Exxon, Conoco refuse to sign Venezuela deal

CARACAS, Venezuela - Exxon Mobil Corp. and ConocoPhillips refused to sign deals Tuesday to keep pumping heavy oil under tougher terms in Venezuela’s Orinoco River basin, signaling their departure from one of the world’s largest oil deposits.

Analysts said the move, however, won’t have a major effect on supplies or lead to higher prices at U.S. pumps because production by the two companies will shift to other producers who agreed to the pacts.

Four major oil companies — U.S.-based Chevron Corp., BP PLC, France’s Total SA and Norway’s Statoil ASA — signed deals to accept minority shares in the oil projects under new terms set by President Hugo Chavez’s government.

“Exxon Mobil is disappointed that we have been unable to reach an agreement on the terms,” the Irving, Texas-based company said in a statement. “However, we continue discussions with the Venezuelan government on a way forward.”

The changes are part of a broader nationalization effort by the Chavez government to assume greater control over “strategic” sectors of the economy. Aside from the oil industry, the government recently nationalized the country’s top telecommunications and electricity companies.

Elogio Del Pino, a director of the state oil company, said Houston-based ConocoPhillips, the third largest U.S. oil company, is not leaving the country completely and will maintain a 50-percent share in the Deltana Platform natural gas project.

Officials said Exxon Mobil, the world’s largest publicly traded oil company, will have no remaining oil interests in the South American country.

Venezuela “has an informal agreement to continue talking” with Exxon Mobil and ConocoPhillips about the terms of finalizing their involvement in the heavy crude projects, Oil Minister Rafael Ramirez said at a signing ceremony in Caracas.

“In the case of Exxon Mobil and ConocoPhillips, they are ending their participation in the businesses” of the Orinoco and other exploration activities, Ramirez said. “We are talking with both companies to continue negotiations to establish settlements.”

Ramirez said the signed agreements will benefit Venezuelans. He thanked the companies that agreed to the new terms, saying they are working toward a “secure future” in Venezuela.

It remains unclear how the companies are being compensated for their losses. The six companies invested more than $17 billion in the Orinoco projects and hold some $4 billion in outstanding debts, but Petroleos de Venezuela SA, also known as PDVSA, would not be assuming those obligations, Ramirez said.

“Each company is responsible before the banks for its commitments,” he told reporters.

The U.S. State Department urged Venezuela to provide proper compensation.

“The government of Venezuela, like any other government, has the right to make these kinds of decisions to change ownership rules,” said State Department spokesman Tom Casey. “We want to see them meet their international commitments in terms of providing fair and just compensation.”