THE BOSTON GLOBE
May 01, 2007
JOSE, Venezuela (Reuters) - Venezuela stripped the world's biggest oil companies of operational control over massive Orinoco Belt crude projects on Tuesday, a vital move in President Hugo Chavez's nationalization drive.
The May Day takeover came exactly a year after Bolivian President Evo Morales, a leftist ally of Chavez, startled investors by ordering troops to seize his country's gas fields, accelerating Latin America's struggle to reclaim resources.
U.S. companies ConocoPhillips, Chevron, Exxon Mobil, Britain's BP, Norway's Statoil and France's Total agreed to obey a decree to transfer operational control on Tuesday, although the OPEC nation complained ConocoPhillips was somewhat resistant.
The four projects can turn about 600,000 barrels per day (bpd) of heavy, tarry crude into valuable synthetic oil.
Thousands of oil workers gathered on a road just outside the project facilities for an all-night vigil, dancing to salsa music and playing dominoes as they prepared for a massive rally Chavez is scheduled to lead on Tuesday afternoon.
"President Chavez has ordered us to take full control over the sovereignty of our oil, and we are doing that today," Oil Minister Rafael Ramirez told state television at the oil installations shortly after midnight after a hero's welcome from the workers.
"In this very instant our oil workers are taking control of each of the areas of each of the installations."
Workers exploded into a frenzied celebration after a New Year's Eve-style countdown to midnight, dancing until the early dawn hours with some standing atop a pipeline that runs toward the installations, which are worth an estimated $30 billion.
Chavez was also in a festive mood before a rally marking what he called the end of an era of U.S.-prescribed policies that opened up the largest oil reserves in the hemisphere to foreign investment.
"Open investment will never return," he said late on Monday to a rally in Caracas of thousands of cheering workers dressed in the signature red of his self-styled leftist revolution.
Buoyed by an oil price bonanza in a key crude exporter to the United States, Chavez is popular among the majority poor for spending freely on schools, clinics and food handouts.
The man who calls Cuban leader Fidel Castro his mentor has vowed to take at least 60 percent of the projects, radicalizing his policies as he rules by decree and politicizes the army, state oil company and judiciary.
He is also quickly nationalizing power utilities and the country's biggest telephone company.
In the oil projects, the companies have agreed to hand over operations but are still discussing continued shareholding and compensation in sometimes contentious negotiations before a deadline next month.
Despite being the only targeted company that refused to sign an agreement last week over the nationalization, ConocoPhillips said it cooperated on Tuesday "to ensure a safe, orderly transfer of operations."
"Agreements have not been reached with respect to ConocoPhillips' future participation in these projects or the compensation the company will receive," it added in a statement.
Although Venezuela claims output of more than 3 million bpd, analysts reckon it strains to pump 2.6 million bpd. U.S. data peg it as the world's No. 8 exporter.
Industry analysts fear Venezuela's state oil company PDVSA could ultimately run into production and safety problems when it loses the management and technology of the experienced majors.
Still, Chavez hailed Tuesday's takeovers as the South American nation reclaiming its sovereignty.
"The wheel has turned full circle," he said. "Long live PDVSA, long live the workers of PDVSA."
(Additional reporting by Jorge Silva and Patricia Rondon)