Venezuela Yet to Put Price on Oil Services Takeovers

President Hugo Chavez
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CARACAS (Dow Jones Newswires), Jul. 21, 2009

Venezuela's state oil company has yet to initiate a valuation process for the 74 foreign and local oil services companies the government has nationalized since May, local media reported Tuesday.

The delay by Petroleos de Venezuela SA, or PdVSA, in putting a price tag on the companies suggests those firms will have to continue to exercise plenty of patience as they await some type of compensation.

The total value of all the companies could be in the ballpark of $3 billion, said El Universal newspaper, citing sources linked to the process. But observers say the final total may be much less as PdVSA could take into account labor and environmental liabilities, and other factors.

PdVSA last month set up committees aimed at evaluating the companies, the paper said, but it's unclear what else has been done.

Officials at PdVSA were not immediately available for comment.

The nationalization of oil services companies, which provide services to the petroleum exploration and production industry but do not typically produce oil themselves, is the latest step in President Hugo Chavez' move toward socialism. It follows his 2007 decision to nationalize multi-billion dollar oil production projects in the crude-rich Orinoco region that were once operated by a handful of the world's largest private sector oil companies.

PdVSA chief Rafael Ramirez last month said that sometime around the middle part of the year all the aspects pertaining to the compensation processes would be set, the newspaper reported.

Among the foreign companies impacted by the takeovers are natural gas distributor Williams Cos. of Tulsa and Exterran Holdings Inc., a Houston-based company. They owned and controlled the PIGAP II gas compression plant.

Others affected include the John Wood Group; Gulmar Offshore Middle East, a United Arab Emirates-based contractor; and Tidewater Inc., a U.S. operator of ships and barges on Lake Maracaibo.

Ramirez said in May the companies affected have lost 632 pieces of equipment, including boats, barges, cranes, dock equipment and other oil production technology.

Making matters worse for the companies whose assets were seized that were seized, the nationalization law allows Chavez to pay companies using government debt instruments, an option Chavez has said he may favor.  

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

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