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Wed, Jan 17, 2007 - Page 10 News List

Venezuela ends negotiations on oil project control

THAT'S IT Caracas has officially shut the door on negotiations for the Orinoco river basin oil project. Minority stakes is the only game in town


Venezuela will end negotiations with foreign oil companies on how it will take a majority control of their operations along the Orinoco river, Oil Minister Rafael Ramirez said.

Ramirez told reporters on Monday that "there's no possible negotiation" with the foreign firms, but that private companies would be allowed to own minority stakes in the lucrative Orinoco river basin oil projects.

"Every case will be different," he said. "We will have an effective majority control."

The government negotiated last year with the companies about taking majority control of oil operations in the country, but no agreements were reached.

In a speech to congress last week, President Hugo Chavez said the private companies -- British Petroleum PLC, Exxon Mobil Corp, Chevron Corp, ConocoPhillips Co, Total SA and Statoil ASA -- would be given the option to stay on as minority partners.

Chavez -- a close ally of Cuban leader Fidel Castro -- also announced plans to nationalize companies within Venezuela's telecommunications, electricity and natural gas industries.

The government has already taken majority ownership of Venezuelan oil-producing operations outside the Orinoco region through joint ventures controlled by the state oil company.

Asked about the upcoming nationalization of top power company Electricidad de Caracas, owned by Arlington, Virginia-based AES Corp, Ramirez said: "We will take 100 percent of that stake."

Ramirez did not give details on how much the state would compensate EDC shareholders, but said officials would "try to reach a final resolution for all these issues this year, or the first half of this year."

EDC shares fell 6.15 percent on Monday on the Caracas Stock Exchange.

AES bought its 86 percent stake in EDC amid a hostile takeover in 2000 that was approved by the Chavez administration.

Government officials have criticized AES for making drastic staff cuts to reduce operating costs.

On natural gas, Ramirez said state oil company Petroleos de Venezuela SA -- which he also heads -- was "100 percent in agreement" with Chavez about imposing state control over the sector.

Private companies can hold a majority stake in natural gas projects, but Ramirez said that would be changed for future contracts.

He said existing gas licenses will be left untouched for now, though the government will take a closer look at them later on.

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