Monday, April 09, 2007

Hugo Chavez vs. Exxon-Mobil - A Showdown in Venezuela

A water line installed courtesy of increased Venezuelan social spending from oil revenue.

An important piece here by Simon Romero, previewing one of the most important battles you'll ever see - a country with more reserves than Saudi Arabia trying to gain control from some of the richest corporations in history.

This is a typical sly NY Times piece... well researched but titled towards US interests. What starts as a portraitof the epic story becomes something else - another blatant pro-market, slime Chavez piece of garbage.

The piece sees fit to mention that Venezuela highly subsidizes domestic oil consumption (20 cents/gallon), but neglects to mention that Chavez has recently proposed hiking those prices on environmental grounds. Romero and other anti-Chavez folks argue against nationalization by citing the loss of production at PDVSA. But they never seem to provide any useful context. Romero mentions a "strike" - but does not link it to production nor mention that it was an political employer-led strike. The culprit seems to be Chavez's "social spending," the effects of which seem to not interest Romero. Neither do the details of Chavez's plan to double production in 7 years, the investments in pipelines and capital raised to accomplish the plans.

Still there are some interesting passages in this piece. Here's the flavor:

“Chávez is playing a game of chicken with the largest oil companies in the world,” said Pietro Pitts, an oil analyst who publishes LatinPetroleum, an industry magazine based here. “And for the moment he is winning.”
Over the last several decades, control of global oil reserves has steadily passed from private companies to national oil companies like Petróleos de Venezuela. According to a new Rice University study, 77 percent of the world’s 1.148 trillion barrels of proven reserves are in the hands of the national companies; 14 of the top 20 oil-producing companies are state-controlled.
The talks have bogged down over how much the oil companies’ stakes in four big Orinoco projects are worth, whether Venezuela’s cash-short oil company would pay for the assets in oil instead of cash and, most important, who would manage the reduced operations of the foreign oil companies.
“If the United States wants to diversify its oil supplies for reasons of national security, then Venezuela should be allowed to diversify its customer base for the same reason,” said Mazhar al-Shereidah, an Iraqi-born petroleum economist who is one of Venezuela’s leading energy experts.
No one sees an immediate crisis at Petróleos de Venezuela. But its windfall from high oil prices masks the devilish complexity and rising costs of producing heavy oil.

Meanwhile, the company acknowledged last month that spending on “social development” almost doubled in 2006, to $13.3 billion, while its spending on exploration badly trailed its global peers. And Petróleos de Venezuela’s work force has ballooned to 89,450, up 29 percent since 2001 even as production declined.



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