Venezuela threatens foreign oil takeover compensation

By Enrique Andres Pretel

PORLAMAR, Venezuela (Reuters) - Venezuela threatened on Tuesday not to compensate some foreign oil companies in its planned takeover of their multibillion dollar projects in the OPEC nation's vast Orinoco reserve.

The warning from the oil minister intensified the pressure the leftist government of President Hugo Chavez has exerted on some of the world's largest companies as they negotiate before a June deadline over the nationalizations.

"We are all talking. There are permanent conversations with all the partners," the minister, Rafael Ramirez, told reporters on the sidelines of an energy summit on the Venezuelan resort island of Margarita.

"We are going to see if there's compensation because in some cases there may not be compensation," he added.

Companies whose investments are targeted for takeover in the reserve of tarry crude are Chevron Corp., Exxon Mobil, Conoco Phillips, Norway's Statoil, Britain's BP Plc and France's Total.

Ramirez said most of the companies were willing to stay on after the government takes a majority stake in the four heavy crude upgrader projects that are valued at over $30 billion and can produce 600,000 barrels per day.

On May 1, Venezuela's state oil company takes over the operation of the projects and has decreed that the new makeup of the joint ventures' ownership should be finalized by June 26.

Ramirez also said, without elaborating, that he expected Venezuela to sign an accord over Orinoco projects "within days."

Another senior Venezuela official later said the accords were about the May 1 operatorship transfer.

TOUGH TALKS

Tuesday's threat was the first time Venezuela explicitly said companies may not be compensated for losing investments in the Orinoco.

It reflected the tough negotiating tactics ordered by a president who often rails at capitalism even though he says he is not ejecting the companies from the South American nation in his self-styled socialist revolution.

Compensation was already a controversial issue in the talks to allow the state to take majority control of the projects.

Despite raising billions of dollars this year in financing on international markets, Venezuela had previously warned it did not want to give compensation in cash and would possibly offer some kind of payment in oil.

Most companies are expected to work out a way of remaining in the projects because the Orinoco is one of the world's largest reserves and high oil prices allow them to return profits despite their sometimes harsh treatment by Chavez.