Watching Government - Petroamérica

Sept. 8, 2003
Facing a likely recall referendum, Venezuelan President Hugo Chávez is looking to improve goodwill at home and with some neighbors. One way he hopes to boost his credibility is through the revival of a decade-old plan to create a Latin American energy cartel called Petroamérica.

Facing a likely recall referendum, Venezuelan President Hugo Chávez is looking to improve goodwill at home and with some neighbors. One way he hopes to boost his credibility is through the revival of a decade-old plan to create a Latin American energy cartel called Petroamérica.

In past months, Chávez has aggressively lobbied other state-run oil companies amenable to his leftist brand of politics to combine forces and create what would in essence be a powerful supermajor (see related story, p. 32). Chávez says Petroamérica would be an "energy epicenter," commanding respect in both international oil and petroleum product markets. In theory, the company also would be able to leverage big investments across industry sectors, generating jobs and revenue throughout Latin America.

Not too surprisingly, Venezuela's biggest customer, the US, strongly opposes the idea, calling it monopolistic.

Lingering doubts

No one really knows how serious Chávez is about Petroamérica, which was first suggested by Vene- zuelan and Brazilian politicians in 1995. Latin American countries, he says, must band together now to fight what he calls the "perverse" effects of globalization or face economic annihilation. And if critics choose to compare such a group to the Organization of Petroleum Exporting Countries, so be it, he told reporters recently. "But we have an obligation to unite, and the time has come," Chávez told reporters on a recent visit to Trinidad and Tobago, according to Spanish-based news company Agencia EFE SA.

Given that the chances of a recall are growing, Chávez's statements could be interpreted as mere political rhetoric. Most oil analysts doubt Chávez can pull together such a grand scheme. But they also say it is conceivable Chávez's adopted Petro- américa plan could succeed if he survives a recall vote and is reelected for another 6-year term in 2006. Along with Trinidad and Tobago, Chavez says other members of Petroamérica could include Brazil, Ecuador, Peru, and Bolivia. The Venezuelan president also sees Mexico and Colombia possibly joining Petroamérica although those leaders have not been particularly enthusiastic about that. Still, it's entirely possible that Chávez could outlast both of those two politicians and pitch his plan again to more sympathetic listeners.

Friendly neighbors

During his visit to Port of Spain last month, Chávez told reporters that Venezuela hopes to liquefy gas in Trinidad and Tobago and export it to the potentially lucrative US market. Trinidad and Tobago also signed an agreement with Venezuela to jointly explore Caribbean region offshore natural gas reserves within the Plataforma Deltana area; three exploratory blocks in the area straddle the territorial waters of the two countries.

In late August, several foreign oil companies, including large multinationals ChevronTexaco Corp., Conoco- Phillips, and ExxonMobil Corp., placed formal bids on two Delta exploration blocks that belong exclusively to Venezuela. Final bids are due Nov. 28, with winners to be announced Dec. 15. Two other blocks under Venezuela's jurisdiction were awarded earlier this year to a group that includes ChevronTexaco, ConocoPhillips, and Statoil ASA (OGJ Online, Mar. 25, 2003).