Venezuela’s State Oil Co Migrates Foreign Oil Companies to Joint Ventures

Oil minister and PDVSA President Rafael Ramirez signed agreements with the 19 out of 20 companies to turn operating agreements into joint ventures. Only ExxonMobil has so far failed to sign such an agreement and now faces the prosepct of losing control over the oil fields it operated.

Caracas, Venezuela, December 20, 2005—Venezuela’s Minister of Energy and Petroleum, Rafael Ramirez, signed the second to last agreement for migrating foreign oil companies’ activities from operating agreements to joint ventures. Ramirez hailed the move, saying, “from now on we will operate as partners in the development of important reserves.”

Ever since the so-called “oil opening” of the early 1990’s, Venezuela’s state-owned oil company PDVSA has been contracting with transnational oil companies to produce oil in some of the more marginal and difficult to extract oil fields of Venezuela. Via these operating agreements, foreign oil companies produce 532,000 barrels of oil per day and paid very low taxes while over-charging for the extraction process, say Chavez government officials.

Early last year, Venezuela’s Ministry of Energy and Petroleum announced that all 20 transnational oil companies doing business in Venezuela under the operating agreements, would have to sign agreements to transition these agreements into joint ventures with PDVSA, where PDVSA would take an average 60% share in the projects. Many critics of the plan at the time said that such a transition was unrealistic and that the companies would not agree to it.

Yesterday, during the a ceremony for the signing of the 19th joint venture transition agreement, all foreign oil companies had agreed to the transition, except for ExxonMobil. The 20 companies were involved in 32 operating agreement projects. Companies that signed transition agreements include Eni Dación B.V., Total Oil and Gas Venezuela, West Falcon Sansom Hydrocarbons, Chevron Global Technology Services, BP, Shell, Repsol YPF, and Harvest Vinncler.

ExxonMobil, the world’s largest oil company, is the only company that has so far not agreed to switch to a joint venture and now faces the prospect of being forced out of the oil fields it currently operates. The Venezuelan government stated that it would not allow any oil company that does not sign a transition agreement before the end of 2005 to continue its operating agreements. ExxonMobil is also the only oil company that is challenging the Venezuelan government in court, over back taxes and tax increases that the government is trying to collect from many transnationals.