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Venezuela might not pay foreign firms in oil takeover

They stand to lose as much as $30 billion of investment in the Orinoco reserve if the negotiations go sour.

April 18, 2007|From Reuters

PORLAMAR, VENEZUELA — Venezuela threatened Tuesday not to compensate some foreign oil companies in its planned takeover of their multibillion-dollar projects in the OPEC nation's vast Orinoco reserve.

The warning from the oil minister has intensified the pressure the leftist government of President Hugo Chavez has exerted on some of the world's largest companies as they negotiate before a June deadline over the nationalizations.

"We are all talking. There are permanent conversations with all the partners," the oil minister, Rafael Ramirez, told reporters on the sidelines of an energy summit on the Venezuelan resort island of Margarita.

"We are going to see if there's compensation because in some cases there may not be compensation," he added.

Companies whose investments are targeted for takeover in the reserve of tarry crude are Chevron Corp., Exxon Mobil Corp., ConocoPhillips, Norway's Statoil, Britain's BP and France's Total.

Tuesday's threat was the first time that Venezuela explicitly said the companies might not be compensated for losing investments in the four heavy crude upgrader projects, which are valued at more than $30 billion and can produce 600,000 barrels per day.

It reflected the tough negotiating tactics ordered by Chavez, who often rails at capitalism even though he says he is not ejecting the companies from the South American nation in his self-styled socialist revolution.

Compensation was already an issue in the talks to allow Venezuela to take majority control of the projects. Despite raising billions of dollars this year in financing on international markets, Venezuela had previously warned that it did not want to give compensation in cash and that it would possibly offer some kind of payment in oil.

Venezuela's state oil company will take over the operation of the projects May 1. The new makeup of the joint ventures' ownership should be finalized by June 26.

Most companies are expected to work out a way of remaining in the projects because the Orinoco is one of the world's largest reserves and high oil prices allow the firms to make profits despite their sometimes harsh treatment by Chavez.

Separately, Ramirez said Venezuela was studying selling its stakes in refinery investments at Chalmette, La., and Sweeny, Texas, that also involve Exxon Mobil and ConocoPhillips.

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