Wall Street Journal and New York Times V. Hugo Chavez
Stephen Lendman
June 27, 2007
On June 27, the New York Times and Wall Street Journal vied for attention with feature stories on oil giants ExxonMobil and ConocoPhillips "walking away from their multi-billion-dollar investments in Venezuela" as the Journal put it or standing "Defiant in Venezuela" as the Times headlined. Both papers can barely contain their displeasure over Hugo Chavez wanting Venezuela to have majority ownership over its own assets and no longer let Big (foreign) Oil investors plunder them. Those days are over. State oil company PDVSA is now majority shareholder with a 78% interest in four Orinoco joint ventures. That's up from previous stakes of from 30 to 49.9%. That's how it should be, but it can't stop the Journal and Times from whining about it.
What ExxonMobil and ConocoPhillips reject, oil giants Chevron, BP PLC, Total SA and Statoil ASA agreed to. They're willing to accept less of a huge profit they'll get by staying than none at all by pouting and walking away as their US counterparts did. Or did they? The Wall Street Journal reports "Conoco isn't throwing in the towel in Venezuela yet. By not signing a deal, the Houston company kept open the option of pursuing compensation through arbitration." Exxon, however, is mum on that option for now. It's spokesperson responded to Energy Minister Rafael Ramirez saying it and Conoco will lose their stakes in the Orinoco oil fields altogether. A company spokesperson expressed "disappoint(ment) that we have been unable to reach an agreement on the terms for migration to a mixed enterprise structure (but will) continue discussions with the Venezuelan government on a way forward."
So what's likely ahead as most Big Oil giants agree to what they have no other option on while two outliers haven't but may yet choose to. The country's oil reserves are too lucrative to walk away from, especially with Russia now pressuring foreign investors the same way. It also wants majority stakes in its own resources with its giant oil and gas company Gazprom in control. It has an export monopoly over the country's Sakhalin gas field projects and has taken over two of the largest energy projects in the country's eastern regions.
If successful in Venezuela and Russia, and it's likely they will be, these actions may influence other oil producing nations to follow a similar course wanting larger stakes in their own resources as well. Why not? They own them and even with less ownership interests, Big Oil will still earn huge profits from foreign investments, just not quite as huge as they once did on one-way terms benefitting them most in the past. So the end of this story may not yet be its end according to Michael Goldbert, head of the international dispute resolution group at Baker Botts. It's a law firm representing major international oil companies. He said he didn't think the June 26 actions were "necessarily the end of the story (adding) The prospects of a deal are never over until a sale is made or an arbitrator reaches a decision."
The investments are large ranging from $2.5 - $4.5 billion for Conoco and $800 million for Exxon if Venezuela assumes ownership of its heavy oil projects. Conoco explained "Although the company is hopeful that the negotiations will be successful, it has preserved all legal rights, including international arbitration." Exxon also expressed its hope an agreement could be reached permitting it to continue operating in an ownership role.
It looks like Conoco and Exxon want one foot in and the other outside Venezuela to keep its interest in the country alive. It also looks like they're playing games and letting the Wall Street Journal and New York Times be their lead moaners about what they ought to give thanks for - the right to invest and earn huge profits the way other Big Oil investors are opting to do. Despite their June 26 decisions, Exxon and Conoco may, in the end, decide on the same choice. If they don't, oil production lost will shift to other producers according to James Cordier, president of Liberty Trading Group in Tampa, Florida. He continued stating "Before everyone walks out, a deal will be struck and production there will continue." Caracas-based petroleum economist Mazhar al-Shereidah agrees saying "Venezuela is now free to find other partners (and) this doesn't constitute a dramatic situation."
Conoco and Exxon may in the end reach the same conclusion, stop whining, and decide to stay invested in Venezuela. Why not? The country is more open than many other oil-producing nations with much of their world's proved reserves controlled by state monopolies barring private investment. Venezuela barred them from 1975 - 1992 when the nation's energy sector was completely nationalized. That changed with a series of partial privatizations in the 1990s, and Chavez indicated having no plans to reinstitute a complete oil industry nationalization. Private investors can thus remain in the country and continue earning huge profits doing so. Conoco and Exxon may decide after all to share in them.
Stephen Lendman lives in Chicago and can be reached
at [email protected].
Also visit his blog site at sjlendman.blogspot.com and listen to The Steve Lendman News and Information Hour on TheMicroEffect.com Saturdays at noon US central time.
