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Venezuela Takes Control of Final Privately Run Oil Fields

BY Admin  May 1, 2007 at 1:30 PM EDT

Oil drills in Venezuela

The turnover of the Orinoco fields occurred at midnight on May Day, the international workers’ holiday. After a countdown to midnight, workers celebrated and danced until dawn, some standing on a pipeline leading into the installations, Reuters reported.

“President Chavez has ordered us to take full control over the sovereignty of our oil, and we are doing that today,” the Associated Press quoted Oil Minister Rafael Ramirez as saying as the midnight deadline struck. “In this very instant our oil workers are taking control of each of the areas of each of the installations.”

The projects affected by the government takeover had been producing some 600,000 barrels a day of heavy crude which can be refined into various synthetic oil products, officials said.

The impacted companies include BP PLC, ConocoPhillips, Exxon Mobil Corp., Chevron Corp., France’s Total SA and Norway’s Statoil ASA, according to the AP.

All but ConocoPhillips have agreed to the state control, and Venezuela has warned it may take possession of ConocoPhillips assets if the company doesn’t comply.

Chavez has said he is interested in having the companies stay as minority partners. The parties have until June 26 to negotiate the terms under the new state ownership, reported the AP.

David O’Reilly, chief executive of Chevron, said his company’s future in Venezuela “will very much be dependent on how we’re treated in the current negotiation.”

Chavez, meanwhile, described the turnover as the end of the era of U.S.-oriented policies that opened up oil reserves to foreign investment.

“Open investment will never return,” he said late Monday at a rally in the country’s capital Caracas.

Chavez still will need outside investment to develop the Orinoco region, which could help Venezuela surpass Saudi Arabia as the country with the most reserves, the AP reported.

The companies already have invested more than $17 billion in their Orinoco projects, so pulling out would be financially damaging for them.

They also have few other options, since state oil monopolies control three-quarters of the world’s proven oil reserves, according to the AP.