Friday, February 15, 2008

It would be the worst time politically for Chavez to cut oil shipments to US

"It would be the worst time politically for Chavez to cut oil shipments to the U.S.," said Patrick Esteruelas, Latin America analyst at the Eurasia Group in New York.
Oil analysts dismiss threat by Chavez on sales to U.S.
Dan Caterinicchia
Associated Press
Feb. 12, 2008 12:00 AM
WASHINGTON - Venezuelan President Hugo Chavez's latest threat to cut off oil sales to the U.S. produces tantalizing headlines and rattles some oil
traders' nerves.But analysts say it presents no long-term danger to global oil supplies or prices and makes no economic or political sense for his own country.Chavez's threat was in retaliation to Exxon Mobil Corp.'s efforts in U.S. and British courts to freeze billions of dollars of assets belonging to Venezuela's state oil company to resolve an oil-production contract dispute.

"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said Sunday. "Do you know how? We aren't going to send oil to the United States. "His comments helped stir anxiety on oil markets on Monday, sending crude futures prices up by nearly $2 a barrel. (Violence in Nigeria, refinery outages and colder weather in the U.S. also propelled prices higher.)
If Chavez actually cuts off supplies to the U.S., the impact would be mostly symbolic, said oil analyst Peter Beutel of Cameron Hanover in New Canaan, Conn. Any short-term supply disruption would dissipate as other nations make arrangements to take the Venezuelan crude and the U.S. makes up its shortfall by purchasing additional barrels from the Middle East, Africa and other regions.
"It makes no sense for Mr. Chavez to follow through on his threats" because the U.S. refining industry's plants, some of which are owned by Venezuela, are customized to handle much of Venezuela's high-sulfur crude oil, said Tom Kloza, chief oil analyst at the Oil Price Information Service in Wall, N.J. If Venezuela's crude was low in sulfur content, making it more valuable on the global market, he might have a better hand to play, Kloza said.
Indeed, the U.S. remains the No. 1 buyer of Venezuelan oil, purchasing more than 41 million barrels in November, accounting for roughly 10 percent of all crude-oil imports that month, according to the most recent Energy Department data available.
With oil prices hovering above $90 a barrel, Chavez relies largely on U.S. oil money to stimulate his economy and bankroll social programs that have traditionally boosted his popularity. Nevertheless, Chavez in December lost a vote on constitutional changes that would have let him run for re-election indefinitely."It would be the worst time politically for Chavez to cut oil shipments to the U.S.," said Patrick Esteruelas, Latin America analyst at the Eurasia Group in New York.
This isn't the first time Chavez has tried to use the oil weapon. He has repeatedly threatened to cut off shipments to the U.S. if Washington tries to oust him, but many analysts have dismissed that scenario as highly unlikely. Chavez, meanwhile, has been vague about precisely what actions by the U.S. government could constitute an attack against his government worthy of halting oil shipments.
Exxon Mobil has gone after the assets of Petroleos de Venezuela SA in U.S. and European courts as it challenges the nationalization by Chavez's government of four heavy oil projects in the Orinoco River basin, one of the world's richest oil deposits. Other oil companies including Chevron Corp., France's Total, Britain's BP PLC and Norway's Statoil Hydro ASA have negotiated deals with Venezuela to continue as minority partners in the project, but ConocoPhillips and Exxon Mobil balked at the tougher terms and have been in compensation talks with Petroleos.
It still remains unclear how much Venezuela stands to lose economically from Exxon Mobil's lawsuits in courts in New York and London.Although a British court last month issued an injunction "freezing" as much as $12 billion (euro 8.3 billion) in Venezuelan assets, initial reaction from Venezuela's top oil official suggested that Chavez's government does not expect to face much harm.
Oil Minister Rafael Ramirez said last week that the state oil company does not have "any assets in that jurisdiction that even come close to those sums."Light, sweet crude for March delivery rose $1.82 to settle at $93.59 a barrel Monday on the New York Mercantile Exchange after earlier hitting a one-month high of $94.72.
A key factor, analysts said, was that unidentified gunmen in Nigeria attacked a naval vessel that was escorting petroleum industry boats. Militant attacks have cut the African nation's oil output by nearly a quarter in the past two years.

