Venezuelan President Hugo Chavez continues his campaign to nationalize the country’s industry, forcing oil producers Exxon and Conoco to walk away from huge investments.
Follow this link to the original source: "Two Oil Giants Exit Venezuela"
Major U.S. oil firms Exxon Mobil and ConocoPhillips are the latest losers in Hugo Chavez’ ongoing campaign to nationalize industry in Venezuela. The Associated Press noted that the Chavez government "took majority control of Venezuela’s last privately run oil projects May 1 and gave the companies until Tuesday to decide whether they would accept new terms as junior partners." Several companies, including Chevron, British Petroleum, France’s Total SA and Norway’s Statoil ASA reached agreements with the Venezuelan government, but Exxon and Conoco, both with significant investments in the country, did not, opting instead to walk away from the unpredictable neo-communist regime in Caracas.
The agreement reached between the remaining oil producers and Venezuela was announced by Oil Minister Rafael Ramírez in a televised ceremony, according to BusinessWeek. Standing under a poster of Chavez bearing the disturbing motto "Fatherland, Socialism or Death," Ramirez remarked, "This is an act of sovereignty for our country, for our people."
In fact, the nationalization of the oil industry in Venezuela really is theft. Exxon Mobil and Conoco were large investors in the Venezuelan oil industry, responsible for finding the oil and building the infrastructure needed to tap it and turn it into useful fuels and products. The two companies’ combined investment in the oil-rich nation is over $3.5 billion and the consequences may be severe if the companies can not strike a deal with the Chavez regime on compensation for the loss of that investment. If a deal can’t be reached, according to BusinessWeek, "That could pave the way for the U.S. companies to seek permission to attach PDVSA assets in the U.S., such as refineries of its subsidiary, Citgo Petroleum, pending a final agreement."
"One of the reasons to pull out now," said analyst James Williams, "is to have the option to go after Venezuelan assets in the U.S. now before Chávez can sell them." Previously, Chavez has warned that he might sell Citgo or end oil sales to the United States. Currently, the U.S. imports 14 percent of its oil from Venezuela.
At present, the ouster of Exxon and Conoco from the lucrative oil fields in Venezuela is not expected to dramatically increase prices at the pump in the United States, though the long-run future of Venezuelan oil now seems increasingly clouded.