Chevron and other firms undeterred by Venezuela’s nationalization efforts
Among the fraternity of multinational oil companies, it appears that money talks.
Chevron and several other firms agreed last week to development deals in Venezuela, a far-left, oil-rich nation that nationalized large swaths of industry just three years ago. Venezuelan President Hugo Chavez, who has led the nation for the past 11 years, is known for his bombastic manner and strong anti-U.S. sentiment.
And little was changed last week when Chavez spoke to oil company officials at the presidential palace. "This is mutually beneficial," he said.
"You are here because you need to be here. These are relationships of equals, of friendship."
But, in the same speech, he acknowledged that Venezuela needed investment from foreign companies, too. "We could not develop the Orinoco Belt alone," Reuters quoted him as saying.
Orinoco is unique for two reasons: its massive size and the low quality of its oil. The U.S. Geological Survey reported last month that recoverable reserves in the Orinoco could total 513 billion barrels, but the Orinoco’s oil is heavy and sulfurous. Saudi oil, by contrast, is light and sweet.
Heavier oil presents extraction challenges, and the high sulfur content of Venezuela’s reserves necessitates increased refining.
And the country’s state-owned oil company, PDVSA, is swamped in debt. The company owes $21.4 billion, according to a Reuters report released in January – marking a 42 percent increase from 2008.
The Venezuelan government announced last week that two blocks in the Orinoco would be developed by two foreign consortia. California-based Chevron will lead one of the two groups, and Spain’s Repsol will lead the other.
The government’s terms were hardly accommodating: Both groups will pay signing bonuses for access and will pay more than $1 billion each in financing to PDVSA.
But the blocks hold an estimated 128 billion barrels of oil, a figure that makes the terms more palatable.
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