Processing Magazine

Chavez Threatens US Oil Cutoff

February 11, 2008
The Associated Press reported recently that President Hugo Chavez threatened to cut off oil sales to the United States in an "economic war" if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.

Exxon Mobil has gone after the assets of state oil company Petroleos de Venezuela SA in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez''s government.

A British court has issued an injunction "freezing" as much as $12 billion in assets.

Chavez has repeatedly threatened to cut off oil shipments to the United States, which is Venezuela''s No. 1 client, if Washington tries to oust him. Chavez''s warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government''s nationalization drive through lawsuits.

Exxon Mobil spokeswoman Margaret Ross said the company had no comment. A U.S. Embassy spokeswoman in Caracas did not return a call.

Venezuela accounted for about 12 percent of U.S. crude oil imports in November, the latest figures available from the U.S. Energy Department. The 1.23 million barrels a day from Venezuela makes that country the U.S.''s fourth-biggest oil importer behind Canada, Saudi Arabia and Mexico.

Venezuelan Oil Minister Rafael Ramirez has argued that court orders won by Exxon Mobil have "no effect" on the state oil company PDVSA and are merely "transitory measures" while Venezuela presents its case in courts in New York and London.

Exxon Mobil is also taking its claims to international arbitration, disputing the terms it was granted under Chavez''s nationalization last year of four heavy oil projects in the Orinoco River basin, one of the world''s richest oil deposits.

Other major oil companies including U.S.-based Chevron Corp., France''s Total, Britain''s BP PLC, and Norway''s StatoilHydro ASA have negotiated deals with Venezuela to continue on as minority partners in the Orinoco oil project.

ConocoPhillips and Exxon Mobil, however, balked at the tougher terms and have been in compensation talks with PDVSA.