CIUDAD OJEDA, Venezuela, (Reuters) – Venezuelan President Hugo Chavez sent troops to seize oil service companies yesterday, tightening his grip on the oil industry as low crude prices pinch the OPEC nation’s finances.
Chavez is a socialist and former soldier who has already nationalized large chunks of the OPEC nation’s economy, including most of the energy sector and telecommunications companies.
Williams Companies said the government seized two natural gas facilities in eastern Venezuela after building up millions of dollars in debts for services, adding it could demand payment through international arbitration.
Military vehicles rolled through the streets of Ciudad Ojeda, on the shores of oil heartland Lake Maracaibo, where the government seized hundreds of boats and shipyards after Chavez signed a law to nationalize a group of oil service companies.
“We have started to nationalize all these activities connected to oil exploitation,” Chavez said from a confiscated boat sailing across the lake. “This is a revolutionary offensive.”
Williams said the government took over the El Furrial and PIGAP II gas compression facilities, which are crucial for boosting the production of fields that produce Venezuela’s most valuable crude.
Flush with cash amid an oil boom, the president in 2007 nationalized oil projects worth billions of dollars, leading oil giants Exxon Mobil and ConocoPhillips to quit the nation and sue for compensation.
Crude revenues have fallen in recent months and Chavez is now moving against smaller service companies the government has struggled to pay. The new law gives the government the option to pay compensation in bonds rather than cash.
The move could lead to further declines in oil production by risking slowdowns in key services following years of underinvestment by state-owned oil company PDVSA, which bankrolls the social programs that keep Chavez popular after a decade in office.
The law makes it easier for the government to later seize assets owned by service giants such as Halliburton and Schlumberger as PDVSA builds up billions of dollars in debts with contractors.
It appears to be targeted at specific service companies that have been hampered by severe cash flow problems due to lack of payment by PDVSA, which as of last year owed at least $8 billion to contractors and providers.
Chavez told hundreds of oil workers dressed in the red shirts that identify his supporters that the takeovers included a water injection project part-owned by British company John Wood Group.
Six people demonstrating near Maracaibo, across the lake from Chavez’s rally, suffered gunshot wounds when an unidentified gunmen fired on them, the investigative police in Maracaibo said.
Wood Group said yesterday it was in a strong position to extract compensation for the loss of its 49.5 percent interest in a 16-year, $800 million contract in Lake Maracaibo.
According to Williams’ filings with the U.S. Securities and Exchange Commission, it has three gas compressor facilities in Venezuela with a net book value of $324 million.
Oil Minister Rafael Ramirez said the facilities help PDVSA pump 500,000 barrels of crude per day from Venezuela’s best quality fields in the eastern state of Monagas.
Other oil service companies in Venezuela include Baker Hughes and BJ Services.
