Experts see repercussions from oil giants’ Venezuela pullout

Chavez, who is leading Venezuela toward socialism, says state-run energy companies from Iran, China and elsewhere are lining up to replace the American companies and will help his country, the world’s fifth-largest oil exporter, double its oil production within five years.

But many independent experts caution that the pullout of the two U.S. oil giants could further harm the investment climate in Venezuela. They also question whether its state-run energy company, Petroleos de Venezuela, also known as PDVSA, and its new suitors have the expertise, money and technology to exploit the tarlike heavy oil in the Orinoco basin, which may hold upward of 300 billion barrels of petroleum.
“They’ve got a problem, because new money isn’t coming in,” said David Mares, an expert on Latin American energy issues at the University of California at San Diego. “PDVSA is confident, but I would say it’s based on blind hope.”

Venezuela, like some other countries, is raising taxes and royalties in a time when the oil producers are looking for different ways to maximize revenues.

Oil generates about 90 percent of the country’s total export revenue and more than 50 percent of its estimated $52 billion budget in 2006, according to the CIA.

Many of the company’s best workers, including heavy oil experts, were fired by Chavez after a 2002-03 general strike called to topple him from power, and billions of petrodollars have been siphoned from oil investment and spent on anti-poverty, development, defense and foreign-aid programs.

Daily oil production is falling and now stands at 2.3 million barrels, down from 3 million barrels in 2002 before the strike.

Unlike ConocoPhillips and Exxon Mobil, none of the state-owned companies in the Orinoco basin have much experience producing heavy oil, which requires more technical know-how than conventional petroleum. That’s a key factor because experts believe breakthroughs soon could lead to higher recovery rates for heavy oil.

Only about 10 percent to 15 percent of the oil in the Orinoco can be recovered and commercialized now.

Houston Chronicle