Chavez shutting out U.S. oil companies

USA
Petroleumworld.com 01 26 05

Venezuela’s left-wing government says it is negotiating new energy contracts with Iran, Russia and China to expand its oil export market. But some U.S. analysts say it could be a measure to squeeze U.S. energy companies.

The New York Times reports U.S. energy firms with long-established ties to Venezuela’s oil sector are being told to either cut production or exploration.

At the same time, Venezuela’s left-wing leader, President Hugo Chavez, is raising royalties on those companies three-fold.

For example, said the paper, Harvest Natural Resources – a Houston-based firm which gets all of its oil from Venezuela – was ordered to cut production last week, sending shares of company stock spiraling downward.

Meanwhile, ConocoPhillips, in the final stages of finalizing an oilfield development plan with Chavez, had its plans suspended suddenly two weeks ago, said the Times.

And, “Rafael Ramírez, the Venezuelan energy minister, said the government would review its 33 operating agreements with oil companies from the 1990’s to see if they still made sense for Venezuela,” the paper reported.

The sudden decisions have left executives of American energy firms, as well as U.S.-based oil industry analysts, stumped.

“I’m a businessman and I don’t like to get involved in politics,” Harvest CEO Peter J. Hill said. “But there’s been a demonstrable change in the way things are done in Venezuela.”

It could be that Chavez is simply taking advantage of the current high demand-high oil prices climate, in order to secure a bigger share of the energy pie for Caracas, say analysts.

“I tend to believe that these disputes have to do with the government wanting a bigger share of the pie,” Roger Tissot, director for markets and countries at PFC Energy, a consulting group in Washington, told the paper.

Others speculate the Venezuelan leader may eventually see to it his oil companies shift their shipments away from the U.S. to China and other countries. Currently, the U.S. buys about 50 percent of Venezuelan oil, said the Times.

If that were to happen, the U.S. could replace what it loses from Latin America by increasing imports from the Middle East and African suppliers.

But a loss of the U.S. market, as well as continued tensions with the United States, could lead to less overall exploration, development and output in Venezuela. That, in turn, could further strain already tight world supplies. And, at a time of nearly chronic high demand, that will ultimately mean higher fuel prices.

In the end, however, Chavez could overplay his hand, one analyst said.

Antonio Szabo, a former executive at the country’s national oil company Petróleos de Venezuela, who now runs an energy and software consulting company in Houston, told the Times Chavez’s strategy of trying to extract more oil industry commissions and taxes for his country “is fine as long as oil remains high. But if prices retreat, they’ll have grave difficulty in fulfilling the promises that are now being made.

http://www.petroleumworld.com/storyt05012602.htm