International

Venezuela Nationalizes Oil Industry

May 01, 2007 11:19 AM
by findingDulcinea Staff
Venezuela has officially assumed control over the country’s last remaining privately run oil field in a May Day takeover that saw the holdings of six major oil companies appropriated by the government.

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In what he has deemed the “last step” in regaining national control over domestic oil, Venezuelan President Hugo Chavez has taken over operations of the Orinoco River Basin oil field from six major oil companies, guaranteeing the state-run PDVSA with at least 60 percent of future operations.

The Orinoco field is recognized as the world’s single largest known oil deposit, and with the proper development could help Venezuela surpass Saudi Arabia as the country with the most oil reserves.

However, because Orinoco’s crude is thick and tarlike, requiring a great deal of refinement to make it marketable, Venezuela will most likely remain dependent on the resources of foreign investors.

Highlighting Chavez’s aggressive nationalization strategy, the oil industry has become the state’s most valuable acquisition in a series of planned private sector takeovers.

The strategy includes nationalizing Venezuela’s telephone and electricity utilities, creating a system of collective property ownership, and strengthening military and economic ties with Russia.

Although the government states that its intentions are to redistribute its wealth among the nation’s poor and disadvantaged, critics doubt that Venezuela can manage its industries well enough to accomplish its goal.

Headline

Venezuela and the ousted oil companies have until June 26 to negotiate an investment deal. If the companies decide to abandon their investments, the region could end up lacking in the capital and technical expertise needed to fully exploit Orinoco’s potential.
Stock quotes for the oil companies affected by Venezuela’s Orinoco Basin seizure from SmartMoney.com.

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