Chavez Chagrined: Will Oil Companies Return to Venezuela?

It looks like Chavez needs the first string team back on the (oil) field.

Hugo Chavez recently drove Western oil companies out of Venezuela and let national oil companies from Iran, China and Belarus take up the slack. The New York Times is now reporting that the Venezuelan President (not for life… not yet) has been quietly courting companies such as Chevron (CVX), Royal Dutch Shell (RDS.A), and Total (TOT) and promising them access to some of the world’s largest petroleum reserves.

Chavez needs oil money to fund his social programs, and lower prices, natural production declines and a lack of proper maintenance are likely to have lightened his wallet significantly.

Their willingness to even consider investing in Venezuela reflects the scarcity of projects open to foreign companies in other top oil nations, particularly the Middle East.

Oil prices would be considerably lower today if there was uniform access to the global petroleum endowment. The Western majors are very restricted in where they are allowed to operate. Most of their competitors are state-owned. The one advantage Western oil companies had was technical know-how, although they were happily outsourcing innovation to universities and service companies for years. Now companies like Schlumberger (SLB) and Halliburton (HAL) are charged with providing technical expertise and innovation to the majors.

Not long ago Venezuela’s state run oil company PDVSA boasted, "We’re going to create our own firm, called PSVSA Services, We can have our own Halliburton, ours, the Boliviarian one."

The majors have heard this kind of rhetoric before. They know that it is one thing to restrict oil development by political decree. Even an incompetent national oil company can increase production with exclusive access to an underdeveloped basin. It is much more difficult to efficiently produce oil from a well defined petroleum reserve when you don’t have the capacity. The major oil and service companies won’t be replaced anytime soon.

Stock position: None.

Comments

[longoil:]

I would not trust Hugo Chavez, as soon as he has heavy oil extraction technology in hand, he will kick the western majors again like he did in 2006.

Historically, when a national oil company feels their own people can run the show, they will nationalize the assets of foreign oil companies. This process can take up to 40 yrs. Just look at the Middle East, in 1969 the American, British & Dutch oil companies produced more than 90% of the oil in the region. By 1979, they were kicked out and production was done in house.

Jan 16 08:38 AM

[john s. gordon:]

chavez isn't a moron, he's just a junior league mussolini (clown).
> jack

Jan 16 09:21 AM

[quasi-venez...:]

All kidding aside about Hugo "por que no te callas" Chavez, the major oil companies have an opportunity to drive a hard bargain and should. On the other hand, funding Chavez's ill fated Bolivarian Revolution will curry no favor with Venezuelans, especially if it continues to deteriorate and we become seen as the piggy bank.

One question, why is Chevron included on your list? My understanding is that they are the U.S. arm of PDVSA. They may be an American company, but they have a Chavista-dominated board and officers - I thought.

Jan 16 09:29 AM

[Petroleumwo...:]

What about Oil Companies returning to venezuela?

They never left !

Elio Ohep

Jan 16 10:32 AM

[Petroleumwo...:]

Chevron, Chavista? No Way !

The oil companies are in any country to do a job, busines is business, that is their MOTO !

Chevron is all over the world and works with all kinds of goverments, they just doing their job, if they don't do it, someone else will.

Oil busines is a long term one, they are there for long run !




On Jan 16 09:29 AM quasi-venezuelan wrote:

> All kidding aside about Hugo "por que no te callas" Chavez, the major
> oil companies have an opportunity to drive a hard bargain and should.
> On the other hand, funding Chavez's ill fated Bolivarian Revolution
> will curry no favor with Venezuelans, especially if it continues
> to deteriorate and we become seen as the piggy bank.
>
> One question, why is Chevron included on your list? My understanding
> is that they are the U.S. arm of PDVSA. They may be an American company,
> but they have a Chavista-dominated board and officers - I thought.

Jan 16 10:37 AM

[Isabel:]

Hello morons Bushes just cry.La Revolucion Bolivariana is ahead

Jan 16 11:14 AM

[huangjin:]

"One question, why is Chevron included on your list?"

You're thinking of Citgo.

Jan 16 11:42 AM

[charlie1023:]

I think you may be confusing Chevron with Citgo? Citgo is Chavez controlled, reason why 7Eleven booted them out and now brand their own gasoline.....


On Jan 16 09:29 AM quasi-venezuelan wrote:

> All kidding aside about Hugo "por que no te callas" Chavez, the major
> oil companies have an opportunity to drive a hard bargain and should.
> On the other hand, funding Chavez's ill fated Bolivarian Revolution
> will curry no favor with Venezuelans, especially if it continues
> to deteriorate and we become seen as the piggy bank.
>
> One question, why is Chevron included on your list? My understanding
> is that they are the U.S. arm of PDVSA. They may be an American company,
> but they have a Chavista-dominated board and officers - I thought.

Jan 16 11:43 AM

[scfranklin94:]

The bulk of new Venezuelan crude production is a very heavy petroleum, which is high in sulfur and resembles a viscous tar. Conoco and Exxon are the experts in extracting this type of crude, but both were given their marching papers by Chavez and they won't come back unless Venezuela honors prior contracts, which Chavez won't. It would be idiotic for Chevron to get involved in this mess. The national oil companies for Russia and Iran don't have the technology to extract this crude for less than $70/bbl, so they're not much help. Total SA could do it, and they might; never underestimate the French.

Jan 16 11:44 AM

[searcher:]

Yes, the French are to be commended for their hypocracy which gives us a run for the money. Big Oil is the ultimate international player.

Jan 16 12:11 PM

[Jim Letourneau:]

The quoted NYT article said Chevron was approached by Venezuela


On Jan 16 11:42 AM huangjin wrote:

> "One question, why is Chevron included on your list?"
>
> You're thinking of Citgo.

Jan 16 12:53 PM

[hwood007:]

I would only work for Chavez if he paid in gold and I would set a high price. I have always wanted to booby-trap wells I dug and then blow them via radio after I am kicked out and my work stolen.

Jan 16 03:36 PM

[john s. gordon:]

do you have ground-penetrating radio?
> jack

Jan 16 03:55 PM

[X-15:]

CVX could employ DR. Evil. No-wait Dr. Evil is currently employed at Halliburton.

Jan 16 11:06 PM

[kurt walter:]

Pound sand, Chavez.

Jan 17 02:30 PM

[Michael Fit...:]

How could any international oil company get serious about investing in Venezuela until the existing law suits involving XOM and COP are settled? I wonder what the status of these suits are today... Anyhow, the point is, why should any major oil company expect Chavez would not pull the same tricks on them when oil prices sky the next time, and they will sky.

Jan 18 10:27 AM