Orinoco Heavy Oil Belt
(Click to Enlarge)

Venezuela is not considering a cash payment to compensate foreign oil companies for their nationalized assets, the oil minister said early Thursday.

"We do not expect to disburse money so we can reach an agreement with these companies," Oil Minister Rafael Ramirez said in a televised interview on state television, referring to oil upgraders in the Orinoco river basin. "We're still discussing the numbers, the economic agreements."

Ramirez made the comments when he was asked if Petroleos de Venezuela, or PdVSA, would use part of the $7.5 billion obtained through a bond issue to cover the costs of compensating companies. Part of that money, he said, would go to enhance operations in these upgraders, but compensation is another matter.

On Tuesday Venezuela's government took over control of four heavy-crude upgraders located in the Orinoco river belt but PdVSA has yet to determine how it will compensate companies for those assets. So far Ramirez has said the state will only recognize the book value of the investments these companies made in the area.

Companies operating the upgraders have signed memoranda of understanding agreeing to reduce stakes in each venture and are expected to continue talks with the government until June 26. The state expects to have worked out the minority stakes and a compensation deal by then.

Oil companies operating in the area include Exxon Mobil Corp. (XOM), Total SA (TOT), Chevron Corp. (CVX), Statoil (STO) BP PLC (BP) and ConocoPhilips (COP).

Chavez took control of heavy crude ventures as part of a nationalization program he unveiled early in the year. He has also nationalized the entire electricity industry and the country's largest phone carrier, businesses he considers strategic for the country's economic development.

Copyright (c) 2007 Dow Jones & Company, Inc.