Venezuela's oil politics

Published: Saturday 15 March 2008

Venezuelans support nationaliz (Credit: REUTERS)Barely a week after the Venezuelan president Hugo Chavez threatened to halt oil shipments to the us, the socialist leader has sent a placatory message, saying the country is not preparing to cut off oil supply to the us.

"We don't have plans to stop sending oil to the us," said Chavez on February 17 during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco river basin that the government nationalized in May last year. Chavez, however, reiterated Venezuela's right to control its resources and indicated he may cut off supplies to the us if Washington "attacks Venezuela or tries to harm" the nation.

Venezuela is the fourth largest oil supplier to the us.

Chavez's earlier warning, aired in his weekly television broadcast 'Alo Presidente', was in retaliation for a judicial action by the us- based oil giant Exxon Mobil to freeze us $12 billion of assets belonging to Venezuela's state-owned oil company Petroleos de Venezuela S A (pdvsa) in the uk. Exxon also secured similar rulings in the us and in the Netherlands.

Venezuela is locked in a legal battle with Exxon Mobil after the government nationalized all operations in the region by raising its stake over oil resources to 85 per cent from about 45 per cent. Eleven of the 13 foreign companies operating in Venezuela--including oil majors TotalFinaElf of France, Statoil of Norway, British Petroleum of the uk and Chevron of the us-- accepted the terms.

But Exxon Mobil and Conoco Phillips, who controlled 51 per cent of their operations prior to May 2007, refused to comply. Instead Exxon is seeking compensation for its forced exit from one of its four heavy oil projects in the Orinoco river basin.

Oil minister Rafael Ramirez, however, says Exxon Mobil is demanding more than 10 times the compensation it may deserve from Venezuela for nationalizing the oil venture.

The Orinoco river basin has 235 billion barrels of petrol in deposits, which Chavez estimated as equivalent to 200 years' worth of oil. It produces around 600,000 barrels a day.

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