Exxon Mobil, ConocoPhillips Balk As Venezuela Signs Oil Agreements
Wednesday, June 27th 2007, 8:20 am
By: News On 6
CARACAS, Venezuela (AP) _ Exxon Mobil Corp. and ConocoPhillips have refused to keep pumping oil in Venezuela under less profitable terms, signaling their departure from one of the world's largest oil deposits.
Analysts said their refusal would not cause oil shortages or higher U.S. pump prices, since production will likely shift to other companies.
President Hugo Chavez has led a nationalization drive in strategic areas of the economy including the oil, telecommunications and electricity sectors.
Chavez, a fierce critic of U.S.-style capitalism, argues a larger state role is necessary to ensure that industry profits and services benefit Venezuelans instead of enriching private companies. His detractors argue he is violating contracts and ruining the investment climate to Venezuela's long-term detriment.
The government took majority control of Venezuela's last privately run oil projects on May 1 and gave the companies until Tuesday to decide whether they would accept new terms as junior partners.
Chevron Corp., Britain's BP PLC, France's Total SA and Norway's Statoil ASA accepted the terms at a signing ceremony Tuesday, and accepted new minority stakes.
But Conoco Phillips and Exxon Mobil balked and will no longer participate in Venezuela's lucrative Orinoco heavy crude fields, Oil Minister Rafael Ramirez said.
Ramirez warned in May that companies that resisted would have to leave the country entirely, but Venezuela appeared to take a softer stance on Tuesday: ConocoPhillips will continue exploring for gas in the offshore Deltana Platform. Exxon Mobil, however, will have no remaining Venezuelan interests.
Ramirez said the only thing left to resolve is the terms of their exit.
``In the case of Exxon Mobil and ConocoPhillips, they are ending their participation in the businesses'' of the Orinoco and other oil exploration activities, Ramirez said. ``We are talking with both companies to continue negotiations to establish settlements.''
Exxon Mobil, based in Irving, Texas, expressed disappointment and said talks continue with the Venezuelan government ``on a way forward.''
It was unclear how the companies would be compensated for their losses.
The six oil companies invested more than $17 billion in the Orinoco projects and hold some $4 billion in outstanding debts, but Ramirez said PDVSA would not be assuming those obligations.
``Each company is responsible before the banks for its commitments,'' he told reporters.
The U.S. State Department urged Venezuela to provide proper compensation.
``The government of Venezuela, like any other government, has the right to make these kinds of decisions to change ownership rules,'' said U.S. State Department spokesman Tom Casey. ``We want to see them meet their international commitments in terms of providing fair and just compensation.''
Tuesday's deals increase PDVSA's stakes to an average of 78 percent in the four Orinoco joint ventures.
Elsewhere, PDVSA is also taking control of Exxon Mobil's 50.1 percent stake in the La Ceiba block still under development. ConocoPhillips was developing the Corocoro offshore oil field with Italy's Eni SpA, but PDVSA will take a 74-percent stake there with Eni holding the remainder, Ramirez said.
Houston-based ConocoPhillips was the single largest private oil producer in the Orinoco, with its share of production equal to about 128,000 barrels a day. Venezuelan operations account for about 4 percent of the company's daily global oil and natural gas production.
The company said it expects to take a charge of $4.5 billion in its second-quarter financial statements as a result of pulling out of the Venezuelan fields.
Shares of ConocoPhillips closed down $2.24, or 2.9 percent, to $75.80 Tuesday, while Exxon Mobil fell 55 cents, or 0.7 percent, to $81.82.
Oil analysts also said they do not expect the exit of ConocoPhillips and Exxon Mobil to affect world oil supplies and prices.
``Before everyone walks out, a deal will be struck and production there will continue,'' under some other company, said James Cordier, president of Liberty Trading Group in Tampa, Florida.