Venezuela Oil Fields Takeover

South American Events

| Home | Populist reforms in Bolivia | Ecuador President Correa--Palast Interview | Free Popular Election in Cuba | Venezuela hugh oil reserves | Radical Leadership, 4 countries | Brazil Election Unrest | Brazil President's conservatism cause of unrest | HUMANITARIAN TRADE--CHAVEZ | Bolivia joins Venezuela | Venezuela: Chavez speaks on the revolution's challenges | Venezuela's social programs | Venezuela Oil Fields Takeover | Venezuelan Socialism | Bolivia not socialist | Chavez and the people's revolt against foreign exploitation | Latin America Heading Towards a People's Socialism? | Peasant (Campesino) movemnt in Peru

Recent developments in their oil (May 07).  The second article is from a year earlier. 

For much more on the World Trade Organization,





International News, Green Left Weekly issue #708 9 May 2007

Venezuela takes on oil multinationals


Stuart Munckton

4 May 2007


“Thousands of Venezuelan workers took control of foreign-owned oil fields yesterday as Hugo Chavez stepped up his battle with Washington in a new wave of nationalisation and an announcement that the country was leaving the World Bank and the International Monetary Fund [IMF]”, reported the British Guardian on May 2.

The paper reported on the most significant of the new moves by the pro-working-class government of President Hugo Chavez to “deepen” the pro-poor revolution it is leading in order to create “socialism of the 21st century” — the forcing of the foreign oil giants operating in the Orinoco Belt, believed to hold the world’s largest reserves of crude oil, into joint ventures with PDVSA that will give the state-owned oil company at least 60% control. The investments of ConocoPhillips, Chevron, Exxon Mobil, BP, Statoil and Total in the area amount to US$17 billion.

Chavez gave oil corporations until May 1 to cede control. All but ConocoPhilips struck agreements handing a majority of shares over to PDVSA. The Guardian reported that oil workers began gathering at key installations on the evening of April 30. The paper reported: “Amid jubilant scenes, oil workers wearing red T-shirts emblazoned with ‘yes to nationalisation’ moved into the giant Orinoco basin shortly after midnight …”

The moves follow the bitter, and ultimately successful, battle to bring PDVSA under full government control in 2003. Previously, the nominally state-owned industry was run by a corrupt elite that, before Chavez’s election in 1998, had begun preparing for the industry’s privatisation. Only 20% of PDVSA’s revenues were being handed over to the state.

Despite being the largest oil producer in
Latin America, when Chavez was elected the majority of Venezuela’s population lived in poverty. The PDVSA elite allowed private oil corporations access to Venezuela’s oil reserves in the 1990s under a policy known as the “opening”.

As well as imposing a series of tax and royalty hikes on oil corporations operating in the country, last year the government forced 32 private operations into joint ventures with PDVSA that gave the company a majority share. Corporations that failed to come to an agreement were forcibly taken over.

The government has used the growth in oil revenue, a result of high prices and increased government control of the industry, to fund its social missions, which are aimed at redistributing wealth and empowering the poor. Pro-poor policies, which are at the heart of the Bolivarian revolution led by Chavez, have resulted in a reduction in the official level of households living in poverty from just under 50% at the time of Chavez’s election to 37% by 2005.

Following his re-election in December, with the largest number of votes in Venezuelan history and on an explicit platform of constructing socialism, Chavez insisted that strategic industries need to be under government control, and that “all that was privatised, let it be nationalised”.
Venezuela’s largest telecommunications company and six electricity companies have since been nationalised.

While angering the
US government and Venezuela’s corporate-owned media, such policies are strongly supported by working people. Reuters reported that at midnight on May 1, workers who had gathered for a symbolic event welcoming the takeover “exploded into a frenzied celebration after a New Year’s Eve-style countdown, dancing until the early dawn hours with some standing atop a pipeline that runs toward the installations”. reported on May 2 that PDVSA oil workers at the event symbolically swapped their traditional blue helmets for new red ones — the colour of the Bolivarian revolution.

