President of Venezuela Hugo Chavez signed a decree yesterday on the final nationalization of all oil deposits in the country. The decree will come into effect on May 1. “I signed the decree on the nationalization of the oil deposits controlled by foreign companies. We are recovering property and management in these strategic areas. The privatization of oil is over in Venezuela. This was the last area that we hadn’t recovered. This is the true nationalization of the oil. The oil belongs to all Venezuelans. If they [foreign companies developing Venezuelan oil wells] reject our offer then they can leave the country,” Chavez said.
In January Chavez established the state control over energy and telecommunication branches of Venezuela’s economy. As for crude reserves, the state controlled the lion’s share of them before. Now foreign investors have been offered to hand over 60% of stocks of their oil projects to the government of Venezuela.
Chavez’s decision touches upon the leading oil corporations of GreaT Britain, Norway, the USA and France: BP, ExxonMobil, Chevron, ConocoPhillips, Total, Statoil and others. Until recently, Venezuela was repurchasing the shares at market prices within the framework of nationalization. Now it goes about the sum which exceeds 15 billion dollars.
The Venezuelan leader stressed out that he did not want the foreign investors to leave the country as a result of the newly signed document. Chavez offers foreign corporations to set up joint ventures with the national state-run company PDVSA. Private-owned foreign companies could count on the development of heavy crude deposits in the Orinoco Oil Belt, which concentrates world’s largest crude reserves evaluated at 316 billion barrels. The situation changed after a sudden price rise on oil. The profitability of deposits, which used to be handed over to foreign oil companies, has considerably increased.
Hugo Chavez knew that foreign oil companies would agree to dance to his tune. Spokespeople for Norway’s Statoil are certain that the decision to nationalize oil deposits in Venezuela would not affect the company’s activities in the country. Statoil is currently in talks with Venezuela’s Ministry for Energy and Oil regarding Sincor deposit. A mutually beneficial agreement may follow shortly. Statoil owns 15 percent in the Sincor project, which is one of the most lucrative ones in the Orinoco Belt. Statoil has been working in Venezuela for eleven years already. The company has licences for 30 years in advance and is not going to shut down its activities in Venezuela.
Venezuela’s oil industry had been under private control until 1974, when Venezuela nationalized it. In the 1990’s, though, PDVSA engaged in a so-called “oil opening,” where it allowed more and more private companies to extract oil, via majority shares in joint ventures and the operating agreements.
Chavez supporters have long argued that oil was never truly nationalized in Venezuela because the same management controlled oil production after nationalization and that the oil industry never really operated under government control until the old management was fired in the wake of the December 2002 to January 2003 oil industry shutdown.
Translated by Dmitry Sudakov