[OPE] Chávez expropriates oil service companies

Chávez seizures fuel Venezuela oil fears
By Benedict Mander in Caracas

FT May 10 2009

A fresh round of expropriations in Venezuela has raised fears that the Opec
producer’s already declining oil output could sink to its lowest level in
the past 20 years.

Troops were mobilised over the weekend to assist Venezuela’s state-owned oil
company, PDVSA, in seizing the assets of some 60 oil service companies,
after a law was approved last week that paves the way for the state to take
increasing control over its all-important oil industry.

“To God what is God’s, and to Caesar what is Caesar’s,” said Venezuela’s
President Hugo Chávez, as he presided over the expropriation of more than 30
oil terminals and some 300 boats.

“Today we also say: to the people what is the people’s,” the socialist
leader said to roars of approval from red-clad supporters on the shores of
Lake Maracaibo, the heartland of the nation’s oil production.

This move forms part of a broader assault against the private sector, which
Mr Chávez has increasingly blamed as Venezuela slides into recession.
Simultaneously he is engaging in what opposition leaders say is a campaign
of persecution of his political foes.

Manuel Rosales, a former presidential candidate, has been granted asylum in
Peru to escape arrest over corruption charges, while congress has removed
almost all the spending powers of Antonio Ledezma, the anti-Chávez mayor of
Caracas. Other opponents have been jailed or gone into hiding.

PDVSA, which is suffering from a sharp fall in export income, made the
surprise move against the oil service companies in response to their threat
that they would suspend operations until it paid a backlog of invoices.
Some, including Helmerich & Payne and Ensco International, abandoned rigs
this year.

PDVSA, which is under pressure to cut expenses by 60 per cent because of
tumbling revenues, is estimated to owe as much as $12bn (8.9bn euro, 7.9bn
pounds) to
contractors since suspending payments to them last August, shortly after oil
prices began their precipitous decline.

It has demanded that companies accept a 40 per cent cut in their bills,
arguing that the decline in oil prices means they are charging too much.

The new law will also enable PDVSA to pay debts with bonds rather than cash,
and compensate assets at book value.

The move is the latest sign of the deepening cashflow crisis that has
bedeviled the state oil company for at least two years as it has become
overburdened with responsibilities far removed from its core business – in
particular funding and running the massive social programmes that have
become the bedrock of Mr Chávez’s support.

But analysts say that by shifting its problems onto its suppliers, PDVSA is
storing up even bigger problems for the future. Not only does it lack the
ability to operate as efficiently as the service providers, but it sends a
grim signal to companies considering investing in Venezuela. Consequently,
future oil production is under threat. (...)

Complete:
http://www.ft.com/cms/s/0/b332e432-3d54-11de-a85e-00144feabdc0.html?nclick_check=1

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Received on Fri May 15 16:42:51 2009