Bolivia and Venezuela Move Forward with Nationalization of Petroleum Industries

NotiSur - South American Political and Economic Affairs, May 18, 2007 | Go to article overview

Bolivia and Venezuela Move Forward with Nationalization of Petroleum Industries


On International Workers Day, May 1, the governments of Bolivia and Venezuela announced that the nationalization of their respective petroleum industries was moving forward or had been completed. In Venezuela's case, the government took over the last of the country's private oil fields on May 1, while Bolivia has been continuing its effort to take control of its large-scale natural-gas reserves and gasoline refineries from foreign companies. Additionally, the government of Venezuelan President Hugo Chavez made moves to nationalize the telecommunications and electric systems. Chavez also threatened to nationalize banks if they did not offer optimal loans to infrastructure-development projects in Venezuela.

Venezuelan troops accompany oil nationalizations

Chavez said on April 12 that soldiers would accompany government officials when they took over oil projects in the Orinoco river basin in May.

Chavez has decreed that Petroleos de Venezuela SA (PDVSA) will take a minimum 60% stake in four heavy-oil projects in the Rio Orinoco region, and he invited the six private companies operating there to stay on as minority partners.

"On May 1, we are going to take control of the oil fields," Chavez said. "I'm sure no transnational company is going to draw a shotgun, but we will go with the armed forces and the people."

The projects--run by BP PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips, France's Total SA, and Norway's Statoil ASA--upgrade heavy, tar-like crude into more marketable oils and are considered Venezuela's most promising. As older fields elsewhere go into decline, development of the Orinoco is seen as key to Venezuela's future production.

Negotiations on the takeover have yet to yield an agreement and are expected to be difficult as the companies seek a deal that takes into account more than US$17 billion in investments and loans related to the projects.

Chavez has been given special powers by the congress (Asamblea Legislativa, AL) for 18 months to issue laws by decree in energy and other areas like electricity and telecommunications (see NotiSur, 2007-01-26). Chavez promotes the nationalizations as necessary steps to give the government control of sectors strategic to Venezuela's interests, and they play a key role in his political popularity.

As promised, the government took over Venezuela's last privately run oil fields on May 1, which international business reporters said would intensify the power struggle with multinational companies regarding the world's largest-known single petroleum deposit.

Newly bought Russian-made fighter jets streaked through the sky as Chavez shouted, "Down with the US empire!" to thousands of red-clad oil workers in the Orinoco river basin, calling the state takeover a historic victory for Venezuela after years of US-backed corporate exploitation.

"The nationalization of Venezuela's oil is now for real," said Chavez, who declared that for Venezuela to be a socialist state it must have control of its natural resources. "Today we are closing a perverse cycle that opened here more than 10 years ago, a perverse process that they called the petroleum opening," said Chavez in front of a large gathering at the Complejo Criogenico de Jose, in the city of Jose, Anzoategui.

Chavez accused foreign oil companies of bad drilling practices stemming from their hunger for quick profits and said Venezuela could sue them for causing lasting damage to oil fields.

While the state takeover had been planned for some time, the six oil companies remain locked in a struggle with the Chavez government regarding the terms and conditions under which they will be allowed to stay on as minority partners. All but ConocoPhillips signed agreements the previous week agreeing in principle to state control, and ConocoPhillips said Tuesday that it, too, was cooperating.

The companies have leverage with Chavez because experts agree that PDVSA cannot transform the Orinoco's tar-like crude into marketable oil without their investment and experience. …

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