"They can leave," the Venezuelan president declared. "They won't be missed."
Chavez, who is leading Venezuela toward socialism, says state-run energy companies from Iran, China and elsewhere are lining up to replace the American companies and will help his country, the world's fifth-largest oil exporter, double its oil production within five years.
But many independent experts caution that the pullout of the two U.S. oil giants could further harm the investment climate in Venezuela. They also question whether its state-run energy company, Petróleos de Venezuela, also known as PDVSA, and its new suitors have the expertise, money and technology to exploit the tarlike heavy oil in the Orinoco basin, which may hold upward of 300 billion barrels of petroleum.
"They've got a problem, because new money isn't coming in," said David Mares, an expert on Latin American energy issues at the University of California at San Diego. "PDVSA is confident, but I would say it's based on blind hope."
Venezuela, like some other countries, is raising taxes and royalties in a time when the oil producers are looking for different ways to maximize revenues.
Oil's huge significance
In May, Chavez took a majority stake and operational control of four joint ventures in the Orinoco basin that had been set up in the early 1990s, and set a June 26 deadline for the foreign partners to agree to stay on as junior partners. The changes increase PDVSA's stake in the projects from an average of 34 percent to 78 percent.
According to a lawyer familiar with the negotiations, ConocoPhillips and Exxon Mobil rejected the new terms, in part because the companies would have had little say over investment decisions. Chavez's government also rejected their request to allow international arbitration to resolve future disputes, said the lawyer, who asked that his name be withheld.
Four major oil firms — Chevron, BP, Total of France and Statoil of Norway — opted to stay on as junior partners.
In addition, Venezuela has announced tentative deals with state-owned oil companies to explore and produce in 27 blocks in the Orinoco belt, an expanse of flatlands covering 4,500 square miles in eastern Venezuela that may be the biggest energy reserve in the hemisphere. Those projects would involve firms from Argentina, Belarus, Brazil, China, India, Iran, Norway, Spain, Russia, Uruguay and Vietnam.
Extending its reach
"Most of the companies decided to stay, so I don't think there's any loss of credibility for the Venezuelan oil industry," said Angel Rodriguez, president of the National Assembly's energy and mines commission, in a telephone interview from Caracas.
The United States remains Venezuela's top retail customer, buying a little more than half its daily petroleum production, about 1.4 million barrels a day in April.
Chavez visited Moscow late last month, at which time he invited the Russians to help develop the Orinoco belt and, in a speech, branded the American oil companies "vampires."
PDVSA plans to more than double daily output in Orinoco to 1.2 million barrels per day and overall production to 5.8 million barrels by 2012. Chavez also talks of sending half a million barrels of petroleum per day to far-away China.
Some energy experts, however, believe Chavez is overreaching.
A dearth of expertise
Daily oil production is falling and now stands at 2.3 million barrels, down from 3 million barrels in 2002 before the strike.
Unlike ConocoPhillips and Exxon Mobil, none of the state-owned companies in the Orinoco basin have much experience producing heavy oil, which requires more technical know-how than conventional petroleum. That's a key factor because experts believe breakthroughs soon could lead to higher recovery rates for heavy oil.
Only about 10 percent to 15 percent of the oil in the Orinoco can be recovered and commercialized now.
"Good management can double the size of the pie," said Pedro Van Meurs, a Dutch oil consultant. "But very few companies have really good technical experience to optimize the recovery of heavy oil."
Mazhar al-Shereideh, an Iraqi who teaches energy policy at the Central University of Venezuela in Caracas, argues that Big Oil no longer holds all the secrets. Cutting-edge technology, he says, can be bought or rented.
"The idea of the superiority of the First World, that if people aren't from Texas or Norway they don't know about petroleum, is a colonialist mentality," he said.
Uncertainty under Chavez
Brazil's Petrobras, for example, has signed a deal to pipe heavy crude from the Orinoco basin to a soon-to-be-built facility in the northern Brazilian state of Pernambuco. But, with the upheaval in Venezuela and Petrobras' disputes with Bolivia over natural gas operations, Pitts said, the project could be delayed.
China's aggravation
"Every day, Chavez comes out and says something new," Pitts said. "So, how can the companies focus on increasing production when they don't know tomorrow if the government will increase taxes or royalties?"
Via: Chron
