Venezuela May Pass Law to Seize Oil Services Cos

Venezuelan President Hugo Chavez
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CARACAS (Dow Jones Newswires), May 5, 2009

Venezuelan lawmakers are ready to support a law that would allow President Hugo Chavez to seize the assets of all oil-services companies, giving the state greater control over the industry.

Members of Venezuela's National Assembly may approve in a first reading the law proposal Tuesday that would declare of "public interest" all goods and services related to primary hydrocarbon activities, a needed step before expropriation.

"This allows the government to seize or nationalize all oil-services companies or to create joint-venture deals with those firms," Angel Rodriguez, a senior lawmaker and head of the congressional energy commission, told Dow Jones Newswires Tuesday.

Rodriguez said congress has given the measure emergency priority, meaning a final approval would happen in 30 days.

The law would include all oil services such as water, gas and steam injection technologies used to improve the recovery of crude oil from oil wells. It would also encompass the transport, and other maintenance activities performed in the oil-rich Maracaibo lake, according to a statement sent out by Rodriguez's office.

Once the law is passed, Petroleos de Venezuela SA, or PdVSA, will be able to take possession of these activities.

Compensation for these assets will be determined by the book value of assets, deducting payroll costs, and will be payable in cash or government debt instruments, according to the document.

The congressional proposal comes at a time when PdVSA has struggled to pay local and foreign contractors for oil-well services such as drilling.

In some cases, companies have stopped operations until they receive payment for services rendered. PdVSA has been in negotiations of late to agree on new rates for oil rigs and gradually pay money owed to such companies as Halliburton Co. (HAL) and Schlumberger Ltd. (SLB).

As talks progress, Oil Minister Rafael Ramirez has made clear the state will take over all equipment from foregn companies that cease operations as a way to push Venezuela into paying past-due bills.

In 2007, Chavez ordered the nationalization of key oil ventures along the Orinoco river belt, and offered foreign companies involved minority stakes in new joint-venture deals. Most companies went along but ExxonMobil Corp. (XOM) and ConocoPhillips (COP) chose to leave the country and have taken Venezuela to arbitration over the loss of their assets.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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