MercoPress. South Atlantic News Agency

Chavez to begin taking over oil industry contractors

State owned Petróleos de Venezuela S.A. PDVSA, will begin Friday taking over control of some oil-field services currently being provided by private firms, President Hugo Chávez said.

That stage is coming: PDVSA will gradually assume control of all those activities that were outsourced ... we’re going to recover all of that,” Chávez said during a Cabinet meeting that was partially aired on state television.

The populist president made the announcement hours after the Chávez-controlled National Assembly approved on first reading a bill that will allow the government to “decree the total or partial expropriation” of businesses that provide “essential” goods and services to the oil industry.

The services that could be affected are the “water, steam and gas injection processes that ... improve (oil) recovery, as well as natural gas compression,” a pro-Chávez lawmaker said.

“Included are the services linked to activities in Lake Maracaibo, such as boats for the transport of materials, diesel, industrial water and other supplies,” the legislator said.

Also encompassed by the bill are tugboat and flat-bottomed barge transport, the replacement of underwater pipes and cables and boat maintenance in garages.

“To calculate a fair price for the (nationalized) assets,” the bill says, “in no case will loss of earnings or indirect damages be taken into account.”

It added that “the book value will apply and labour and environmental liabilities determined by the relevant authorities will be deducted,” while “payment will be made in cash, securities or bonds from public companies.”

PDVSA has been locked in disputes in recent months with domestic and foreign firms over the fees the latter charge for oil industry services. The Venezuelan state oil company, which owed billions to suppliers and contractors in 2008, says those fees are exorbitant now that oil prices have plunged amid the global financial crisis.

On May 1, 2007, the Chávez government turned over control of the oil-rich Orinoco Belt to PDVSA, stripping foreign oil companies of their last remaining majority stakes in petroleum projects in Venezuela.

The new scheme of joint ventures granted PDVSA an average stake of 78.3% in the operations in that zone, which accounts for production of close to 600,000 barrels of crude per day.

Venezuela is the world’s fifth-leading oil exporter and fourth-largest supplier of crude to the United States, the destination for almost 1.5 million of the 3 million barrels the country produces per day, according to official. ( LatinAmerica Herald Tribune).-