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Exxon Mobil and ConocoPhillips Say No to Chavez as Other Oil Players Comply
The Maritime Executive ^ | 6/28/07 | Joseph Keefe

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


TOPICS: Business/Economy; Foreign Affairs; Front Page News; News/Current Events
KEYWORDS: chavez; conocophillips; energy; exxon; hugochavez; latinamerica; oil; venezuela

1 posted on 06/28/2007 12:43:32 PM PDT by capt.P
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To: capt.P

In a positive light, I think Chavez’ days are numbered. The world will slowly shut his insane communist ways.


2 posted on 06/28/2007 12:46:29 PM PDT by EagleUSA
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To: capt.P

Atlas is Shrugging, Wyatt’s torch is being lit.........


3 posted on 06/28/2007 12:48:45 PM PDT by Red Badger (Bite your tongue. It tastes a lot better than crow................)
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To: EagleUSA
I think Chavez’ days are numbered. The world will slowly shut his insane communist ways.

That was supposed to happen to Castro by 1961.

4 posted on 06/28/2007 12:49:43 PM PDT by AU72
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To: capt.P

I hope Navy SEALs are gearing up.


5 posted on 06/28/2007 12:50:53 PM PDT by wastedyears (Cloture? Nuts.)
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To: AU72

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....


6 posted on 06/28/2007 12:56:50 PM PDT by EagleUSA
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To: Red Badger

Only if Exxon and Connoco blow up their facilities on the way out the door. Not THAT would be something to see.


7 posted on 06/28/2007 12:56:51 PM PDT by Camerican (It is a tale told by an idiot, full of sound and fury, signifying nothing - Macbeth)
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To: Red Badger

Oops. “Not” = Now.


8 posted on 06/28/2007 12:57:42 PM PDT by Camerican (It is a tale told by an idiot, full of sound and fury, signifying nothing - Macbeth)
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To: capt.P
On Tuesday, Exxon Mobil Corporation and ConocoPhillips refused to comply with deadlines imposed by Venezuela and its leftist president, Hugo Chavez.

In a perfect world, the two corporations would hire a mercenary army and overthrow him. ;)

9 posted on 06/28/2007 1:00:09 PM PDT by Mr. Jeeves ("Wise men don't need to debate; men who need to debate are not wise." -- Tao Te Ching)
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To: Camerican

I know I set a few charges off before shutting down ops.......


10 posted on 06/28/2007 1:01:55 PM PDT by Red Badger (Bite your tongue. It tastes a lot better than crow................)
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To: capt.P

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?


11 posted on 06/28/2007 1:01:59 PM PDT by wayoverontheright
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To: Mr. Jeeves
In a perfect world, the two corporations would hire a mercenary army and overthrow him. ;)

Like the United Fruit Company did?........

12 posted on 06/28/2007 1:02:43 PM PDT by Red Badger (Bite your tongue. It tastes a lot better than crow................)
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To: Red Badger

Please keep the Dulles brothers out of this one.


13 posted on 06/28/2007 1:10:38 PM PDT by BGHater (My Tagline will defend freedom.)
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To: capt.P

If oil companies and executives are so evil, how come Chavez is still alive? /sarc


14 posted on 06/28/2007 1:16:03 PM PDT by coconutt2000 (NO MORE PEACE FOR OIL!!! DOWN WITH TYRANTS, TERRORISTS, AND TIMIDCRATS!!!! (3-T's For World Peace))
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To: capt.P
Venezuelan oil, representing a huge chunk of America’s current oil imports, is going away.

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.

15 posted on 06/28/2007 1:17:00 PM PDT by marron
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To: BGHater

....and Sister.......


16 posted on 06/28/2007 1:17:43 PM PDT by Red Badger (Bite your tongue. It tastes a lot better than crow................)
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To: Camerican

That would not be necessary. Maintenance or lack thereof will accomplish the same thing sooner or later.


17 posted on 06/28/2007 1:19:56 PM PDT by RightWhale (It's Brecht's donkey, not mine)
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To: EagleUSA
I would hope you're right that Chavez's days are numbered, but he is forming an iron alliance with China and Iran with significant help from Russia. He could well have the same staying power as Castro, but with much more money and arms.
18 posted on 06/28/2007 1:23:37 PM PDT by Truth29
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To: wayoverontheright

That’s exactly what we should do.


