Venezuela to Cut Oil Contracts As Prices Fall

(THE WALL STREET JOURNAL via Dow Jones Newswires), Mar. 4, 2009

Venezuela said it will seek to renegotiate contracts with oil-service companies, a move that points to increased economic strain.

More than 90% of Venezuela's hard currency comes from its oil production, which populist President Hugo Chavez has used to fund a splurge in consumer imports and underwrite social spending programs.

In the past few months, Mr. Chavez also spent freely on a political campaign to persuade Venezuelan voters to scrap term limits and allow him to run for president as many times as he likes. He won that referendum last month.

But as oil prices have plummeted, Mr. Chavez is increasingly hard-pressed to pay for his programs. Adding to woes is falling production at state oil company Petroleos de Venezuela SA.

Oil Minister and PDVSA President Rafael Ramirez said in a statement that the company planned to cut its spending on oil-service contractors by 40%. He didn't say how much money it intended to save. The company has built up huge debts with more than 6,000 contractors and suppliers, some of which have stopped work until they are paid.  

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