With Declining Revenues, Venezuela Looks to Bring Back Foreign Companies
With lower oil prices, petro-states have been finding it harder to project their influence across their borders. Venezuela, which has used its excess oil wealth to support a wide-range of social subsidies, including its heating oil program in the U.S., is facing a massive budget crunch due to decreasing oil revenues.
The NYT reported on Wednesday that this decline is due to a combination of factors, including the failure of Venezuela’s national oil company, Petróleos de Venezuela, to produce enough oil for sale and a decline in other sectors of that nation’s economy, due to capital flight stemming from the nationalization of these industries by President Hugo Chavez.
However, Venezuela has recently begun to solicit bids from the world’s biggest oil companies again. Although Chavez kicked out foreign oil companies and investors in 2007, they are once again looking to get back into the country in order to gain access to its valuable oil reserves.
The NYT quotes an anonymous Venezuelan oil executive as warning, “An agreement on a piece of paper means nothing in Venezuela because of the way Chavez abruptly changes the rules of the game. In 10 years, not one major oil project has been built in Venezuela. Chavez has left his so-called strategic partners out to dry, like the Chinese, who have been given the same treatment as Exxon.”
Nonetheless, these companies will surely return if given the option. That is because, even with the risks of re-nationalization, there is just too much potential money to be made. In the world of extractionist economics, normal behavior and logic often get turned upside-down.
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