19 posted on 06/28/2007 1:32:36 PM PDT by Almondjoy
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To: wayoverontheright
Democrat controlled congress?

Liberal controlled State Department?

20 posted on 06/28/2007 1:41:35 PM PDT by fireforeffect (A kind word and a 2x4, gets you more than just a kind word.)
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To: M. Espinola
From the article:

"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."

Surely, it's been noticed by some, but the majority of folks--entertainment inhalers--haven't really noticed it.
21 posted on 06/28/2007 1:44:48 PM PDT by familyop
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To: capt.P

Why, we oughtta...! We should...!

Chavez has been visiting the Middle East and Asia. We need to take military action but not against Venezuela. Iran is the key.


22 posted on 06/28/2007 1:48:39 PM PDT by familyop
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To: capt.P

None of the content behind the following may be posted at Free Republic (copyright), so here’s the title and link only.

China Seeks Venezuelan Oil After Exxon, Conoco Quit (Update2)
http://www.bloomberg.com/apps/news?pid=20601086&sid=a.xDMUZTWEeI&refer=news


23 posted on 06/28/2007 1:56:33 PM PDT by familyop
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To: capt.P

“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.”

Well for a moment I almost felt bad for both companies but then I remember that they are doing nothing for America by not reinvesting their massive windfall profits of the last two years into refineries or alternative energy. Act like the devil, play with the devil, get burned by the devil. Perhaps these companies may decide to invest 20 B - 30 B in alternative energy which is a great long-term investment and short term builds great PR and most importantly helps America. America is a place of Judas Iscariot’s, selling out souls for 40 pieces of silver. In the end, these people always hang themselves or their enemies do it for them.


24 posted on 06/28/2007 2:54:21 PM PDT by quant5
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To: wayoverontheright

You and I think exactly alike. I was just about to start typing the very same thing.


25 posted on 06/28/2007 2:59:07 PM PDT by mamelukesabre
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To: familyop

“None of the content behind the following may be posted at Free Republic (copyright), so here’s the title and link only.

China Seeks Venezuelan Oil After Exxon, Conoco Quit (Update2)
http://www.bloomberg.com/apps/news?pid=20601086&sid=a.xDMUZTWEeI&refer=news";

Cause and effect. The US market sells out for hard fast corporate profits to the Chinese, now the Chinese become our direct competitor paying almost nothing in real terms for these assets Conoco & Exxon built. The investment community at the top has become fat, lazy, complacent group of sellouts and is being outperformed by the Chinese. Nice work boneheads. Don’t worry, some of us business people still do long-term forecasting and can be good Americans at the same time.


26 posted on 06/28/2007 3:00:04 PM PDT by quant5
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To: quant5

Well, I’ll be the devil’s advocate here, but it’s worth looking into whole R&D expenses, rather than alternative energy, which, for the life of me, I’d NEVER invest in personally. Would you ask Bumblebee Tuna to invest in Greenpeace?

We’re still paying for the low gas prices of the 90’s, because exploration got scaled back so hard die to smaller profit margins at the time. It will be years before new infrastructure to access more remote sites gets developed at a rate we can live with. Something’s got to give, anyhow.


27 posted on 06/28/2007 3:10:44 PM PDT by capt.P (Hold Fast! Strong Hand Uppermost!)
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To: Mr. Jeeves

And think what a blockbuster summer movie it would make.


28 posted on 06/28/2007 3:32:30 PM PDT by Kellis91789 (Liberals aren't atheists. They worship government -- including human sacrifices.)
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To: capt.P

Boy I hate commies....


29 posted on 06/28/2007 4:46:37 PM PDT by Rick_Michael (Fred Thompson....IMWITHFRED.COM)
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To: Rick_Michael

Anyone ever wonder why God gave the bad guys all the resources?


30 posted on 06/28/2007 5:56:14 PM PDT by EQAndyBuzz (THE US SENATE IS THE MOST CORRUPT BODY POLITIC SINCE THE ROMAN EMPIRE.)
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To: EQAndyBuzz

“Anyone ever wonder why God gave the bad guys all the resources?”

