CARACAS (Reuters) – Venezuela yesterday approved legislation allowing the nationalization of a group of oil service companies, opening the door for future takeovers as President Hugo Chavez extends control over the oil industry.
The law will directly affect natural gas producer Williams Companies Inc, which runs a key facility that boosts output of some of Venezuela’s most valuable crude and which last month took a $241 million charge for PDVSA nonpayment.
It will also makes it easier for the government to seize assets owned by service giants such as Halliburton and Schlumberger as state oil company PDVSA builds up billions of dollars in debts with contractors amid low oil prices.
The move could lead to further declines in the OPEC nation’s oil production by risking slowdowns in key services following years of underinvestment by PDVSA, which bankrolls the social programs that keep Chavez popular. “This seems like it’s an easy way out of this current debt dispute with service companies but it’s a short-sighted approach,” said Antoine Halff, vice president of research at the Newedge Group brokerage in New York.
“First, there are questions about how well PDVSA can run those services companies, but there are also questions of how this will affect future investment in oil projects,” he said. The law puts the state in charge of companies providing a range of services including gas and water reinjection and marine transport in oil-rich Lake Maracaibo and gives PDVSA the right to take over companies involved in those operations.