President Hugo Chavez vows to diversify Venezuela's oil customers to reduce reliance on U.S. companies, such as ExxonMobil and ConocoPhillips.
CNNMoney.com, June 26, 2007
CARACAS (Reuters) -- President Hugo Chavez pushed U.S. oil giants Exxon Mobil and ConocoPhillips out of Venezuela Tuesday in a nationalization drive the United States said could hurt its oil supply.
ExxonMobil (Charts, Fortune 500) and ConocoPhillips (Charts, Fortune 500) decided to quit their oil operations in the OPEC nation after they failed to strike a deal to stay in multibillion-dollar projects that the anti-U.S. leader decreed should be taken over.
Four other oil majors - Chevron (Charts, Fortune 500), Norway's Statoil (Charts), Britain's BP (Charts) and France's Total (Charts) - signed pacts allowing Venezuela to increase its stake to as much as 83 percent in projects worth $30 billion.
The backdrop for the ceremony was a huge poster displaying Chavez dressed in his signature red with his fist clenched in the air in the typical salute of his self-styled socialist revolution.
"We characterize this ceremony as an act of sovereignty for our country, for our people," Energy Minister Rafael Ramirez said after the companies signed the deals.
Exxon and ConocoPhillips can now negotiate compensation or take Venezuela to court for the loss of assets that are part of four heavy-crude upgrading facilities capable of producing around 600,000 barrels per day from the vast Orinoco oil belt.
Chavez, who vows to diversify Venezuela's oil customers to reduce traditional reliance on U.S. oil markets, prides himself on confronting American "imperialism," even though the United States is the country's biggest oil importer.
Washington fretted over Tuesday's move by its No. 4 foreign petroleum supplier.
"I'm concerned," Energy Secretary Sam Bodman told reporters. When asked if he was worried U.S. oil and product imports from Venezuela could be reduced with the companies leaving, he said: "Sure, of course."
Driving the U.S. giants out burnishes the anti-U.S. credentials of Chavez, who can spice his speeches up with the refrain "Gringos Go Home."
This year, he has squeezed out U.S. telecommunications and electricity companies in nationalizations. But taking the oil assets on Tuesday was by far the biggest move he has made against private property since coming to power in 1999.
Exxon said it was disappointed to leave Venezuela - a country with the world's largest oil reserves outside of the Middle East.
ConocoPhillips, which did not immediately comment on its decision, still has a stake in a Venezuelan gas project, but a source close to the company said it would leave the country entirely and likely head to arbitration.
Chavez: Big oil firms to leave Venezuela
Oil majors are well-known for withstanding harsh investment climates.
Statoil and Total agreed to reduce their stakes in their Orinoco project. BP and Chevron were able to maintain their share because they were involved in the ventures vacated by Exxon and ConocoPhillips.
Industry officials said the four companies were willing to stay mainly because crude prices are robust and oil majors are finding it increasingly difficult to access such large reserves as are available in the Orinoco.
Still, the exit of Exxon and ConocoPhillips highlights how difficult it can be for foreign companies to do business in a nation led by a man who calls capitalism an evil and Cuban leader Fidel Castro his mentor.
Foreign investment in Venezuela has been falling because companies fear they could lose their assets.
Chavez depends increasingly on revenue from high oil prices to maintain the food hand-outs and free doctors visits that make him popular among the majority poor.
"I think this was the right thing to do," said Hilda Valencia, 50, a bookseller at a kiosk in Caracas. "The natural resources are for Venezuelans and we can use them as we see fit."
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