Venezuela seizes gas compression plants, faces union unrest

LOS ANGELES, June 5 -- Venezuela’s President Hugo Chavez said state-owned Petroleos de Venezuela SA (PDVSA) is continuing to nationalize oil field service companies in the country, with Houston-based Exterran confirming its facilities as the latest seizure.

“We continue advancing, recovering the control, property and management of all these plants and compression units. Nobody will stop us in this," said Chavez, adding, "We have a timetable to take control of the production plants in the Orinoco belt."

PDVSA Chief Executive Pedro Coronil added to Chavez’s words, saying, "With the takeover of five more plants in the eastern region that produce about 224 MMcfd of gas and 35,000 b/d of oil, we are continuing the plan to renationalize activities connected with compression of gas."

In May, the Venezuelan government enacted a law that reserves to Venezuela certain assets and services related to hydrocarbon primary activities. Under the law, reserved activities are to be performed by PDVSA or its affiliates, or through mixed companies under the control of PDVSA or its affiliates.

Exterran confirmed the seizure of its facilities, saying that “on June 2, 2009, Petroleos de Venezuela SA, or PDVSA, commenced taking possession of our assets and operations in a number of our locations in Venezuela.”

Enterran said, “We cannot predict whether the Ministry of People's Power for Energy and Petroleum will name us in a resolution within the reserved activities, nor can we predict the amount of our assets and operations that PDVSA or its affiliates will seize.”

For the year ended Dec. 31, 2008, Exterran said its operations in Venezuela accounted for $159.7 million, or 5%, of the firm’s revenue and $84.2 million, or 8%, of its gross margin. The seizure included Exterran offices and five compression plants in Monagas state, Eastern Venezuela.

According to PDVSA, the seizure will significantly reduce its costs with Exterran, which were estimated at $210,000/month for rent, operations and maintenance.

So far, PDVSA said that 45% of all private oilfield service companies—about 76 firms—have been taken over since nationalization began 2 weeks ago.

Meanwhile, Venezuela’s national assembly is reading a proposed law to put all petrochemical activity under state control, which could affect Japanese and US companies and add to the growing list of oil sector companies already in government hands.

Under the proposed petrochemical law, joint ventures with the private sector will be permitted only as long as the Venezuelan state has the controlling share.

It was not immediately clear which companies stand to be affected by the planned law, which is due to go to a second reading next week and is likely to be passed by the assembly, which is controlled by the Chavez government.

Japan's Matsui & Co has a 15% stake in the Propilven chemical complex in Zulia state, while US chemical maker FMC Corp. has a stake in the Tripoliven plant. US chemical company Koch Industries part-owns Fertinitro, a fertilizer plant in Venezuela.

Meanwhile, Chavez, responding to concerns of union officials and oil workers, said PDVSA will employ all 8,000 workers from the more than 70 oil service contractors that the government nationalized last month.

According to Chavez, 668 workers have been transferred to the PDVSA payroll since May 8 when the government took over 76 oil services companies working in the Lake Maracaibo region of the western state of Zulia.

"Between [June 8 and June 9], 600 more (workers) will be absorbed (into PDVSA) and, going forward, 1,000 workers (weekly), until reaching the 8,000 who had been outsourced, slaves," Chavez said on June 3 during a Cabinet meeting broadcast over national television.

The workers joining PDVSA will enjoy "social security and dignified jobs, so they can help build socialism," said the president in an effort to stave off union dissatisfaction.

Union official Rafael Zambrano stepped up the criticism, however, saying that his organization had information showing that "only 2,500 workers" from the nationalized firms in the Lake Maracaibo region would be added to the PDVSA payroll.

Since last week, oil workers have gathered on the Lake Maracaibo piers to protest the nationalization of the oil services firms operating in the region—a point that raised the ire of government officials.

Oil Minister Rafael Ramirez blamed fugitive opposition politician Manuel Rosales for attempts to cause "chaos” and vowed that the Venezuelan government “will not allow this region to become chaotic.”

Union leader German Cortez disputed the minister’s view, saying, "This is not a problem of political parties, this is an economic and labor problem.”

Contact Eric Watkins at hippalus@yahoo.com.

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