Venezuela Seeks Control of Remaining Oil Ventures

VIENNA Sep 12, 2006 (Dow Jones Newswires)

As a final step to gaining complete control of its oil industry, Venezuela will by the end of the year seek a majority stake in three conventional exploration and production projects jointly held with foreign oil companies, oil minister Rafael Ramirez said Tuesday.

The transformation of "conventional oil exploration and production projects" into mixed companies controlled by the Venezuelan state oil giant is "still pending," said Ramirez at a conference of global energy executives and oil ministers in Vienna.

"Once we complete that, we'll have accomplished our purpose of creating a new petroleum regime" that will reflect Venezuela's "oil sovereignty," Ramirez said.

The three high risk exploration contracts - Corocoro, Golfo de Paria Este and La Ceiba - were signed in 1997, when Petroleos de Venezuela S.A. (PVZ.YY) welcomed foreign investors to help augment the country's output.

ConocoPhillips (COP), Eni Spa (ENI), Exxon Mobil Corp. (XOM) and Petro-Canada and other foreign companies are conducting exploration activities in these fields.

Now the state oil company will take over a controlling stake of the operations just as it has assumed control of other sectors of the oil industry, although Ramirez didn't specify a time frame.

Venezuela, which has gradually reversed direction on foreign oil investment since leftist president Hugo Chavez assumed office in 1999, has already transformed operating service contracts into state-controlled joint ventures. In the process, it's securing a majority stake in four heavy oil projects in the Orinoco Belt. Ramirez told reporters on Monday that PdVSA would control the Orinoco projects "before the year is over."

The transformation of the other high risk exploration contracts "will be ready too" before the end of the year, he said.

Despite the recent transformations, private foreign investment still has a place in Venezuela, the minister said. "Our oil sovereignty doesn't exclude the presence of private capital, as long as they respect our sovereign rights," he said. "We ask them to abstain from promoting the policies of consuming countries that have a yearning for their colonial or imperial past."

Under previous administrations, PdVSA aligned itself with the interests of consumer nations as it sought to become an international oil company, said Ramirez. When PdVSA acquired several U.S. refineries, the company signed supply contracts that heavily discounted Venezuelan oil.

PdVSA will overhaul those contracts and adopt "a public pricing system," said Ramirez, as it continues to evaluate its foreign partnerships in the U.S.

The contracts are difficult to dismantle, as many were tied to securities issued by Citgo, PdVSA's refining arm in the U.S.

Also, some partners "thought they had an acquired right" to the supply contracts, said Ramirez, referring to Citgo's partnership with Lyondell Chemical Co. at a Houston refinery. PdVSA recently sold its minority stake in the refinery to Lyondell.

"As we have shown with our sale of Lyondell, we won't allow these practical obstacles to become an excuse" to maintain the structures of the past, Ramirez said.

Copyright (c) 2006 Dow Jones & Company, Inc.

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