Re: [OPE] Chavez expropriates oil sevice companies

From: Gerald Levy <>
Date: Sat May 16 2009 - 06:21:26 EDT

Here is a much better story which is clearer about what actually happened.
In solidarity, Jerry

Venezuelan Government Expropriates Petroleum Related Activities
May 9th 2009, by Tamara Pearson –
 Mérida, May 9th 2009 ( - The National Assembly passed
a law on Thursday assigning goods and services connected to the petroleum
industry to the state. The law re-establishes government control over a
range of activities that were previously contracted out to foreign
transnationals, and transfers the corresponding contract workers to the
state oil company PDVSA or its affiliates.
Activities that are fundamental for producing petroleum, such as the
injection of water, steam, or gas to increase energy reserves and the amount
of petroleum extracted, or the compression of gas, the boats used for
transportation of staff and divers, the cranes that transport material, ship
and pipe maintenance and so on, are now legally under state control.
On Friday, the government expropriated 300 boats, 30 barges, 39 terminals
and docks, 5 dams and 13 workshops on Lake Maracaibo, where there are large
crude oil reserves. Chavez said that next week they will also start
expropriating some petroleum complexes in Monagas state.
According to the Venezuelan newspaper El Universal, among the companies to
be affected is US-based Williams Company, which is in charge of the project
High Pressure Gas Injection. The newspaper says that PDVSA has a large debt
to the company for its operations for the first quarter of this year. The
Woodgroup consortium will also be affected.
Through the law, the government has the right to partially or completely
expropriate any petroleum related activities, and Venezuelan President Hugo
Chavez said, "We are going to have a liberating battle" in Lake Maracaibo.
The National Assembly's statement motivating the law says, "such activities,
which are of strategic character and necessary for the principle industry of
the country and that are carried out by Petroleum of Venezuela (PDVSA) and
its affiliates, were [contracted out] during the Fourth Republic [that is,
the period before the Chavez government] with the consequent loss of direct
control and vulnerability of the Venezuelan state."
Further, the minister for energy and petroleum, Rafael Ramirez, pointed out
that the law is fulfilling Article 302 of Venezuela's constitution, which
establishes that "primary activities are reserved for the absolute control
of the Venezuelan state through its national company, Petroleum of
Ramirez also estimated that the government will save $700 million annually
for expropriating the various goods and services today, out of what it was
previously paying for the contracts.
"At the start of the year we denounced that there was a surcharge in the
rates that [the contract companies] were charging for their services, but as
there was a monopoly we didn't have any choice. We can't extract the
petroleum in the lake if we don't have control of the launches, of the
terminals, likewise with the extraction of the gas, in the north of Monagas
500,000 barrels daily depended on an injection that was in the hands of a
North American transnational," Ramirez said.
The president of the National Assembly's commission for energy and mines,
Angel Rodriguez, said that the new law corrects the breaking up of essential
areas of the petroleum industry when in 1992 the "old PDVSA" started a large
scale process of subcontracting, leaving a large part of the exploitation of
oil in hands of foreign companies.
The new law is also about Venezuelan sovereignty, said Ramirez. "These
[contracted] companies were speculating and controlling a large part of the
oil industry and now we are going to correct anything that is improper,
safeguarding our sovereignty and reducing costs in the production of oil."
The law stipulates that to expropriate such goods and services, future loss
of profit or damages will not be considered. The value will be determined
according to the norms, with labour and environmental liabilities deducted.
Any disputes over the application of the law can only be settled in
Venezuelan courts.
Ramirez also explained that workers who are affected by the change will now
work for PDVSA or its affiliates. In the appropriations that occurred today,
he said 8,056 workers will now be "absorbed" into PDVSA.
The minister for work and social security, Maria Cristina Iglesias, also
noted that in the last four years, PDVSA has incorporated over 21,000
workers that were previously contract workers.
Yesterday the price of oil rose to $58 per barrel, the highest price since
last November.

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