Venezuela Takes Control of the Orinoco Oil Reserves

The following is excerpted from an article by Chris Carlson
in, May 2

Merida, May 2, 2007 - The Venezuelan government took control of the Orinoco oil installations yesterday, completing the process of "re-nationalization" of the nation's oil reserves. Energy Minister Rafael Ramirez took formal control of the installations in a symbolic event at midnight on April 30th. Venezuelan President Hugo Chavez then led another event on May 1st to celebrate the takeover of the Orinoco Oil Belt and the end of the privatization of Venezuela's oil production.

"Welcome to the new PDVSA (Venezuela's state oil company)," said Rafael Ramirez on Monday night. "Here we begin the real petroleum nationalization."

"The existing oil reserves in all national territory.belong to the republic and are goods of the public domain," said Ramirez. "Venezuela is exercising its right to administer its natural resources for the benefit of the people."

Starting May 1st, PDVSA controls a minimum 60% of the shares in all oil operations in the Orinoco river basin. So far four joint companies have been formed with multinational companies including Total, Sincor, ChevronTexaco, ExxonMobil, British Petroleum and the German company Veba Oel. Conoco Phillips is the only company with operations in the Orinoco that has not yet signed an agreement with the Venezuelan state oil company.

President Chavez also spoke before a huge crowd of PDVSA employees on Tuesday, in the Industrial Complex Jose Antonio Anzo tegui, in the state of Anzo tegui.

"Finally, today we have buried the 10 years of petroleum opening," said Chavez, referring to the "opening" of the industry to privatization in the 1990's.

During the 1990's the Venezuelan economy was increasingly opened to privatization, including the state-owned oil industry. Chavez promised to put a stop to this and to reclaim the national sovereignty over the oil industry.

"Imperialism dominated our basic industry, our energy resources and our natural resources for a long time. That is over today," said Chavez. "Today is the end of that time when all our natural resources always ended up in the hands of anyone but the Venezuelan people."

Venezuela's PDVSA, in turn, will have to step up their operations to meet the high technology requirements. The oil found in the Orinoco Oil Belt is heavy and extra heavy crude oil, which requires a complex process of extraction. PDVSA President Rafael Ram¡rez assured that Venezuela has the technological capacity and personnel necessary for the task. He also stated that the government plans to make new investments to continue the expansion of the sector.

The Orinoco region has more than 55,000 square kilometers of oil resources which will give the Venezuelan state the control of an additional 600,000 barrels of oil per day. Venezuela currently produces 3.3 million barrels of oil per day, according to official figures.

By 2008, the Venezuela government hopes to certify that the Orinoco contains around 270 billion barrels of extractable oil with the use of modern technology. With that certification, Venezuela would have around 316 billion barrels of total reserves, placing it above Saudi Arabia as the country with the world's largest oil reserves.