Venezuela and ConocoPhillips have yet to come to terms over the state takeover of the Houston-based company`s operations in the oil-rich Orinoco Belt.
ConocoPhillips was supposed to come to terms with Venezuela`s state-run petroleum company PDVSA by May 1.
Earlier this week Energy and Petroleum Minister Rafael Ramirez said the energy giant must accept Venezuela`s new rules and negotiate with PDVSA a price for acquiring majority control of its project in the country`s most lucrative oil field.
On May 1, which marks International Workers` Day, Venezuela assumed majority control over the Orinoco Belt, the latest effort by President Hugo Chavez to wrest control of the country`s petroleum industry.
'The president has ordered us to take full control of our oil sovereignty,' said Ramirez as workers cheered in a celebration of Venezuela`s near total dominance of its most lucrative resource.
The takeover stipulates that PDVSA has at least a 60-percent share of the projects pumping heavy crude once dominated by foreign firms such as BP PLC, Chevron and Total SA of France. Those firms and others would be given fair market value for controlling interest of the projects, Chavez said.
Only ConocoPhillips did not sign a majority takeover agreement last week, prompting warnings from Venezuelan oil officials the projects there could be seized, by force, if no deal is reached.
Just why ConocoPhillips remains a holdout remains a mystery. Officials at the company`s headquarters in Houston refused to speculate on the delay in negotiations when questioned by United Press International.
However, company Chief Executive Officer Jim Mulva is scheduled to head up a shareholders meeting Wednesday, after which he`ll hold a news conference in which the Venezuelan situation is expected to be at the top of the agenda.
ConocoPhillips spokesman Charlie Rowton told UPI Tuesday that talks between the company and officials in Caracas are ongoing and being conducted 'at the highest levels.'
'We`re continuing to discuss the matter in hopes of reaching resolution,' he said.
Talks could be stymied due to what one petroleum analyst, who declined to be named, termed a personality conflict between Energy Minister Ramirez and Mulva.
'There`s a real clash of personalities between Ramirez and Mulva,' said the analyst.
Ramirez made clear Venezuela`s intentions to move forward with its nationalization agenda for oil and gas and made public assertions that Venezuela will seize assets, by force if needed, to complete the task.
Mulva in turn is reportedly keen on securing royalties for ConocoPhillips on technology developed by the company in Orinoco.
'Mulva is trying to secure the best price for the company`s assets,' PFC Energy analyst Roger Tissot told UPI Tuesday.
Chavez`s decision to take over the reserve capable of producing upward of 600,000 barrels per day could spell bad news for foreign oil, the concern being Orinoco could be more than PDVSA can handle. Though Chavez has spent billions of dollars on social projects and discount oil for friends and foes, not nearly enough of the Venezuelan oil wealth has been reinvested in new equipment, personnel or training, leaving PDVSA unprepared to handle the rigors of the reserve`s heavy crude.
Some warn Venezuela isn`t financially equipped to pay the market share it promised for the Orinoco stakes. Others have expressed concern the heavy hand of bureaucracy will devastate the industry.
Peter DeShazo, Americas program director at the Center for Strategic & International Studies who is a former deputy assistant secretary of state for Western Hemisphere Affairs, noted that PDVSA`s workforce was depleted by the nationwide general strike of 2002-2003.
'Certainly PDVSA overall capabilities are not what they used to be,' he said.
