Oil — Venezuela’s lifeblood — is also a political flashpoint

Hugo Chavez vs. Big Oil. Now there’s a showdown without an obvious crowd favorite.

The notoriously anti-American president of Venezuela started this fight by tearing up his contracts with four oil industry partnerships, demanding they convert the government’s minority stakes into majority control. The oil majors developing the projects, including ExxonMobil, Chevron and ConocoPhillips, fume about having their deep pockets picked, but they don’t have much choice. If they can’t agree on financial terms by June 26, Chavez could always order the army to seize the oil fields.
The battle over Venezuela’s Orinoco Belt development highlights the increasingly critical role of Petroleos de Venezuela or PDVSA, (ped-eh-VAY-sa), the national oil company that will control the multibillion-dollar ventures in four weeks. Once recognized as a world leader among state-owned companies, PDVSA today is a troubled entity struggling to cope with responsibilities that far exceed merely pumping oil. Chavez taps the state-owned giant to finance an array of social programs at home and to cement his regional influence through subsidized oil exports to allies such as Cuba and Bolivia.

But as PDVSA prepares for the Orinoco takeover, some question whether its already stretched managers are up to the job. “Can they do it as well? A lot of people say no,” says Pietro Pitts, editor of the Caracas-based trade publication LatinPetroleum.

USA Today