Venezuela’s Government Nationalizes Orinoco Belt Projects

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Researched by Industrial Info Resources (Sugar Land, Texas). On Monday May 1, 2007, following the path towards the nationalization of Venezuela’s resources to take complete control over the country's economy, President Hugo Chavez announced the nationalization of four projects that pump and upgrade around 400,000 barrels per day of heavy crude oil in the Orinoco Belt area. These undertakings are valued at more than $30 billion and pump heavy crude oil of 8 API to convert it into medium grade 32 API synthetic oil.

The Orinoco Belt Basin is a 55,314 square kilometer area located at the southern strip of the eastern Orinoco River Basin which holds one of the world's largest petroleum reserves. It contains 1.3 trillion barrels of extra-heavy hydrocarbons that could sum up 316 billion barrels and make Venezuela the biggest oil reserves bearer, followed by Saudi Arabia, Canada, Iran and Iraq.

PDVSA is claiming a minimum 60% stake in the projects, which had been run by private companies, with Venezuelan Oil Company as its minority partner. Cerro Negro Project was run by ExxonMobil (NYSE:XOM) and BP PLC (NYSE:BP), Ameriven was operated by Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP), Petrozuata was managed by ConocoPhillips and Sincor was controlled by Total SA (NYSE:TOT ), and Norway's Statoil (NYSE:STO). All the companies, except for ConocoPhillips, have agreed to conform to transfer operational control and signed a memorandum of understanding . Houston-based Conoco’s resistance to hand over the control in two of the four Orinoco deals in Venezuela has created insecurities heading toward handing over actual shares in the oil ventures on June 26, 2007.

According to analysts, PDVSA will not be able to maintain the same operating standards without enough specialized personnel and the technology owned by experienced majors which may in turn result in a decline in production and safety problems. However, Chavez’s government will continue with its nationalizing program that started last year with the take over of oil fields from ENI (NYSE:ENI), and Total and continued at the beginning of 2007 with the nationalization of power utilities, Electricidad de Caracas and the country's biggest telephone company, CANTV.

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