Venezuela seeks oil investment after 2007 crusade

By Brian Ellsworth - Analysis

CARACAS (Reuters) - Less than a year after Venezuelan President Hugo Chavez launched a nationalization crusade, the OPEC nation is boosting efforts to bring in private oil investment amid growing energy-sector problems.

Venezuela has announced a string of deals with oil companies and the first oil field bidding round since Chavez took office in 1999, and industry sources report a marked change in tone from last year's wave of takeovers.

State oil company PDVSA may be seeking to stem growing cash flow and operational problems, only months after a wave of nationalizations that drove out two of the world's biggest energy companies.

Energy Minister Rafael Ramirez on Saturday spoke about the need for cooperation with private business after years of focusing on Chavez's leftist agenda to boost ties with other state oil companies.

"Now that we have completed this (nationalization) process we are ready to attract private capital," he said in a statement.

One oil sector contractor who asked not to be identified said PDVSA this year has been speeding up contract talks.

"Last year they were telling me, 'You'll never see this work again' -- and now it's all about extending contracts and negotiating rate increases," he said.

This year alone, PDVSA has signed deals with Royal Dutch/Shell (RDSa.L), Total (TOTF.PA) and Statoil (STL.OL) for oil-field studies.

Last week the energy ministry announced a bidding round for the Carabobo I block of the vast Orinoco heavy crude belt. It was the first such bid since the opening of Venezuela's oil sector in the 1990s -- a process that Chavez largely rolled back in the last two years.

The bid comes after Venezuela for years snubbed private company proposals to develop the vast Orinoco belt, instead offering fields to state oil companies from politically allied nations like Cuba and Belarus with limited oil experience.

OPERATIONAL PROBLEMS

With heavy contributions to Chavez's social development crusade draining PDVSA of much-needed investment, the warming to the private sector may signal a call for help.

Market observers say Venezuela's output is around 25 percent below official production figures of 3.2 million barrels per day, while exports to the United States of refined products tumbled last year amid chronic refinery outages.

Venezuelan central bank figures show oil-sector GDP, which measures activity in oil production, processing and transport, shrank 5.3 percent last year despite record income at PDVSA and borrowing of close to $13 billion in 2007.

Analysts say PDVSA's resources are being stretched thin by enormous social spending obligations that now include importing and distributing food to ease nagging shortages of groceries.