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The New York Times: Venezuela Reaches Deal With Spain's Repsol: Posted Saturday 31 December 2005

Published: December 30, 2005
Filed at 2:28 p.m. ET

CARACAS, Venezuela (AP) -- Venezuela's state oil company said Friday it has successfully signed agreements to bring all 32 privately operated oil fields under government control after reaching a deal with Spanish-Argentine oil company Repsol YPF.

The Venezuelan government had set a Dec. 31 deadline for all private companies holding contracts to independently pump oil here to agree to new joint ventures that will be majority-owned by the state oil company.

The 15,000 barrel-a-day Quiamare-La Ceiba oil field, however, was the only one not to have submitted to the contract changes due to objections by Exxon Mobil Corp., which jointly operates the field with Repsol.

Repsol has acquired Exxon's 25 percent stake in the field and agreed to convert its operating agreement into a joint venture, Petroleos de Venezuela S.A., or PDVSA, said in a statement. The company did not provide a cash value for the deal.

The government had threatened to reclaim oil fields from companies that refused to sign the so-called transitional joint-venture agreements, which will later be converted into permanent agreements with PDVSA.

Of 22 companies that held operating agreements, Chevron Corp., BP PLC, Royal Dutch Shell PLC and Brazil's state oil company Petrobras S.A. were among those that signed earlier.

The state could take as much as a 90 percent stake in the new ventures. The amount the private companies have invested in the fields will determine the amount of control they have, Oil Minister Rafael Ramirez has said.

The changes will significantly reduce the oil companies' share of profits and control over operations. The companies have also expressed concern that the changes could undermine the value of their Venezuelan assets. Analysts say the contract uncertainty has caused output to decline slightly at the 32 privately run fields as companies have been unwilling to continue investments.

The contract changes are part of a wider strategy by President Hugo Chavez's administration to exert more control over the oil industry.

In less than four years, his government has sharply raised taxes and royalties charged to foreign oil companies and demanded $3 billion in unpaid taxes.

Separately, Exxon has heavily invested in Venezuela's Orinoco tar belt holding a 41.7 percent stake in the 120,000 barrel-a-day Cerro Negro project to upgrade extra heavy crude. It has also been planning to join PDVSA in a $3 billion petrochemicals project.

But Ramirez, who is also president of PDVSA, has said that the dispute caused by its resistance to the operating agreement contract changes could hurt the company's future investments in the country.

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