PDVSA Pres: ConocoPhillips Must Accept Oil Takeover Before Talks

CARACAS May 08, 2007 (Dow Jones Newswires)

ConocoPhillips (COP) must formally accept Venezuela's oil nationalization before negotiating compensation of lost assets, said Petroleos de Venezuela SA (PVZ.YY) President Rafael Ramirez late Monday.

ConocoPhillips is the only foreign oil company that has not yet signed a document to formally put its operations under PdVSA control, placing the Houston, Texas-based firm on Venezuela's black list. Some analysts say ConocoPhillips's refusal to sign indicates it is preparing for an arbitration battle.

Ramirez said ConocoPhillips has "sent some signals that it wants to talk."

PdVSA took control of ConocoPhillips's assets on May 1, along with all other foreign oil operations, despite the lack of an agreement. Ramirez still wants ConocoPhillips to sign before moving forward.

"First, they have to accept the transfer of operations," said Ramirez, speaking to Dow Jones Newswires on the sidelines of an official event late Monday.

"When they accept this, we can talk about the other things."

He added that ConocoPhillips, which has the largest operations in Venezuela of any foreign oil company, is "last on the list" in his agenda.

"Everyone said they accepted ... except ConocoPhillips."

Last week Venezuela took control of four heavy crude projects that have a capacity to produce over 600,000 barrels a day, and three conventional oil fields that have not yet entered commercial production. Apart from ConocoPhillips, other companies affected by the move include Exxon Mobil Corp. (XOM), Total (TOT) and Chevron Corp. (CVX).

PdVSA is demanding a minimum 60% stake in each project and it remains unclear how these firms will be compensated for accepting smaller stakes. Ramirez has said the companies will not be paid in cash, and has suggested payment in crude oil.

ConocoPhillips has a 50.1% stake in Petrozuata and a 40% stake in Hamaca, two massive projects that extract tar oil from the Orinoco river basin and then upgrade it into synthetic crude at special refineries along Venezuela's eastern coast.

Venezuela took control of all foreign oil operations last week, and has set a June 26 deadline to negotiate new corporate structures for each project.

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