PUERTO PIRITU, Venezuela (Reuters) — Venezuela will strip the world’s biggest oil companies of operational control over massive Orinoco Belt crude projects Tuesday, a vital move in President Hugo Chavez’s nationalization drive.
The May Day takeover comes exactly a year after Bolivian President Evo Morales, a leftist ally of Chavez, startled investors by ordering troops to seize his country’s gas fields, accelerating Latin America’s struggle to reclaim resources.
London-based BP reports a drop in first quarter profits, as expected.
“The importance of this is that we are taking back control of the Orinoco Belt which the president rightly calls the world’s biggest crude reserve,” said Marco Ojeda, an oil union leader before a planned rally led to mark the transfer.
The four projects are valued at more than $30 billion and can convert about 600,000 barrels per day (bpd) of heavy, tarry crude into valuable synthetic oil.
U.S. companies ConocoPhillips (Charts, Fortune 500), Chevron (Charts, Fortune 500), Exxon Mobil (Charts, Fortune 500), Britain’s BP (Charts), Norway’s Statoil (Charts) and France’s Total (Charts) have agreed to obey a decree to transfer operational control, although the OPEC nation has complained ConocoPhillips has resisted.
Big Oil’s money machine
In Puerto Piritu, near the facilities that refine Orinoco crude, workers prepared to celebrate the takeovers, displaying Venezuelan red, blue and yellow flags and painting a wall with Chavez’s slogan: “Homeland, Socialism or Death”.
The anti-U.S. leader has vowed to take at least 60 percent of the projects, radicalizing a self-styled leftist revolution in which he is ruling by decree and politicizing the army, state oil company and judiciary.
He is also quickly nationalizing power utilities and the country’s biggest telephone company.
In the oil projects, negotiations over continued shareholding and compensation could prove contentious.
Oil Minister Rafael Ramirez has said there may not be compensation in some cases and that Venezuela will only consider agreements on the booked value of the projects rather than their much larger current net worth.
Industry analysts fear Venezuela’s state oil company could ultimately run into production and safety problems when it loses the management and technology of the experienced majors. Although Venezuela claims output of more than 3 million bpd, analysts reckon it strains to pump 2.6 million bpd. U.S. data peg it as the world’s No. 8 exporter.
Chavez was in a festive mood on the eve of the takeover to celebrate what he called the end of an era of policies dictated by Washington that gave away Venezuela’s resources.
“The wheel has turned full circle,” he said to cheering supporters at a workers’ event.