Speaking to oil workers on April 30, energy minister Rafael Ramirez said: “Welcome to the new PDVSA. Here we begin the real petroleum nationalisation.” He explained, “The existing oil reserves in all national territory … belong to the republic and are goods of the public domain.
Venezuela is exercising its right to administer its natural resources for the benefit of the people.” reported that Chavez addressed a gathering of 40,000 oil workers and supporters at the Industrial Complex Jose Antonio Anzoategui, on May 1 to celebrate the takeover and May Day, the international workers’ day. Standing in front of a banner reading “Full oil sovereignty. Road to socialism”, Chavez said: “Finally, today we have buried the 10 years of petroleum opening [to private corporations … Imperialism dominated our basic industry, our energy resources and our natural resources for a long time. That is over today.”

This year’s May Day further signalled the degree to which the Chavez government is attempting to deepen the revolutionary process in favour of the poor and working people. reported on May 1 that the previous evening Chavez announced an increase in the minimum wage of 20%, bringing it to $286 per month, the highest in
Latin America. The minimum wage has been repeatedly increased under Chavez; it was $183 per month when he was first elected.

Chavez explained that previously, conditions imposed on
Venezuela by the IMF required low wages. Responding to criticism from the right-wing, opposition-controlled Confederation of Venezuelan Workers that the increase was insufficient, Chavez pointed out that public service workers also receive food stamps worth $209, making the real minimum wage for public sector workers $495 per month.

A May 2 article reported that the government also used May Day to announce plans to slash the working week from 44 hours to 36 hours by
May 1, 2010. A commission has been established to draw up a new labour law, with shortening of the working week a key component. According to labour minister Jose Ramon Rivero, the law would also protect household labour, require bosses at firms with more than 20 workers to provide meals, and promote the organisation of socialist education classes in workplaces. also reported that
Venezuela was officially withdrawing from the IMF and World Bank. The Chavez government has been an outspoken critic of the institutions, which force neoliberal policies on Third World countries that further impoverish the population. Venezuela has initiated, with the support of Argentina, Bolivia, Ecuador and Brazil, Bancosur — the Bank of the South. Bancosur aims to provide an alternative source of cheap credit for Third World countries without imposing harsh conditions.

Chavez announced that
Venezuela finished paying off its debt to the World Bank and IMF on April 13, and is demanding the IMF pay Venezuela the $3.9 billion it has invested in the institution. Chavez said: “We do not need to go to Washington, to the [IMF] nor to the World Bank. We will withdraw. I want to sign the order this evening and ask that they return what is owed us.”



The kind of news that US corporate press reports with a slant. 


VENEZUELA: Foreign-operated oil fields taken over

Gregory Wilpert, Caracas

Venezuela’s state-owned oil company PDVSA took over seven oil fields in early April, which were previously run by foreign oil companies. Five of these fields were ceded to PDVSA intentionally and the others — one run by the Italian oil company Eni and one by the French oil company Total — PDVSA took over without the companies’ agreement.

The takeovers were the result of the cancellation of so-called “operating agreements”, whereby foreign oil companies pumped Venezuelan oil under contracts with PDVSA. Last year, PDVSA, though, informed the companies that they would have to transition their operating agreements to joint ventures if they wanted to continue pumping oil in Venezuela.

Italy’s Eni said it is considering challenging the takeover in court, reported AFP. “Eni believes that PDVSA’s decision constitutes a violation of its contractual rights. Eni will give PDVSA some time to find an agreement that covers all of Eni’s rights”, said a communique from the company. Eni produced 50,000 barrels of oil per day in Venezuela.  Venezuela’s oil minister and PDVSA president Rafael Ramirez said that Total and Eni are resisting compliance with Venezuela’s new hydrocarbons law, which only allows for joint ventures, not operating contracts. “We were very flexible, with the understanding that the old PDVSA signed agreements, in the name of the state. But this is not a confrontation, it’s what the law says”, said Ramirez.  “We’re not going to trample over anybody but we can’t accept being trampled on either”, he added. “Companies that don’t adjust to our laws, we don’t want them to continue in the country.”

