Venezuela oil service grab risks output slump

CARACAS (Reuters) – Leftist President Hugo Chavez’s abrupt takeover of Venezuelan oil service companies risks reducing the OPEC nation’s crude output by spooking investors and weakening crucial oilfield operations.

Last week’s nationalization of foreign assets and a swath of small local companies puts state oil company PDVSA in charge of a range of key services as it is struggling to cope with low oil prices and growing debts with contractors.

The move may increase the perception that Venezuela is a risky place to invest as the nation seeks billions of dollars from private companies to develop new projects after a decade of underinvestment that has left oil output in a slump.

“In the long run, I think this will hurt Venezuela because some service companies may stay out of the country,” said Roger Tissot, a consultant with Gas Energy Latin America.

“It will be difficult for PDVSA to stay up to date with technology — in recent years the bulk of innovation has come from service companies, not from oil companies.”

Reuters