Stephen Lendman
June 27, 2007
On June 27, the New York Times and Wall Street Journal vied for attention with feature stories on oil giants ExxonMobil and ConocoPhillips "walking away from their multi-billion-dollar investments in Venezuela" as the Journal put it or standing "Defiant in Venezuela" as the Times headlined. Both papers can barely contain their displeasure over Hugo Chavez wanting Venezuela to have majority ownership over its own assets and no longer let Big (foreign) Oil investors plunder them. Those days are over. State oil company PDVSA is now majority shareholder with a 78% interest in four Orinoco joint ventures. That's up from previous stakes of from 30 to 49.9%. That's how it should be, but it can't stop the Journal and Times from whining about it.
What ExxonMobil and ConocoPhillips reject, oil giants Chevron, BP PLC, Total SA and Statoil ASA agreed to. They're willing to accept less of a huge profit they'll get by staying than none at all by pouting and walking away as their US counterparts did. Or did they? The Wall Street Journal reports "Conoco isn't throwing in the towel in Venezuela yet. By not signing a deal, the Houston company kept open the option of pursuing compensation through arbitration." Exxon, however, is mum on that option for now. It's spokesperson responded to Energy Minister Rafael Ramirez saying it and Conoco will lose their stakes in the Orinoco oil fields altogether. A company spokesperson expressed "disappoint(ment) that we have been unable to reach an agreement on the terms for migration to a mixed enterprise structure (but will) continue discussions with the Venezuelan government on a way forward."
So what's likely ahead as most Big Oil giants agree to what they have no other option on while two outliers haven't but may yet choose to. The country's oil reserves are too lucrative to walk away from, especially with Russia now pressuring foreign investors the same way. It also wants majority stakes in its own resources with its giant oil and gas company Gazprom in control. It has an export monopoly over the country's Sakhalin gas field projects and has taken over two of the largest energy projects in the country's eastern regions.
If successful in Venezuela and Russia, and it's likely they will be, these actions may influence other oil producing nations to follow a similar course wanting larger stakes in their own resources as well. Why not? They own them and even with less ownership interests, Big Oil will still earn huge profits from foreign investments, just not quite as huge as they once did on one-way terms benefitting them most in the past. So the end of this story may not yet be its end according to Michael Goldbert, head of the international dispute resolution group at Baker Botts. It's a law firm representing major international oil companies. He said he didn't think the June 26 actions were "necessarily the end of the story (adding) The prospects of a deal are never over until a sale is made or an arbitrator reaches a decision."
The investments are large ranging from $2.5 - $4.5 billion for Conoco and $800 million for Exxon if Venezuela assumes ownership of its heavy oil projects. Conoco explained "Although the company is hopeful that the negotiations will be successful, it has preserved all legal rights, including international arbitration." Exxon also expressed its hope an agreement could be reached permitting it to continue operating in an ownership role.
It looks like Conoco and Exxon want one foot in and the other outside Venezuela to keep its interest in the country alive. It also looks like they're playing games and letting the Wall Street Journal and New York Times be their lead moaners about what they ought to give thanks for - the right to invest and earn huge profits the way other Big Oil investors are opting to do. Despite their June 26 decisions, Exxon and Conoco may, in the end, decide on the same choice. If they don't, oil production lost will shift to other producers according to James Cordier, president of Liberty Trading Group in Tampa, Florida. He continued stating "Before everyone walks out, a deal will be struck and production there will continue." Caracas-based petroleum economist Mazhar al-Shereidah agrees saying "Venezuela is now free to find other partners (and) this doesn't constitute a dramatic situation."
Conoco and Exxon may in the end reach the same conclusion, stop whining, and decide to stay invested in Venezuela. Why not? The country is more open than many other oil-producing nations with much of their world's proved reserves controlled by state monopolies barring private investment. Venezuela barred them from 1975 - 1992 when the nation's energy sector was completely nationalized. That changed with a series of partial privatizations in the 1990s, and Chavez indicated having no plans to reinstitute a complete oil industry nationalization. Private investors can thus remain in the country and continue earning huge profits doing so. Conoco and Exxon may decide after all to share in them.
Stephen Lendman lives in Chicago and can be reached
at [email protected].
Also visit his blog site at sjlendman.blogspot.com and listen to The Steve Lendman News and Information Hour on TheMicroEffect.com Saturdays at noon US central time.