On June 27, the New York Times and Wall Street Journal vied for attention with feature stories on oil giants ExxonMobil and ConocoPhillips "walking away from their multi-billion-dollar investments in Venezuela" as the Journal put it or standing "Defiant in Venezuela" as the Times headlined. Both papers can barely contain their displeasure over Hugo Chavez wanting Venezuela to have majority ownership of its own assets and no longer let Big (foreign) Oil investors plunder them. Those days are over. State oil company PDVSA is now majority shareholder with a 78% interest in four Orinoco joint ventures. That's up from previous stakes of from 30 to 49.9%. That's how it should be, but it can't stop the Journal and Times from whining about it.
What ExxonMobil and ConocoPhillips reject, oil giants Chevron, BP PLC, Total SA and Statoil ASA agreed to. They're willing to accept less of a huge profit they'll get by staying instead of none at all by pouting and walking away as their US counterparts did. Or did they? The Wall Street Journal reports "Conoco isn't throwing in the towel in Venezuela yet. By not signing a deal, the Houston company kept open the option of pursuing compensation through arbitration." Exxon, however, is mum on that option for now. Responding to Energy Minister Rafael Ramirez saying the two oil giants will lose their stakes in the Orinoco oil fields altogether, a company spokesperson expressed "disappoint(ment) that we have been unable to reach an agreement on the terms for migration to a mixed enterprise structure (but will) continue discussions with the Venezuelan government on a way forward."
So what's likely ahead as most Big Oil giants agree to Venezuela's terms while two outliers haven't yet but may in the end do so. The country's oil reserves are too lucrative to walk away from, especially with Russia now pressuring foreign investors the same way. It also wants majority stakes in its own resources with its giant oil and gas company Gazprom in control. It has a monopoly over the country's Sakhalin gas field exports and has taken over two of the largest energy projects in eastern Russia.
If these actions by Venezuela and Russia succeed as is likely, they may influence other oil producing nations to follow a similar course and pursue plans for larger stakes in their own resources as well. Why not? They own them and even with less ownership interests, Big Oil will still earn huge profits from their foreign investments. They just won't be quite as huge as they once were with one-sided deals benefiting them most. So the end of this story may not be its end according to Michael Goldbert, head of the international dispute resolution group at Baker Botts, an influential law firm representing major international oil companies. He said he didn't think the June 26 actions were "necessarily the end of the story,” adding, “The prospects of a deal are never over until a sale is made or an arbitrator reaches a decision."
The investments are large, ranging from $2.5 - $4.5 billion for Conoco and $800 million for Exxon if Venezuela assumes ownership of its heavy oil projects. Conoco explained "Although the company is hopeful that the negotiations will be successful, it has preserved all legal rights, including international arbitration." Exxon also expressed its hope an agreement could be reached permitting it to continue operating in an ownership role.
It looks like Conoco and Exxon want one foot in and the other outside Venezuela to keep its interests in the country alive. It also looks like they're playing games and letting the Wall Street Journal and New York Times do their moaning about what they ought to be grateful for - the right to invest and earn huge profits the way other Big Oil investors are opting to do. Despite their June 26 decisions, Exxon and Conoco may, in the end, make the same choice. If they don't, the stakes they relinquish will shift to other producers according to James Cordier, president of Liberty Trading Group in Tampa, Florida. He said production won't halt, and "Before everyone walks out, a deal will be struck and production there will continue." Caracas-based petroleum economist Mazhar al-Shereidah agrees saying "Venezuela is now free to find other partners (and) this doesn't constitute a dramatic situation." There are plenty of capable and willing takers around.
Conoco and Exxon may in the end accept less of a good investment, stop whining about it, and continue operating in Venezuela. Why not? The country is more open than many other oil-producing nations with much of their world's proved reserves controlled by state monopolies barring private investment. Venezuela barred them from 1975 - 1992 when the nation's energy sector was completely nationalized. That changed with a series of partial privatizations in the 1990s, and Chavez said he has no plans to reinstitute a complete oil industry nationalization. Private investors can thus remain in the country and continue earning huge profits doing so. Conoco and Exxon may decide after all to share in them.
Venezuelan V. Iraqi Oil Policies - A Study in Contrasts
High-level US officials from the administration, Congress, and Pentagon are pressuring the puppet Iraqi parliament to pass its new "Hydrocarbon Law" drafted in Washington and by Big US and UK oil companies. Its provisions are in stark contrast to Venezuela's oil management policies under Hugo Chavez. For Chavez, his nation and peoples' interests come first. In Iraq, however, Big Oil licensed plunder will become law if the parliament agrees to accept what its occupier and corporate interests demand. At this stage, it's nearly certain it will clearing the way for stealing part of what a US state department spokesperson in 1945 called "a stupendous source of strategic power, and one of the greatest material prizes in world history" - the vast (mostly Saudi) Middle East oil reserves.
In Venezuela, the nation and its people will benefit most from the country's oil wealth. In Iraq, their resources are earmarked mostly for Big US and UK Oil. The new "Hydrocarbon Law" is a shameless act of theft on the grandest of scale. It's a privatization blueprint for plunder giving foreign investors a bonanza of resources, leaving Iraqis a mere sliver for themselves. As now written, its complex provisions give the Iraqi National Oil Company exclusive control of just 17 of the country's 80 known oil fields with all yet-to-be-discovered deposits set aside for foreign investors.
Even worse, Big Oil is free to expropriate all earnings with no obligation to invest anything in Iraq's economy, partner with Iraqi companies, hire local workers, respect union rights, or share new technologies. Foreign investors will be granted long-term contracts up to 30 or more years, dispossessing Iraq and its people of their own resources in a naked scheme to steal them.
The Wall Street Journal, New York Times and rest of the dominant US media shamelessly denounce Hugo Chavez for his courage and honor doing the right thing. In contrast, their silence, and effective complicity, on what will be one of the greatest ever corporate crimes when implemented shows their gross hypocrisy. It'll be up to the people of Iraq to resist and reclaim what Venezuelan people already have from its social democratic leader serving their interests above all others.
Stephen Lendman lives in Chicago and can be reached at [email protected].Also visit his blog site at sjlendman.blogspot.com and listen to The Steve Lendman News and Information Hour on TheMicroEffect.com Saturdays at noon US central time.