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A Venezuelan Oil Takeover

illustration only
by Carmen Gentile
UPI Energy Correspondent
Miami (UPI) Aug 08, 2007
Efforts to nationalize Venezuela's oil and gas sector have increased government revenue by $5.8 billion a year since 2004, according to President Hugo Chavez. In a national address last week, Chavez said, "You can't have a socialist economist model - without including oil," a reference to his recent efforts to wrest greater state control of the country's petroleum sector. On May 1, Venezuela's state-run energy company Petroleos de Venezuela SA assumed majority control of the Orinoco River oil reserve, a move that added an additional $800 million to state coffers, Chavez said.

The extra revenue will go toward social programs for poor Venezuelans, Chavez said, as well as education and defense.

Chavez also took time to defend Oil and Energy Minister Rafael Ramirez, who was criticized following recent comments from a PDVSA official who said the national firm was facing an uncertain future due to a shortage of oil rigs.

The official, Luis Vierma, exploration and production vice president at PDVSA, said Venezuelan oil faces a "significant operational emergency" if it does not increase the number of rigs operating in the country and that the state firm fell short of its 2007 goal of getting 191 rigs online in 2007 and producing some 3.3 million barrels per day. So far, he said, 112 rigs were online as of July, and by the end of the year the number would only likely increase to 120.

"Venezuela is moving toward technological independence, but it will take a long time," Vierma said.

PDVSA's independence could take even longer considering Venezuela's oil output is believed to have slipped by more than 250,000 bpd from a year ago, according to the Paris-based International Energy Agency. Production has reportedly decreased from 2.6 million bpd to 2.37 million bpd.

Meanwhile, some opposition lawmakers have accused Ramirez and others in PDVSA of corruption.

Hoping to counter the production shortfall, PDVSA recently announced it was investing $3.5 billion in new oil rigs, a much-needed injection of cash into improvements for a sector that some experts say has been abused by Chavez for his social programs.

State energy officials' concerns about "an operational emergency" could be a calculated effort to jump-start the oil sector, some analysts say.

"Recent statements by PDVSA officials declaring the company in ‚euro"operational emergency' seem to aim at legitimizing a fast-track procurement process that bypasses normal bidding rules," read a recent report by the New York-based Latin Source.

Peter DeShazo, a former U.S. deputy assistant secretary of state for Western Hemisphere affairs and now Americas program director at the Center for Strategic and International Studies, a Washington think tank, noted PDVSA's infrastructure has been neglected in recent years to fund Chavez's social spending agenda.

"Certainly PDVSA's overall capabilities are not what they used to be," DeShazo told United Press International.

Venezuelan oil has also faced setbacks in recent weeks on the foreign-investment front, prompting some to believe Chavez's policies could eventually be the sector's undoing.

Oil giants ConocoPhillips and Exxon Mobil Corp. announced in July they were pulling out of Venezuela despite spending millions of dollars in development over the last few years.

"They won't be missed," Chavez said of the companies.

Their pullout followed a protracted tussle between PDVSA and private foreign companies after Chavez announced Venezuela would acquire a majority stake in every operation in the Orinoco. While most companies acquiesced, Conoco and Exxon would not come to terms with PDVSA.

Source: United Press International

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Time To Withdraw Iraq Oil Law
Washington (UPI) Aug 07, 2007
Iraq's citizens suffer from the August heat, little electricity and fuel. Death is seemingly around every corner. So the time may not be right for an oil law, especially the one the Bush administration wants. United Press International has found a recurring theme over recent months during coverage of the Iraq oil law: creating a law governing the bloodline to Iraq's economy should be less of a priority than stopping the bloodletting of Iraq's citizens.

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