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Friday, February 8, 2008

Exxon wins freeze on $12bln of Venezuelan assests

This is terrible to Venezuela...... Thanks Chavez and his political supporters, they ruin Venezuelans wealth.... They will have to pay.
vdebate reporter
Exxon wins freeze on $12 bln of Venezuelan assets
Thu Feb 7, 2008 7:32pm EST
(Adds analyst comments, background, byline)
By Michael Erman
NEW YORK, Feb 7 (Reuters) - Exxon Mobil Corp (XOM.N: Quote, Profile, Research) has won court orders freezing up to $12 billion in Venezuelan assets around the world as it fights for compensation for operations lost to President Hugo Chavez's nationalization drive.
The largest U.S. company sought the asset freeze to guarantee repayment should it win arbitration over the Cerro Negro heavy oil project.
The move is the boldest challenge yet by an international oil major against any of the governments around the world that have moved to increase their holds on natural resources as energy and commodity prices have soared.
"To me it sounds like a very aggressive tactic," said Stephen Zamora, professor of international law at the University of Houston Law Center.
"I can't really say that I'm aware this has been used in other investment disputes. They may be trying to get the government to settle."
Exxon -- which last week posted the largest ever year's profit by a U.S. company -- said on Thursday it has received court orders in Britain, the Netherlands and the Netherlands Antilles each freezing up to $12 billion in assets of Venezuela state oil firm PDVSA. An Exxon spokeswoman said the total that could be frozen worldwide was $12 billion.
Exxon also won a court order from the U.S. District Court for the Southern District of New York in December freezing more than $300 million belonging to PDVSA, seeking to guarantee repayment should it win the arbitration.
PDVSA, one of the largest suppliers of crude oil to the United States, was not immediately available for comment. The White House and the U.S. State Department also declined to comment.
Venezuela's sovereign bonds sold off after the court orders surfaced.
Left-winger Chavez, who regularly clashes with the Bush administration, took over Exxon Mobil and ConocoPhillips (COP.N: Quote, Profile, Research) stakes in multibillion-dollar heavy oil projects in Venezuela's oil region last June.
The move was part of the left-wing leader's drive to nationalize key industries including utilities and telecommunications companies owned by private companies.
CHALLENGE TO CHAVEZ
The news comes as a tough blow to Chavez, who suffered a stinging defeat in a December referendum that would have let him run indefinitely for reelection and enshrine socialism as the OPEC nation's economic system.
PDVSA is already facing growing debt and increasing operational problems that analysts attribute to underinvestment caused by the company's massive contributions to Chavez's social programs.
But the near-term effect of the Exxon legal maneuver on PDVSA's day-to-day operations was not immediately clear.
The South American nation has an extensive overseas refining network, including the Citgo refining and marketing branch in the United States.
Exxon said in court filings that recent estimates have placed PDVSA's global asset value -- including its operations in Venezuela -- at over $62 billion
PDVSA's European refining assets, principally a 50 percent share in the German refining joint venture Ruhr Oel, were held through a Netherlands Company PDV Europa BV, according to filings PDVSA made with the U.S. Securities and Exchange Commission in 2006.
Exxon filed for arbitration in September with the International Centre for Settlement of Investment Disputes.
Exxon has not specified how much it wants for the 41.7 percent stake in the Cerro Negro project, but it has said its remaining book investment in the project was about $750 million at the time the assets were expropriated.
The move underscores Exxon's reputation for toughness in dealing with foes as varied as governments and fishermen, as it has been willing to wage prolonged legal battles to defend its interests around the world.
Amy Meyers Jaffe, energy policy researcher at Rice's Baker Institute, said the case could have far-reaching implications.
"These are precedents that are going to be important for what people can and cannot do in the oil industry," she said.
ConocoPhillips spokesman William Tanner said his company "continues to discuss an amicable resolution regarding the assets that were expropriated in Venezuela."
Conoco filed for arbitration over the dispute in November.
Venezuela's benchmark global bond due 2027 lost 2.375 points in price to be bid 98.938, while total returns offered by the country's debt slipped 1.52 percent according to the JP Morgan EMBI+ index 11EMJ. (Additional reporting by Robert Campbell, Matt Daily and Matthew Robinson in New York; Anna Driver in Houston; and Brian Ellsworth in Caracas; Editing by Gary Hill)
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