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Venezuelan “social interest” targets oil operational contracts

Thursday, September 29th 2005 - 21:00 UTC
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With Venezuelan president fully involved in his campaign of taking over “idle” land and industrial compounds claiming “social interest”, Energy Minister Rafael Ramirez anticipated that some private exploitation areas in the oil industry will be reviewed.

According to Mr. Ramirez the government owned oil company PDVSA will consider taking over the control of 32 "operational agreements" if foreign corporations refuse to accept their conversion into joint undertakings before the end of the year.

"Operational contracts are illegal?we could easily take over production with not much effort", in case corporations refuse to change contracts added Ramirez. "Never again will we have operational agreements", he emphasized revealing that the Venezuela government will have an 80% participation in the new joint undertakings.

PDVSA has operational contracts with 22 corporations which according to the current wording manage and operate wells belonging to the Venezuelan oil giant. Among those companies figure Chevron, Repsol-YPF which as the others pay royalties per barrel at current international prices that have ballooned in the last twelve months.

The current Hydrocarbons Bill, implemented since the end of 2001 contemplates turning the operational agreements into joint undertakings with PDVSA. The contracts date back to the previous legislation and were signed between 1990 and 1997, before President Chavez took office I 1999 and involve a daily production of half a million barrels.

As of next January Venezuela expects to have converted all the operational agreements into temporary oil contracts, a "transitional formula" until the final contracts are agreed with PDVSA, highlighted Mr. Ramirez.

Meantime the advance over private property continues with Venezuelan Congress approving the expropriation claiming "public interest" (a figure contemplated in the Constitution) of a sugar refinery and a small steel foundry.

This follows the taking over of the corn silos from Venezuela's main agro-business company, Polar, which denies they were "redundant" and has anticipated it will appeal the decision before the Supreme Court.

"Idle" land distributed among peasants already totals 68.000 hectares and President Chavez has revealed that the target is half a million hectares. Venezuelan opposition and business federations have bitterly protested the latest moves.

United States ambassador in Venezuela William Brownfield cautioned about the expropriations effect on foreign investment but admitted that international law contemplates the right of governments to such actions "for the welfare of the people".

He also refused to comment on the latest moves and underlined that economic decisions are a "sovereign affair of each country".

Categories: Mercosur.

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