Venezuela makes deals on oil projects

Several major oil companies reached agreements Monday with the leftist government of President Hugo Chávez of Venezuela over his plan to nationalize multibillion dollar projects in the Orinoco belt.

By Reuters, Bloomberg, IHT
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CARACAS: Several major oil companies reached agreements Monday with the leftist government of President Hugo Chávez of Venezuela over his plan to nationalize multibillion dollar projects in the Orinoco belt.

Exxon Mobil, the world's largest oil company, has agreed to cede the Cerro Negro heavy oil project that it runs by May 1 in compliance with a decree, the Venezuelan energy minister said.

The minister, Rafael Ramírez, later said that Venezuela would compensate major oil companies in crude, instead of cash, in the nationalization of their multibillion dollar holdings in projects in the Orinoco reserve.

Venezuela also agreed to pay the equivalent of $250 million to BP and Total for the seizure of the Jusepin oil field last year.

"Those $250 million, we will not pay in cash, but rather we have a manner of arranging this with them that will not involve monetary effort," Ramírez said without giving details.

BP and Total, the leading European oil companies, formerly managed Jusepin on a fee-per-barrel basis.

On March 31, Petróleos de Venezuela seized the field after Total, the French company, refused to sign an agreement to convert its contract to a joint venture.

Venezuela previously had compensated investors through a voucher mechanism that gives them credit toward future investments.

Such a system could prove attractive to Total and BP, both of which are negotiating with the authorities over the nationalization of four extra-heavy crude oil projects in the Orinoco basin.

"Today the important thing is to work toward the future," Total's chief executive, Christophe de Margerie, said. "Undoubtedly, for Total and the rest of the partners, the Orinoco represents a high priority,"

In a statement, Petróleos de Venezuela said it would "settle with the foreign companies" with Total at 55 percent and BP at 45 percent "in line with their respective holdings in the Jusepin consortium."

The Jusepin field produced about 30,000 barrels per day when it was taken over. BP was the minority partner in operations.

Venezuela seized the field after the foreign companies failed to agree to terms under which the field would be operated as a "mixed company" with the Venezuelan state holding a majority stake.

Under the accord, Petróleos de Venezuela will now convert the Jusepin field into a state-controlled venture, with BP as a part owner, a statement released in Caracas said.

"Partners sometimes have different moments, one is up when the other one is down," de Margerie said.

He pledged to continue Total investments in Venezuela, where the company has run fields for more than three decades.

Since a landslide re-election victory in December, Chávez has been on a nationalization drive.

After buying controlling stakes in utility companies in recent weeks, he has now begun to take concrete steps to fulfill his pledge to take over the much larger foreign investments in the Orinoco.

Companies involved in the Orinoco, which also include Chevron, ConocoPhillips, Statoil and BP, have to cede operations by May 1.

The companies have several more months to negotiate the final terms of any deal over their ownership stakes in the project.

Ramírez said that if the companies did not reach an agreement over the terms of the projects in four months, then the state would simply take over their control.

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