Oil Producers Snub Venezuela Deal

By FABIOLA SANCHEZ The Associated Press

Published: Jun 27, 2007

CARACAS, VENEZUELA - Exxon Mobil Corp. and ConocoPhillips refused to sign deals Tuesday to keep pumping heavy oil under tougher terms in Venezuela's Orinoco River basin, signaling their departure from one of the world's largest oil deposits.

Analysts said the move, however, won't have a major effect on supplies or lead to higher prices at U.S. pumps because production by the two companies will shift to other producers who agreed to the pacts.

Oil production lost to ConocoPhillips or any other oil company will shift to someone else, said James Cordier, president of Liberty Trading Group in Tampa.

"Before everyone walks out, a deal will be struck and production there will continue," Cordier said.

Four major oil companies - San Ramon, Calif.-based Chevron Corp., Britain's BP PLC, France's Total SA and Norway's Statoil ASA - signed deals to accept minority shares in the oil projects under new terms set by President Hugo Chavez's government.

The six companies invested more than $17 billion in the Orinoco projects overall.

"Exxon Mobil is disappointed that we have been unable to reach an agreement on the terms," the company said in a statement. "However, we continue discussions with the Venezuelan government on a way forward."

Elogio del Pino, a director of the state oil company, said Houston-based ConocoPhillips, the third-largest U.S. oil company, is not leaving the country completely and will maintain a 50 percent share in the Deltana Platform natural gas project.

Officials said Irving, Texas-based Exxon Mobil, the world's largest publicly traded oil company, will have no remaining oil interests in the South American country.

Venezuela "has an informal agreement to continue talking" with Exxon Mobil and ConocoPhillips about the terms of finalizing their involvement in the heavy crude projects, Oil Minister Rafael Ramirez said at a signing ceremony in Caracas.

"In the case of Exxon Mobil and ConocoPhillips, they are ending their participation in the businesses" of the Orinoco and other exploration activities, Ramirez said. "We are talking with both companies to continue negotiations to establish settlements."

Ramirez said the signed agreements will benefit Venezuelans. He thanked the companies that agreed to the new terms, saying they are working toward a "secure future" in Venezuela.

Under the deals, the stakes held by Petroleos de Venezuela SA, also known as PDVSA, in the four Orinoco joint ventures rose to an average of 78 percent, from previous stakes ranging from 30 percent to 49.9 percent.

Ramirez said PDVSA is assuming ownership of ConocoPhillips and Exxon Mobil's stakes in the Petrozuata, Ameriven and Cerro Negro heavy oil projects.

Chevron and BP's stakes remain unchanged in their respective ventures.