Venezuela Nationalizes 60 Oil Contractors

9 May 09 | PTV

President Hugo Chavez says that his government is nationalizing 60 oil contractors as he moves to assert greater control over Venezuela’s oil industry.

The move follows months of disputes between the state oil company PDVSA and oil contractors over billions of dollars in unpaid debts accumulated as last year’s oil price tumble left the company with a cash flow crunch.

Venezuela’s Congress on Thursday approved a law allowing the state to take over a group of mostly small local service companies, sparking concerns the government could expropriate assets of major global oil services players.

He said companies to be nationalized under a new law will include the SIMCO consortium, which has worked injecting water into oil fields in western Lake Maracaibo for the past 10 years.

State-run Petroleos de Venezuela SA, or PDVSA, is taking over all oil service work in the lake, where private companies have long helped extract crude, he said.

“SIMCO consortium disappears today,” Chavez said in a televised speech from a harbor in Lake Maracaibo, where he oversaw the seizure of 300 boats, docks and other assets belonging to oil contractors. “Now, it belongs to PDVSA.”

Wood Group, which is a 49.5 percent partner in the consortium, said in an e-mailed statement from its Houston offices on Thursday that PDVSA took over its operations earlier this year “following the consortium submitting a notice of default due to nonpayment and other contractual disputes.”

Wood Group’s parent company is John Wood Group PLC, based in Aberdeen, Scotland.

Oil Minister Rafael Ramirez said the law could also affect U.S. natural gas processor and distributor Williams Companies Inc., based in Tulsa, Oklahoma.

Williams Cos. said in a statement Friday that the Venezuelan government has seized two of its gas compression facilities in eastern Venezuela. In April, the company said it would write off USD 241m related to unpaid fees from PDVSA.

Venezuela’s state oil company has recently clashed with domestic and foreign service providers that help extract the OPEC nation’s heavy crude, accumulating billions of dollars in debts as it aims to renegotiate contracts to reduce costs by 40 percent.

Chavez said the takeovers will allow state oil company PDVSA to reduce its production costs by 20 percent, or USD 500m.

Oil Minister Rafael Ramirez said Venezuela has now taken control of “more than 85 percent of the installations and activities” covered by the law.