Interesting... Chavez courting western oil companies

CARACAS: It is a telling sign of how deeply the global economic crisis has cut: President Hugo Chávez, who initially reveled in describing the crash as proof of capitalism's flaws, is now quietly courting Western oil companies once again.

Until recently, buoyed by the surging price of oil, Chávez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices with the tax authorities and imposing a series of royalty increases.

But faced with the plunge in oil prices and a decline in domestic production, senior officials here have quietly begun soliciting some of the largest Western oil companies in recent weeks, including Chevron, Royal Dutch Shell and Total, in the hope of getting them to invest in Venezuela again.

...

In recent years, Chávez has preferred partnerships with national oil companies from countries like Iran, China and Belarus. But these ventures failed to reverse Venezuela's declining oil output. State-controlled oil companies from other countries have also been invited to bid this time, but the large private companies are seen as having an advantage, given their expertise in building complex projects in Venezuela and elsewhere in years past.

The bidding process was first conceived last year when Petróleos de Venezuela's production decline was getting impossible to overlook. But it was not until this month that Chávez's government was to begin reviewing the bidding plans on new areas of the Orinoco Belt, an area in southern Venezuela with an estimated 235 billion barrels of recoverable oil, for exploration and production. Altogether, more than $20 billion in investment could be required to assemble devilishly complex projects capable of producing a combined 1.2 million barrels of oil a day.

Chávez's olive branch to Western oil companies comes after he nationalized their oil fields in 2007. Two companies, Exxon Mobil and ConocoPhillips, left Venezuela and still wage legal battles over lost projects.

But Venezuela may have little choice but to re-engage with foreign oil companies. Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Chávez was first elected.

...

the severity of the drop in oil prices may ultimately dictate the terms on which Venezuela re-engages with foreign oil companies.

"Chávez is celebrating the demise of capitalism as this international crisis unfolds," said Pedro Mario Burelli, a former board member of Petróleos de Venezuela.

"But the irony is that capitalism actually fed his system in times of plenty," he said. "That is something Chávez will discover the hard way."

source