Chavez’ brain-drain (Updated)
Yesterday I posted this article from CNN Money that Chavez decided to let some oil companies leave Venezuela since they weren’t interested renegotiating with the Chavez government for the operation of their oilfields. At the time no one was sure which companies planned on leaving. Today we find out that it was Exxon and ConocoPhillips;
Two US oil companies have moved a step closer to pulling out of Venezuela. Exxon Mobil and Conoco Phillips are both reported to have rejected an offer from the government of President Hugo Chavez to continue their operations in the OPEC-member nation’s most promising oil reserve. Venezuela has set a deadline for foreign companies to accept its terms for keeping them in the massive Orinoco reserve projects as it moves to nationalise the country’s oil industry. Observers say another American company, Chevron, as well as Norway’s Statoil, Britain’s BP and France’s Total are expected to sign a deal.
An article from the Wall Street Journal (requires subscription) tells about the deal that the oil companies were forced to walk away from;
Earlier this year, Venezuela said the companies had until June 26 to turn over at least 60% ownership of the projects, including four large heavy-oil fields with a combined output of nearly 600,000 barrels a day. The projects’ estimated value is some $31 billion.
Attempts to meet the Venezuelan government halfway were unsuccessful, said the person familiar with the matter, so ConocoPhillips decided to end talks and preserve its right to seek international arbitration. Venezuela has assets in the U.S., including refineries owned by PDVSA’s Citgo Petroleum Corp. Western oil companies have discussed swapping stakes in Venezuelan oil fields for Citgo refineries in Illinois, Louisiana and Texas. A Citgo spokesman declined to comment.
Another interesting story from the Wall Street Journal (requires subscription) tells about Venezuelan oilfield workers who are moving to Alberta, Canada to find work – away from Chavez (and explains my traffic from Alberta);
Frigid, remote Alberta has become one of the world’s fastest growing enclaves of Venezuelans, rivaling such warm-weather spots as Weston, Fla., outside Miami; and Sugar Land, Texas, near Houston. There are now 3,000 Venezuelan-Albertan families, up from 800 or so last year. Some Albertans now call Evergreen, a Calgary housing development, “Vene-green” because of the 100 families who have bought split-level homes there, and dangle Venezuelan flags from car rearview mirrors.
The loss of so many skilled oil workers has hit PdVSA hard. Since Mr. Chávez took power in 1999, Venezuela’s oil production — according to U.S. government statistics — is down to 2.4 million barrels a day, from 3.1 million barrels a day, despite high prices. (Venezuela has consistently accused the U.S. of undercounting PdVSA’s production in recent years.)
So already Chavez is in trouble. I feel sorry for the people who believed that Chavez was the answer to their poverty.
UPDATED: Conoco, according to a new story from the Wall Street Journal, may cost Venezuela some money in the short-term;
Conoco isn’t washing its hands of its assets in Venezuela, though it says it will take a $4.5 billion impairment charge in its second-quarter earnings. The company’s assets there represent about 5% of its oil-and-gas equivalent production last year. Exxon’s Venezuelan assets are about 1% of its overall output for 2006.
[…]
However, even if a Conoco arbitration claim is successful, it could be years before the company gets any money. Still, Venezuela has considerable international assets that Conoco could attach. These include PdVSA’s ownership of Citgo Petroleum Corp. — which has several valuable refineries in the U.S. — and of tankers full of crude oil landing in ports along the Gulf Coast and elsewhere. A Citgo spokesman declined to comment.
[…]
BP won an arbitration case against Libya in the 1970s after the North African nation nationalized, and chased tankers of Libyan crude around the world to seize them as payment. Within the past year, Western companies that purchased debt for unpaid for construction work in the Congo have tried to seize tankers of Congolese oil to satisfy arbitration awards.
Of course, this won’t hurt Chavez, only the Venezuelan people. And Chavez can blame the big oil companies – or it’ll serve as his excuse to seize more private assets.
Category: Economy, Hugo Chavez, Politics
