May 1, 2007 / 12:27 PM / 12 years ago

Venezuela seizes operations from oil majors

JOSE, Venezuela (Reuters) - Venezuela stripped the world’s biggest oil companies of operational control over massive Orinoco Belt crude projects on Tuesday, sending in workers backed by troops to occupy the multi-billion-dollar installations.

Venezuelan oil workers take part in celebrations at the Jose Refinery Complex in Barcelona, May 1, 2007. REUTERS/Jorge Silva

Rallying thousands of workers dressed in the signature red of his self-styled revolution, President Hugo Chavez hailed what he called the end of U.S.-prescribed policies that had opened up the largest oil reserves in the hemisphere to foreign investment.

“Today, we are ending this perverse era,” Chavez shouted looking out from a platform over a sea of red hats, helmets and flags after the major step in his nationalization drive.

“We have buried this policy of the opening up of our oil ... an opening that was nothing more than an attempt to take away from Venezuelans their most powerful and biggest natural resource,” he told the cheering crowd squeezed into a road alongside the imposing crude facilities.

Behind him was a huge banner reading “Full oil sovereignty. Road to socialism,” Russian-made fighter jets roared overhead and in front of him women pushed toward the stage screaming for him to blow kisses. He obliged.

U.S. companies Exxon Mobil, ConocoPhillips and Chevron, Britain’s BP, Norway’s Statoil and France’s Total obeyed a February decree to transfer operational control of their projects developing the OPEC nation’s Orinoco crude reserve, one of the largest oil deposits outside the Middle East.

The May Day takeover came exactly a year after Bolivian President Evo Morales, a leftist ally of the anti-U.S. Chavez, startled investors by ordering troops to seize gas fields in his country, accelerating Latin America’s bid to reclaim resources.

The four Venezuelan projects are valued at more than $30 billion and can turn about 600,000 barrels per day (bpd) of heavy, tarry crude into valuable synthetic oil.

OIL FEST

At midnight, workers exploded into a frenzied celebration after a New Year’s Eve-style countdown, dancing until the early dawn hours with some standing atop a pipeline that runs toward the installations.

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.

The foreign companies are still discussing continued shareholding and compensation in sometimes contentious negotiations before a deadline next month.

Buoyed by an oil price bonanza in a major crude exporter to the United States, Chavez is popular among Venezuela’s poor majority for spending freely on schools, clinics and food handouts.

The man who calls Cuban leader Fidel Castro his mentor vowed to take at least 60 percent of the projects, radicalizing his policies as he rules by decree and politicizes the army, state oil company and judiciary.

He is also nationalizing power utilities and the country’s biggest telephone company.

Although Venezuela claims output of more than 3 million barrels per day, analysts estimate it strains to pump 2.6 million bpd. U.S. data peg it as the world’s No. 8 exporter.

Standard & Poor’s, one of the world’s leading credit ratings agencies, warned investors that the takeover “signifies continued deterioration in Venezuela’s country risk” as the business climate worsens.

But Chavez dismisses such concern as interference inspired by the U.S. empire that wants to destabilize his government.

Slideshow (3 Images)

On the eve of the takeovers, Chavez thumbed his nose at the international economic community, withdrawing the South American nation from the world’s top multilateral lending institutions, the Washington-based IMF and the World Bank.

“You can’t take the shovel out of the man’s hand. He just keeps on digging,” U.S. State Department spokesman Sean McCormack told reporters. “He’s digging a hole for the Venezuelan people.

Additional reporting by Jorge Silva in Jose and Arshad Mohammed in Washington

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