ConocoPhillips’ Woes Mount in Venezuela; ‘A Difficult Situation’

U.S. oil major ConocoPhillips (COP) is licking its wounds in Venezuela as President Hugo Chavez tightens the noose on two of the firm’s showboat projects.

In the 1990s, Conoco invested heavily in Venezuela when a previous, business-friendly administration opened the oil industry to foreigners. The Houston, Texas-based firm took equity stakes in two multi-billion-dollar tar oil projects in the Orinoco river basin – Petrozuata and Hamaca. It also won a so-called “risk-reward” concession to drill for oil in the shallow waters of the Gulf of Paria.

Last year, Chavez, a hard leftist ushering in what he calls “21st Century Socialism,” announced he would take control of upstream production of tar oil, and is now also demanding majority control over the expensive refineries needed to turn the sludge into a marketable grade of synthetic crude.

Making matters worse, state-run Petroleos de Venezuela (PVZ.YY) has decided to levy the country’s 195,000 barrel a day share of an Organization of Petroleum Exporting Countries production cut on tar oil output.

Dow Jones Newswires