CARACAS (Reuters) - Venezuela’s state oil producer, PDVSA, said in a statement it is guaranteeing “legal security” for all foreign companies in the leftist-run nation, rebuffing a government adviser’s suggestion that their operations could be nationalized.
The statement, which was distributed to its joint venture partners and which Reuters saw, comes after a prominent government-allied lawyer said a new legislative body could rewrite parts of the constitution to ensure the state has full ownership of the oil industry.
The new “constituent assembly” would supersede other institutions and has sparked fears that President Nicolas Maduro’s unpopular administration could take aim at joint venture partners, which include large oil companies Chevron Corp and Rosneft.
But PDVSA, whose full name is Petroleos de Venezuela, was quelling fears that a more radical wing of the ruling Socialist Party could be out to nationalize companies, as late leader Hugo Chavez did a decade ago.
PDVSA “guarantees legal security to investors, partners, and others,” the statement read. “In the case of joint ventures, PDVSA has honored and will continue to honor the legal norms that allow the possibility of doing business with private companies.”
Venezuelan oil laws enacted under Chavez allow for minority participation of private companies in oilfield joint ventures, and numerous companies formed such partnerships despite nationalizations in the sector.
PDVSA did not directly mention the comments by Hermann Escarra, a constitutional lawyer and candidate for the constituent assembly. The company did not immediately respond to a request for comment.
Nationalizing oil ventures would worsen a severe drop in production in Venezuela, home to the world’s largest crude reserves. That would hurt the country’s already ailing coffers, which depend on oil sales for more than 90 percent of their revenue.
And PDVSA has been offering more stakes in joint ventures to foreign companies, including key Russian ally Rosneft and ONGC Videsh, the overseas investment arm of India’s top explorer, Oil and Natural Gas Corp, as it tries to minimize operating costs, Reuters has reported.
So, some observers see Escarra’s comments as political show, and instead anticipate fire sales ahead.
“In our view once the Constituent Assembly is in place and Chavismo feels that is settled, it will aggressively seek to sell stakes in projects,” said Raul Gallegos, an analyst with the consultancy Control Risks.
Still, as Venezuela’s political crisis worsens, a half-dozen oil industry sources consulted by Reuters said the situation was becoming more uncertain.
Companies may curtail investments as they await clarity on the July 30 vote for the constituent assembly, which Maduro’s foes have denounced as a bid to consolidate dictatorship via a sham election.
“Imagine justifying to your board of directors that you put more money into Venezuela when there was an announcement from the president’s top adviser that he was going to nationalize companies,” said Francisco Monaldi, fellow in Latin American energy policy at the Baker Institute in Houston.
“This will pour cold water (on investments).”
Reporting by Alexandra Ulmer; Editing by Lisa Von Ahn and Steve Orlofsky