ConocoPhillips holds out against Chavez
KAI RYSSDAL: The big oil story today, though, is Venezuelan heavy crude. Foreign energy firms have until Tuesday to sell their oil interests to the government of President Hugo Chavez.
Four firms threw in the towel this week. But Houston-based ConocoPhillips is holding out. Which has in turn prompted a warning that Conoco’s fields might just be taken outright. From the Americas Desk at WLRN, Marketplace’s Dan Grech has more.
DAN GRECH: It was like a party where one of the guests of honor didn’t show. While U.S. firms ExxonMobil and Chevron dutifully signed over control to the Venezuelan government, ConocoPhillips skipped out on the signing ceremony.
Analyst Fadel Gheit is with Oppenheimer & Co. He says Conoco has major stakes in two of the four oil projects being nationalized.
FADEL GHEIT: They are the largest interest in Venezuela, but the smallest of the three. Therefore, pound for pound, they have more at stake than Chevron or Exxon.
With more to lose, Conoco may be negotiating more carefully. Still, Conoco CEO James Mulva said in a conference call that the firm would ultimately turn over its keys to PDVSA, Venezuela’s state firm.
JAMES MULVA: PDVSA becomes the operator first of May. And we’re working with them to make sure that’s done in a very safe and efficient way. That transition’s going well and we don’t see any issues or problems in accomplishing that.
The problems may come after the May 1 transition of control. Oil companies still need to be reimbursed for the takeover. Venezuela says it’ll pay book value for the projects, which is $10 billion less than the current market value.
Edward Glab is a former Exxon executive. He says Venezuelan President Hugo Chavez risks completely alienating the energy firms, whose help he needs to get oil out of the ground.
EDWARD GLAB: When you’ve dug yourself into a deep hole, the first thing you should do is stop digging. Yet it seems that every action Chavez takes, he just digs himself a little deeper.
Oil companies have until June 26 to negotiate the terms of the takeover.
I’m Dan Grech for Marketplace.
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