Venezuela Oil Trade Show Hit by Service Sector Nationalization

President Hugo Chavez
(Click to Enlarge)

MARACAIBO, Venezuela (Dow Jones), Oct. 13, 2009

The 20th Latin American Petroleum Show kicks off here Tuesday, but without the fanfare seen in previous years due to the Venezuelan government's nationalization of oil companies that traditionally set up booths at the event.

Once one of the region's premier oil and gas trade shows, the three-day LAPS in the past attracted more than 30,000 visitors and teemed with more than 200 booths. Decision-making oil executives from around the globe would swoop in on this sweltering, wealthy oil city in western Venezuela, jamming hotel rooms and restaurants.

This year, though, hotel rooms are still available as the event gets underway, and shuttle flights from the capital city of Caracas weren't even full.

Organizers are trying to put a positive spin on this year's event, and point to some big names they say will be in attendance, including Halliburton, Schlumberger Ltd. and Norway's StatoilHydro.

But the organizers also acknowledge the show is condensed, with only about 100 booths reserved, or half that of years gone by.

The global economic downturn can shoulder some of the blame for dampened spirits. Trade show bookings are down worldwide as companies hunker down to keep costs low and wait for an economic rebound.

But the real culprit for the low turnout at this year's Maracaibo oil show is President Hugo Chavez and his socialist policies. In May, Chavez began nationalizing more than 70 foreign and local oil service companies as part of his push toward "21st Century Socialism."

Making matters worse, the government has dragged its feet on compensating the companies as it seized boats, barges, cranes and dock equipment in an effort to give the Venezuela people more control over oil activities that were outsourced in the years before Chavez took power.

Chavez's moves forced state oil company Petroleos de Venezuela to immediately postpone the Maracaibo oil show, which normally takes place in June or July.

After all, these oil business contract companies, which provide services to the oil exploration and production industry but typically don't produce oil themselves, were the driving force behind the trade show in previous years as they sought to attract the attention of major oil-producing companies like Chevron Corp. and BP PLC.

They often even footed much of the bill for the event, giving the Venezuelan government a free ride. Patricia Martins, one of the event organizers, says the government's nationalization wave is likely behind both the event's postponement this year and its smaller overall size.

"I imagine that back in June (when the show was due to take place) you still had a lot of the companies, companies that might be taking part in the event, waiting for payment from PdVSA," Martins said.

But Martins adds that not all oil contractors were nationalized, and points out that many parts of Venezuela's massive oil sector remain in the hands of the private sector.

Organizers say more than 400 companies, mainly local firms, will be promoting their products and services. Erwin Lingg, president of the Oil Chamber of the state of Zulia state (of which Maracaibo is the capital), said "this event is a showcase of the private national sector's potential in different oil areas, from exploration to production to refining to marketing."

Among the headliners at the event is PdVSA President Rafael Ramirez, who is also Venezuela's oil minister. Also, Russian Energy Minister Sergei Shmatko is scheduled to speak, according to organizers.

Some observers at the trade show, however, are still scratching their heads, wondering what the point is of a capitalism-inspired trade show in a country whose president says he's fully committed to socialism.  

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

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