Posted on 06/28/2007 12:43:29 PM PDT by capt.P
On Tuesday, Exxon Mobil Corporation and ConocoPhillips refused to comply with deadlines imposed by Venezuela and its leftist president, Hugo Chavez. The effect of failure of either oil major to sign onto deals that would have imposed significantly tougher business conditions was effectively muted by the apparent willingness of four other oil firms to do just that, however. As such, most analysts did not think the refusal of the two companies to sign new deals would have a major impact on the ability of Venezuela to continue to move supplies from the region.
Oil Minister Rafael Ramirez had previously warned foreign oil companies that refusal to comply with the new deals would result in their expulsion from Venezuela. Petróleos de Venezuela, S.A. (PDVSA) has said that it was taking ownership of both ConocoPhillips’ and Exxon Mobil’s positions in the country. The move leaves the two oil majors’ $17-billion investment in the Orinoco projects in jeopardy of being lost altogether. PDVSA had already taken over operational control of Venezuela's last privately run oil fields on May 1 as part of its nationalization drive.
Although oil analysts don't expect ConocoPhillips' decision to have significant impact on world crude oil supplies or energy prices, Venezuela’s production will likely be directed to other parts of the globe. And while that trend may not be felt immediately, the South American country seems bent on weaning itself from having to sell its oil in America. At this point, they have little choice. That will change over time.
How all of this will affect PDVSA’s U.S. subsidiary, CITGO, is not yet known. But, the spurned oil majors are not likely to go away without looking for compensation and if they can’t get satisfaction in Venezuela, then Houston will be the next best scenario. Venezuela claims that foreign oil firms owe billions of dollars in back taxes. If that stance sounds hauntingly familiar, then that’s because it is the same pry with which Russia’s Vladimir Putin put Yukos to a slow and lingering death, not too long ago.
Anyone who thinks this soap opera is over is not paying attention. Venezuelan oil, representing a huge chunk of America’s current oil imports, is going away. But before that happens, Chavez will have renegotiated this current round of deals numerous times until it is no longer palatable for anyone to do business there.
Exxon Mobil and ConocoPhillips, if the latest reports are indeed true, will be shown to have done the right thing while everyone else is still throwing bad money after good. Of course, it would be far too much to hope that both of these courageous players would show similar intestinal fortitude in Alaska, where billions of cubic feet of (proven) natural gas await production and transportation south to the lower 48. Faced with a far more benevolent (and patient) local government in Sarah Palin and her so-far friendly legislature, all they’ll have to do is dig “it”(*) up and send it south. Sounds simple to me but what do I know?
(*) It: large volumes of enormously (warehoused for thirty years) profitable, domestic natural gas.
Joseph Keefe is the Managing Editor of The Maritime Executive. Reach him after 8 July at jkeefe@maritime-executive.com
In a positive light, I think Chavez’ days are numbered. The world will slowly shut his insane communist ways.
Atlas is Shrugging, Wyatt’s torch is being lit.........
That was supposed to happen to Castro by 1961.
I hope Navy SEALs are gearing up.
That was supposed to happen to Castro by 1961.
::::::
The Cuban people should have been liberated decades ago — agreed...but Castro is not an economic threat nor an area political destabilizing threat, as Chavez is. Chavez has much more to lose than Castro. Niether one would represent any kind of loss to anyone, except the Hollywood elite who love communists....
Only if Exxon and Connoco blow up their facilities on the way out the door. Not THAT would be something to see.
Oops. “Not” = Now.
In a perfect world, the two corporations would hire a mercenary army and overthrow him. ;)
I know I set a few charges off before shutting down ops.......
Can someone explain to me why we don’t confiscate CITGO’s assets in this country to retaliate? Perhaps award them in some fashion to those who were robbed in Venezuela?
Like the United Fruit Company did?........
Please keep the Dulles brothers out of this one.
If oil companies and executives are so evil, how come Chavez is still alive? /sarc
Its not really going anywhere. The only problem is that without foreign investment Chavez can't maintain his production rates, so they will not increase fast enough to keep up with demand, they may even go down. Venezuela is typically unable even to meet their OPEC quotas. Part of the reason Chavez is such an oil hawk is that he can't make his quota, so he hopes others will cut back to keep prices high on what he can produce.
Venezuela has no choice but to sell oil, they have nothing else. And as long as they sell it to someone, its the same as selling to us. The same customers are going to buy the same quantity of oil from someone, if one producer sells more to europe and less to us, or more to us and less to europe, makes little difference.
If Exxon does take Venezuela to court, they may wind up owning Citgo in any case. Chavez is incompetent, he knows not what he does. Probably its the cocaine.
....and Sister.......
That would not be necessary. Maintenance or lack thereof will accomplish the same thing sooner or later.
That’s exactly what we should do.
Liberal controlled State Department?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.