Wednesday, February 13, 2008

Venezuela- The Empire Strikes Back?

Its looking like the policies of Hugo Chavez's socialist government in nationalising the oil resources of their own nation has prompted Exxon, the US oil giant to strike back ...could this be the start of a concerted effort by the old familiar forces of imperialism to strangle Venezuela's experiment in 21st Century socialism?

According to Bloomberg "Petroleos de Venezuela SA, the state oil company, cut off sales of crude, gasoline and diesel to Exxon Mobil Corp. in retaliation for the freezing of $12 billion in assets in a legal dispute.
Petroleos de Venezuela ``paralyzed'' sales to Exxon in response to court-ordered asset freezes, the Caracas-based company known as PDVSA said in a statement. PDVSA said it will supply the refinery it co-owns with Exxon in Chalmette, Louisiana.
Exxon Mobil, which refines more crude than any other company, won an order freezing $315 million in a Venezuelan account in the U.S. It was granted a ruling blocking transactions in the U.K., the Netherlands and Netherlands Antilles affecting as much as $12 billion in assets pending the resolution of a dispute over the government's seizure last year of a heavy oil project.
``It's more or less political rhetoric,'' Ruchir Kadakia, an international oil analyst at Cambridge Energy Research Associates, told reporters in Houston. ``It'll have very little commercial impact on Exxon Mobil.''
The move probably will cut revenue for PDVSA because it reduces the number of potential customers and will force the company's traders to rely more on middlemen who won't pay as much as Exxon Mobil, Kadakia said.
`Willing to Talk'
Exxon Mobil was still prepared to talk with the Venezuelan government and PDVSA, said Senior Vice-President Mark Albers.
``We remain willing to engage in substantive discussions with the government of Venezuela and PDVSA on the fair-market value of assets,'' he said at a press conference at the Cambridge Energy Research Associates conference in Houston.
Exxon is claiming more than $12 billion in the arbitration, according to a company filing in the U.S. District Court.
ConocoPhillips, which is also in arbitration with Venezuela, wasn't mentioned in today's PDVSA statement. Rafael Ramirez, the country's oil minister and president of PDVSA, said Feb. 8 that talks with Conoco were going well and that he expected a negotiated resolution.
Arbitration will likely take several years, and Conoco favors negotiations with Venezuela to avoid a legal battle, Chief Executive Officer Jim Mulva told reporters at the conference.
``Those talks continue, and we are making progress,'' Mulva said. ``I hope that maybe we can come to some kind of solution in 2008.''
IEA Ready to Act
The International Energy Agency is ``prepared to move'' oil from its strategic reserve if the Venezuelan action causes physical constraints in the oil market, Executive Director Nobuo Tanaka said in a briefing at the CERA conference.
IEA, a Paris-based adviser to 27 oil-consuming countries, requires member states to hold oil stockpiles equivalent to no fewer than 90 days of the prior year's net imports.
``Venezuelan oil is a very heavy crude, and the demand for it is in the Gulf of Mexico,'' Tanaka said. ``So if they have a program where they try to cut exports to the U.S., that will choke their own demand.''
Most of Venezuela's shipments to Exxon last year were to the Chalmette joint venture, Andy Lipow, president of Lipow Oil Associates, said today in a telephone interview. The country, the biggest oil exporter in the Americas, sold about 50,000 barrels a day directly to Exxon and another 78,000 to Chalmette.
Exports Aren't `Huge'
``In the scheme of things, 50,000 barrels a day isn't a huge amount,'' Lipow said. The Atlantis field that BP Plc has brought into production in the U.S. Gulf of Mexico will soon produce 200,000 barrels a day, with characteristics similar to Venezuelan crude, he said.
Venezuela provided about 1.64 million barrels a day of crude and products to the U.S. through November last year, according to Energy Department records. Of that, 1.43 million barrels a day went directly from Venezuela to the U.S. The rest arrived via the Hovensa refinery in the U.S. Virgin Islands. Hovensa is a joint venture of PDVSA and Hess Corp.
Crude oil rose as much as 56 cents, or 0.6 percent, to $93.59 after PDVSA announced it would stop sales to Exxon.
Venezuelan President Hugo Chavez threatened on Feb. 10 to cut off oil sales to the U.S., a warning that was widely discounted by industry analysts in both countries.
Disruption `Unlikely'
``We consider any disruption to the U.S.-Venezuela oil trade as unlikely,'' JP Morgan analyst Katherine Spector wrote in a note to clients today. ``A halt in U.S.-bound exports would ultimately be more devastating to PDVSA than U.S. refiners, especially if carried out for a sustained period.''
Exxon bought five shipments of Venezuelan crude and another cargo of refined products in November, according to Energy Department data. The ships went to facilities in the Texas cities of Port Arthur, Texas City, and Houston as well as Morgan City, Louisiana.
Venezuela has a limited ability to cut off oil supply to the U.S. because most of its crude is heavy and high in sulfur, making it inappropriate for refining in most of the world's refineries.
While Chavez has announced plans for new refineries in Nicaragua, Ecuador and other countries in order to reduce reliance on the U.S., the Gulf Coast remains the location of most refineries able to handle Venezuelan crude. "

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