Venezuela takes control of private oil fields

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Venezuela President Hugo Chavez’s government took over Venezuela’s last remaining privately run oil fields today, May 1. Oil Minister Rafael Ramirez declared that the oil fields had reverted to state control just after midnight, the Reuters news agency reported.

The companies ceding control include BP, ConocoPhillips, Exxon Mobil, Chevron, France’s Total SA and Norway’s Statoil ASA. All but ConocoPhillips have agreed in principle to state control, Reuters reported, but Venezuela has warned it may expropriate that company’s assets if it doesn’t follow suit.

Chavez says the state oil company, PDVSA, is assuming at least 60 percent of each of the Orinoco old field operations, but has invited the companies to stay as minority partners; they have until June 26 to negotiate the terms, including compensation and reduced stakes. “We are going to take over some oil fields that have continued to be in the hands of transnationals,” Chavez said Sunday, calling it “the last step” in recovering state sovereignty over oil.

Despite the fanfare, the companies appear to be taking a decisive stand, demanding conditions — and presumably compensation — to convince them that Venezuela will continue to be good business. Chevron’s future in Venezuela “will very much be dependent on how we’re treated in the current negotiation,” David O’Reilly, chief executive officer of the San Ramon, Calif.-based company, told Reuters. “That process is going to have a direct impact on our appetite going forward.”

If Chavez can persuade the foreign companies to stay, Venezuela could be on track to developing the planet’s largest known oil deposit and possibly surpass Saudi Arabia as the nation with the most reserves.