It’s not that he gave it to them, it’s that they’re evil enough to steal it from others. Was the case in Mexico, the middle east, etc....

The belief in property and in freedom of association is not a concept of the evil. They’re entitled to what you created!?


31 posted on 06/28/2007 6:11:23 PM PDT by Rick_Michael (Fred Thompson....IMWITHFRED.COM)
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To: quant5
"The investment community at the top has become fat, lazy, complacent group of sellouts and is being outperformed by the Chinese. Nice work boneheads. Don’t worry, some of us business people still do long-term forecasting and can be good Americans at the same time."

Thank you.

That reminds me of some words from my first boss, the profitable small business owner's son: "Competition is healthy for business." And it was a reference to domestic competition. The phrase wasn't original, but it was wisdom. Domestic competition is healthy, in the long run, for business and for our nation.

Those were the days...


32 posted on 06/28/2007 6:29:21 PM PDT by familyop (Duncan Hunter for President!)
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To: familyop
Putin and the Red Chinese will rush in to fill the gap to whatever American oil companies abandon, plus the U.S. oil companies should remove and demolish everything they own preventing Chavez from benefiting in any way.

It's a shame that this two bit communist dictator is allowed to continue threatening US, however look at communist Cuba some 90 miles off the Florida coast, and that tyrant remains and that is beyond wrong.

Venezuela oil loss put at $4.5bn

Oil companies weigh risk in Venezuela

Chávez: Venezuela and Russia still energy partners

33 posted on 06/28/2007 6:37:04 PM PDT by M. Espinola (Freedom is never free)
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To: capt.P

“Well, I’ll be the devil’s advocate here, but it’s worth looking into whole R&D expenses, rather than alternative energy, which, for the life of me, I’d NEVER invest in personally. Would you ask Bumblebee Tuna to invest in Greenpeace?”

The analogy kind of fits. However, private investors in the information age are building the competing product/market whether big oil decides to or not. A better analogy would be like in the movie Other People’s Money where Danny Devito describes buggy whips and how the last company who made buggy whips was probably the best damn buggy whip maker. Their are many viable options to make our own oil that have been tested and refined for the last 30 years. Right now, the short play looks like big oil is better to invest in refineries and offshore drilling but the long-term forecasting of the alternative market would need to be factored in and bit by bit and big oil will be forced to adopt new technologies and support it of have lots of buggy whips and no buyers.

“We’re still paying for the low gas prices of the 90’s, because exploration got scaled back so hard die to smaller profit margins at the time. It will be years before new infrastructure to access more remote sites gets developed at a rate we can live with. Something’s got to give, anyhow.”

Very true. If I can hire fantastic economists as board advisors for my smaller business to conduct market research and financial simulations then big oil can do the same. To me their strategy suggests milking their market for all it is worth now and figuring out the long-term strategy later. If this is true, this is poor executive management and at this is passed on as pain to all of America.


34 posted on 06/29/2007 8:09:36 AM PDT by quant5
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To: familyop

“Thank you.

That reminds me of some words from my first boss, the profitable small business owner’s son: “Competition is healthy for business.” And it was a reference to domestic competition. The phrase wasn’t original, but it was wisdom. Domestic competition is healthy, in the long run, for business and for our nation.

Those were the days...”

We’ll reclaim those days I am sure. However, it grieves me to know it will probably be our enemies that shake us to our foundation in finally waking up to personal and corporate responsibility.


35 posted on 06/29/2007 8:11:48 AM PDT by quant5
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To: EQAndyBuzz
Anyone ever wonder why God gave the bad guys all the resources?

Maybe because they are more willing to produce them and put them on the market?

36 posted on 06/29/2007 9:50:18 AM PDT by thackney (life is fragile, handle with prayer)
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To: quant5

I personally believe that effective decisionmaking requires avoiding compromise when dealing with reactions to market forces. From what I can see, your sketch of the larger companies seemingly relying on short-term strategies is dead on. I suppose that the oil companies will invest in alternative energy sources only when there is blatantly obvious economic reason to do so.


37 posted on 06/29/2007 4:06:21 PM PDT by capt.P (Hold Fast! Strong Hand Uppermost!)
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