Community | Classified Copyright © 1997-2006 Mail Tribune, Inc. All rights reserved. Privacy Policy | Terms & Conditions | Website Feedback www.bingo.com Home Security Systems Trunks, Footlocker Custom Build Computers Computer Security Discount Hotel Reservations online casinos news Send Flowers California Casinos GMAT Prep Windermere Van Vleet Deep Muscle Stimulator Sports Equipment Online Casino Reviews Hammocks Online Bingo Entertainment Guide Online Casino Fundraisers Sudoku Online Casinos Canada Email Security Advertisement s Advertisement