Exxon Mobil and ConocoPhillips have decided to abandon their heavy crude oil projects in eastern Venezuela rather than cede majority ownership and operating control to the government.
Yesterday was the deadline set by President Hugo Chavez for the six foreign owners of four mega-projects in Venezuela’s Orinoco Belt region to agree to terms of turning over control to Petroleos de Venezuela, or PDVSA, the state-owned oil company. Chavez then said he was taking over the fields whether the firms agreed or not.
This have serious consequences for the oil companies. ConocoPhillips stands to lose close to 5% of its global oil production by walking away from the Orinoco. The company is bracing itself for the loss of the entire $4.5-billion value of its two Orinoco projects, though it is continuing to negotiate with the Chavez government for “appropriate compensation.”
Exxon Mobil, with a much larger scope of oil production operations, will lose 2% of oil production.