Venezuela’s ambassador to Spain clarified that Eni and Total are still involved in oil production in Venezuela, despite the takeovers of some of their fields. “Total maintains a 47% participation in the Orinoco Oil Belt”, said Arevalo Mendez. Also, Eni is, “participating in two exploratory projects that are broadly promising in Venezuela”. Venezuela’s Ministry of Oil and Energy announced early last year that all companies involved in oil production operating agreements in Venezuela would have to initiate a transition to joint ventures with PDVSA. Towards the end of the year the ministry announced that agreements had been reached with nearly all companies. The agreements were finalised on April 1 of this year, right after the deadline for the transition ran out on March 31.

Aside from forcing companies to share risks and profits with the state-owned oil company, the new legal framework, which had been passed in November 2001 with the new Hydrocarbons Law, also changed taxes and royalties. While foreign oil companies previously had to pay a maximum of 36% taxes, they now are required to pay 50%. Royalties, which mainly affect oil production in the Orinoco Oil Belt, were increased from 1% to 30%. Also, the law specifies that PDVSA has a minimum participation of 60% in all joint ventures.

ExxonMobil is another company that announced early on that it would not accept the new legal framework. A few months ago ExxonMobil announced that it would sell its stake in one of the operating agreements to Spain’s Repsol. Ramirez’s response to the move was, “We don’t want them here then.” Nonetheless, ExxonMobil is still actively producing 120,000 barrels of extra-heavy oil in the Orinoco Oil Belt, where it has a 42% stake in a joint venture.

Of the 32 operating agreements with 18 oil companies, 22 joint ventures with PDVSA have been created, involving 16 oil companies. The oil production volume of these joint ventures will be 600,000 barrels per day, representing 18% of Venezuela’s total production of about 3.3 million barrels per day. PDVSA will have an average participation of 63% in these joint ventures.  Rafael Ramirez said that the joint ventures would allow PDVSA to make sure that the oil is produced far more efficiently than under the old arrangement. Previously oil companies merely billed PDVSA for their costs of producing the oil, which, according to PDVSA, inflated their costs tremendously. We estimate that the production cost per barrel will drop from $22 to $7 and the goal is to level off at $4, which is what our own production [now] costs”, said Ramirez.  

PDVSA has justified its demand that companies transition to joint ventures by saying that the original agreements violated both Venezuela’s old 1961 constitution, under which the agreements were signed, and the new 1999 constitution. Venezuela’s National Assembly passed a new law on April 5, which clarified the requirement for companies to be only involved in Venezuela as minority stake holders in joint ventures.  Another move that has caused unease among foreign oil companies doing business in Venezuela is that Venezuela’s tax collection agency, SENIAT, has stated that many companies owe back taxes. Last week, SENIAT’s director Jose Vielma announced that ChevronTexaco had accepted to pay $50 million in back taxes, interest, and fines. BP, the British oil company, would pay $14 million and France’s Total already paid $19 million. According to SENIAT estimates, foreign oil companies still owe as much as $2 billion in back taxes covering the past ten years.

With the price of Venezuelan oil, which generally sells for less than many other types of oil due to its high viscosity and sulfur content, exceeding $50 per barrel, oil companies in Venezuela have complained relatively little about the changing conditions.

Also, according to a recent US department of energy report, investing in Venezuela is still much easier than in Mexico or Saudi Arabia, both of which practically prohibit foreign oil companies from producing any oil.

[Reprinted from <>.]

From Green Left Weekly, April 12, 2006.
Visit the
Green Left Weekly home page.


Enter supporting content here

link to political cartoons
link to political cartoons

For more articles of a similar flavor