Humbled Chavez invites oil firms back

By Senior Writer Jody Clarke Jan 23, 2009

Jody Clarke

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"Humbled" isn't a word often associated with Venezuelan President Hugo Chavez, says the Chicago Tribune. "But the oil boom-turned-bust has turned down the volume on his hemispheric grandstanding." Having squandered billions during the country's great oil bonanza, the 'cracker in Caracas' has begun inviting oil companies back into the country, just two years after nationalising most of their assets.

The fact that companies such as Chevron are seriously considering his latest offer illustrates the scarcity of new oil projects worldwide. But it also shows "how the global financial crisis is hampering Mr. Chavez's ideological agenda and demanding his pragmatic side", says The New York Times. The Venezuelan president used massive oil revenues to buy political support in countries such as Bolivia and even America, where the Houston-based subsidiary of Venezuela's state-run oil firm delivered free home heating oil to 200,000 struggling families. With the oil price down 60% on last year, he can no longer afford to be so generous.

Meanwhile, nationalisations in sectors such as agriculture and steel manufacturing have led to a massive flight of capital, leaving Venezuela more reliant on oil. It now accounts for 93% of the country's export revenue, up from 69% in 1998, when Chavez first took office. The state run Petroleos de Venezuela is unable to boost production due to a lack of investment and the fact that Chavez fired its engineers after they backed a 2002 oil strike to oust him.

Chavez isn't the only person shaking the coin bucket though. Iran is desperate for a company to come in and develop the South Pars gasfield, while Russia's years of bullying oil companies might finally be coming to an end. Gazprom is starved of cash, after committing billions of dollars to pipelines in the Baltic and gas developments in Siberia, says Carl Mortishead in The Times. "This could be the moment for a company such as ExxonMobil, riding high and unburdened by borrowings, to offer a solution." The Kremlin won't like that. But with Gazprom now unable to provide cheap fuel to Russians and sell surplus gas at a profit to Europeans, it has little choice. "It is time to do good business."

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Published in Investments | More articles by Jody Clarke

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