Venezuela unlikely to follow through on oil threat

NEW YORK (Reuters) - Venezuela is unlikely to follow through on its threat to halt oil exports to the United States over the OPEC nation's dispute with Exxon Mobil (XOM.N) because the move would choke off its main source of revenue.

The largest U.S. company has won court rulings in Britain, the Netherlands, the Netherlands Antilles and New York, freezing over $12 billion of Venezuela's overseas assets to fight the nationalization of a multibillion-dollar oil project last year.

But experts say Chavez, a harsh critic of President George W. Bush, would gain little by cutting off his oil-reliant nation from its main buyer.

"We do not believe that there is any real threat that Venezuela will disrupt crude and product exports to the U.S.," said Societe Generale in a research note.

"Venezuela is too dependent on oil export revenues, and the U.S. is by far its biggest market."

Fiery left-winger Chavez has repeatedly warned that Venezuela, which accounts for around 11 percent of all U.S. oil imports, would halt sales to the United States if the Bush administration interfered with his government.

Chavez says the Bush government has supported his opponents and plotted to kill him.

Venezuela's crude exports were briefly halted in late 2002 and early 2003 during a crippling strike at state oil company PDVSA, which sent prices surging but cut the government off from its main source of income.

Experts said a deliberate U.S. export halt would do little to reverse the courts' decisions and would again slash the revenues needed for Chavez's social programs for the poor.

"The decision to freeze PDVSA assets was a legal decision

-- not a political one -- so it's difficult to imagine how a political decision by Chavez to stop exports to the U.S. could affect the course of justice and serve his aims," said Antoine Halff of Newedge Group.

LIMITED MARKETS

Additionally, finding alternative markets for Venezuela's heavy, sour oil is difficult because the crude must be processed in expensive, complex refineries such as those located on the U.S. Gulf Coast.

"There is no substitute market for Chavez because there is not enough deep conversion capacity elsewhere to pick up the slack. It sounds like it would be a very short-term strategy," said Halff.

If Chavez did cut off supplies, the U.S. government would be quick to tap emergency reserves to ease any shortfalls.

"At this point if Venezuela were to cut exports completely, (the United States) would be more likely to draw into that stock and relieve oil price pressure," said James Crandell of Lehman Brothers.

And while it takes around 45 days to ship crude from the Middle East to the U.S. Gulf Coast compared to just five days from Venezuela, U.S. refiners could find additional barrels of sour crude to help alleviate a cut off.

"There is no great shortage of the kind of crude Venezuela exports. Kuwait and Saudi Arabia occasionally have trouble selling their heavy oil," said Jan Stuart of UBS Securities.

(Editing by Christian Wiessner)