Venezuela congress approved on Tuesday the first of two discussions on a proposed law that will give President Hugo Chavez the right to takeover foreign and local oil services companies.
The Venezuelan Congress or National Assembly (AN) voted in favor of the new proposed Law that will give the right to the government to nationalized the foreign oil service companies that are engage in services such as drilling, manage oil rigs, water injection into oil wells, compressing natural gas and management of docks and motor boats.
Companies like Halliburton co.and Schlumberger Ltd. are the likely candidates to either negotiate to form a force partnership with the venezuelan oil company PDVSA or be taken over. PDVSA owes the two companies more than $8 billion in unpaid bills.
Other companies like Helmerich & Payne Inc. and Ensco International Inc., engage in oil rigs operations are also likely to either agree to operate the rigs under a joint venture as minority stock holders with PDVSA or get their rigs expropriated.
The members of the AN will probably to approve the new law in the second discussionin the coming days. One of the main articles of the law would declare of "public interest" all goods and services related to primary hydrocarbon activities, a needed step before expropriation.
“The national executive would decree the total or partial expropriation of the activities or companies that carry out the aforementioned services,” Angel Rodriguez, an AN member and head of the congressional energy commission said on Tuesday.
"This allows the government to seize or nationalize all oil services companies or to create joint venture deals with those firms," Rodriguez, added.
The AN is totally under control of President Chavez, and the vast majority of the members fully support the president's proposals, so passage of the proposal is likely to be just a rubber stamp of the executive proposal.
I've followed Venezuela politics closely for over ten years, and have visited the country multiple times. Other than a few pockets, the country is a lawless pile of garbage. Chavez lives like a king, he has a huge estate called Falcon Crest, which is likely where he takes visitors like Sean Penn and Danny Glover. The treasury is his personal checkbook, and his is constantly working to muzzle all criticism by any means necessary. Sound like anyone you know?
The similarities between the U.S. and Venezuela over the past five months are real and frightening.
I think the oil companies and oil services companies should put the squeeze on ol' Chavez. Just tell him, if he keeps messing with the oil and service companies, they will take their assest and leave Venezuela to fend and figure out how to get the oil out for itself. Since oil is one of Venezuela's largest forms of revenue and that pays for many of Chavez's socialist policies, they would be hurt pretty bad if American service companies and oil companies decided enough is enough and pulled out.
Oil is Chavez's ONLY form of revenue and his policy promises rely on $80+ price so he's rattling the sabre.
No-one will voluntarily leave Venezuela, there's too much oil there, it's a helluva lot closer to the US than Mid East stuff, and there's too much fixed infrastructure in country that you just can't walk away from.
Oilco's and serviceco's will always keep a position in that market, just see this for what it is... a tool to negotiate a a reduction in the $billions of unpaid invoices sitting with PDVSA.