MercoPress. South Atlantic News Agency

Venezuela makes official “junior” partners for oil industry

Venezuela's only chamber legislature which has no opposition representatives approved the new contract model contract for “mixed enterprises” in which state-owned oil company PDVSA becomes the dominant partner.

The new companies will be chartered for 20 years and PDVSA will hold at least 60% of equity in each of the 16 oil industry companies involved.

The total production of these companies is estimated in half a million barrels per day, just below a sixth of Venezuela's total output of 3.2 million bpd.

Venezuela is the world's fifth oil exporter and number three supplier of United States.

Since the April 1 deadline imposed by the government of President Hugo Chavez, 16 foreign corporations firms active in Venezuela's oil and gas industry, agreed to convert their existing operating agreements into contracts turning them into minority joint venture partners with PDVSA.

Among the companies accepting the new arrangements were Chevron, BP, Spain's Repsol YPF, China National Petroleum and Brazilian state-owned giant Petrobras.

French major Total and Italy's ENI rejected the deal, prompting PDVSA to take direct control of their concessions, while Exxon-Mobil pulled out of Venezuela last December after selling its stake in one oil field to Repsol.

President Chavez said the "mixed enterprises" are part of a broader project contemplated in the 2001 law on hydrocarbons.

Following the submission to the new contracts, President Chavez called on the "junior" partners to come up with some of the 70 billion US dollars needed to develop the Orinoco oil and tar sands belt, which, with an estimated 235 billion barrels of heavy crude, represents the largest oil deposit on the planet.

Heavy crude is both harder to extract and more expensive to refine, but soaring world oil prices have made the Orinoco Basin reserves commercially attractive.