Venezuela’s president, Hugo Chávez, said on Thursday that his government would seize majority state control of four major foreign-run oil producing units by May 1 as part of his self-styled “socialist revolution”.
The Venezuelan government had been negotiating with multinational energy companies to gain majority stakes in the four “strategic association” oil projects in the Orinoco River Belt for about six months.
But the negotiations have been slow-moving and Mr Chávez’s appeared to signal on Thursday that his government is prepared to take over the assets without negotiations if necessary.
“We want to negotiate,” Mr Chávez said on Thursday. “But my instructions are that on May 1 all those oilfields will see the light of day under our control.”
Mr Chávez’s announcement came barely hours after the country’s legislature granted him powers to rule the world’s fifth-largest oil exporter by decree until mid-2008. Last month, Mr Chávez said his government would nationalise the country’s main privately-held telecommunications company and the electricity company that serves the capital, sending the Caracas stock market plunging.
The partial nationalisation of the Orinoco strategic association units, which produce about 600,000 barrels per day, or around a quarter of the country’s daily oil output, will affect several major international oil companies. ChevronTexaco, ExxonMobil and ConocoPhillips of the US, plus Statoil of Norway, Total of France and BP of the UK all have varying-sized equity stakes in the Orinoco projects, which were set up in the 1990s.
The multinationals have together invested an estimated $17bn in the Orinoco projects since their inception, and the assets, including upgrading plants that convert extra-heavy crude into synthetic crude, are worth about $33bn.
Petróleos de Venezuela, or Pdvsa, the state-owned oil company, currently holds stakes in the projects varying between 30 and 49 per cent, but the government will increase that stake to at least 60 per cent, Mr Chávez said.
It appeared that the multinationals would still be able to retain minority stakes in the Orinoco projects, which have proved to be profitable ventures since they were developed using pioneering technology over a decade ago.
However, it remains unclear how the state takeover would affect the holders of existing Orinoco project finance bonds, of which about $4bn is still outstanding.
In theory, the Chávez government has access to enough international reserves to be able to simply pay off the debts to overcome so-called ownership transfer restriction agreements. However, a unilateral state takeover of the Orinoco projects would leave Venezuela technically in default on the bonds, Fitch Ratings said last week.
Analysts have also said that Mr Chávez’s nationalisation programme and his lengthening asset shopping list could put government finances under strain, especially if international oil prices continued to decline.
A spokesman for the US Department of Energy said on Thursday night that Mr Chávez’s nationalisation plans were a “disturbing trend”.