[Peace-discuss] Big oil and Venezuela

[C. G. Estabrook]

[Apropos of David Green's remarks at last night's meeting, regarding
Sunday's referendum in Venezuela, there is an interesting piece in today's
Financial Times on how the oil industry is ready to make peace with
Chavez.  (Cf. the lack of enthusiasm in the industry for the invasion of
Iraq.) Perhaps this lessens Venezuela's chances in the October Surprise
sweepstakes, but then the oil industry didn't stay the American hand in
Iraq...  --CGE]

	ChÃvez win in recall vote will boost oil industry
	By Richard Lapper and Andy Webb-Vidal in Caracas

A decisive victory for Venezuela's President Hugo Chávez in next Sunday's
recall referendum on his leadership could help pave the way for billions
of dollars of fresh international investment in the country's oil and gas
sector.

Industry analysts say that international companies, short of opportunities
elsewhere, would welcome an end to the extreme political instability that
has plagued the last two years in particular of the radical leader's six
years in office.

"The companies are a lot more sanguine about the political situation and
they have become convinced that Mr Chávez is a man they can do business
with," said Fareed Mohamedi, chief economist of Washington- based PFC
Energy.

Two months ago, following a protracted campaign, opposition groups forced
Mr Chávez to hold a recall referendum. With the economy recovering
strongly, however, the president expects to see off the challenge and
avoid calling elections before those scheduled for 2006.

To win in next Sunday's referendum, the opposition would need to beat the
3.8m vote total the president secured in his 2000 election victory.  
Energy analysts most fear a narrow victory for either party since this
could be contested and leave the country facing continued uncertainty and
the risk of violence. A clear Chávez victory would "create a floor and
maybe allow some investment to go ahead", said Michelle Billig, head of
political risk at New York-based PIRA Energy Group. "It would take away an
obstacle."

International companies have also begun to realise that in spite of his
hostility towards Venezuela's traditional business elites, Mr Chávez is
anxious to maintain good relations with international companies,
particularly in the oil sector.

International oil executives have in the past been very influenced by the
"negativism" of local business elites towards Mr Chávez. "It has taken
them some time to look beyond that," said Mr Mohamedi.

Companies have begun to attach less importance to Mr Chávez's occasional
flourishes of anti-American rhetoric and have been reassured by Venezuelan
commitments to continue supplying oil to the US, its biggest market.

Rising prices mean that Venezuela's investment opportunities in natural
gas and heavy oil are seen as attractive - even though state-owned
Petróleos de Venezuela dominates crude oil production, and despite an
increase in royalties on oil and gas production three years ago.

Last week, ChevronTexaco proposed a $6bn (£3.25bn) project to upgrade
heavy oil from the Orinoco river belt in the east of the country into
lighter exportable crude. ChevronTexaco has also recently drilled its
first well on one of two concession blocks it is operating in the Deltana
natural gas project.

In addition, investment opportunities elsewhere are being keenly contested
or, as in the Middle East, are subject to much greater political
uncertainty than in Venezuela.

Mr Mohamedi said that together with Libya, Venezuela was one of the two
"sexiest propositions in the world oil market".

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