'Anti-gringo' revolt in Latin America puts multinational oil companies over a barrel
By Ambrose Evans-Prichard (Filed: 30/05/2006)
As Leftist populism roars back to life in Latin America, the number of countries still safe for foreign oil and gas companies is shrinking by the month.
Venezuela, Bolivia, and Ecuador have already succumbed to asset seizures and confiscatory taxes: Peru and Argentina are sliding in the same direction.
The pin-up paratrooper of the "anti-gringo" revolt is Venezuela's leader, Hugo Chavez, making political hay out of the world's fifth biggest crude exports.
Mr Chavez said last week that his government was taking a 60pc controlling stake in huge Orinoco fields, hitting Exxon, Conoco, Chevron, Total, Statoil and, to a small extent, BP.
It follows the takeover of fields operated by Total and Italy's Enel in April, coming on top of extra oil levies of 33pc based on volume of output, not profit.
Exxon has so far balked at the demands, refusing to sell its stakes. "We're not looking for a fight with anybody but our view has always been 'if you want to change a contract, let's sit down and talk about it'. Sanctity of contracts is important to us," said chief executive Rex Tillerson.
The consulting firm Wood Mackenzie calculates that the Chavez asset-grab has confiscated $5.4bn from foreign companies through contract changes.
"They expect the oil sector to be the milch cow but lack of investment is already running down supply. Venezuela is losing up 600,000 barrels a day," said Dr Manouchehr Takin from the Centre for Global Energy Studies.
"But this wave of nationalisation is now sweeping across all Latin America," he said. The centre estimates that loss of output since 2000 due to political troubles worldwide - from Venezuela to Russia, to Nigeria - has reached 7.8m barrels a day.
In Ecuador, the government has seized Occidental Petroleum's oil fields, demanding the "immediate return to the state of the contracted areas and handover of all its equipment and machinery".
Occidental is taking the case to the international courts. It has invested over $1bn since 1999 in Ecuador, which accounts for 7pc of its global production.
The prize for chutzpah goes to Evo Morales, an Aymara Indian and Bolivia's first indigenous president, who deployed the armed forces in a secret dawn raid on May 1 to occupy his country's oilfields, refineries, and petrol stations.
Latin America's second largest gas reserves - 54 trillion cubic feet worth an estimated $200bn in revenues over the next 20 years - were nationalised at a stroke.
"For more than 500 years, our resources have been pillaged. This has to end now. What we are looking for are partners, not bosses to exploit our natural resources," said Mr Morales last week.
"We now have control of the hydrocarbon resources, you can either stay or leave," he told the multinationals. They will not be compensated.
Britain's BG is in the front line, deriving 5pc of its output (and 11pc of its global reserves) from the country.
Existing contracts are null and void, and the companies have six months to accept terms dictated by Mr Morales. Until then, 82pc of the proceeds from big fields go to the state in taxes and royalties.
Repsol, Total and BG have together invested more than £2bn in the country.
Repsol has already taken the step of writing down its reserves but BG and Total say it is too early estimate any damage.
Argentina's Nestor Kirchner, already facing investor wrath for defaulting on $102bn of sovereign debt, is now muttering about the nationalisation of Repsol YPF.
He threatened strict enforcement of a hydrocarbon law obliging companies to invest or see their exploration rights revert to the state. His government has already pounced on Aguas de Argentina, the water company owned by France's Suez.
In Peru, Col Ollanta Humala - a Chavez fan - has called for the nationalisation of "strategic sectors" if he wins the presidential run-off this week.
His rival Alan Garcia, once himself the bête noire of the International Monetary Fund, is threatening sharply higher taxes on oil - and mining - companies.
But if Latin America's new "caudillo" caste think they can rewrite the rules so gaily, they are in good in company.
Gordon Brown doubled the surtax on North Sea oil in December, raising the rate of corporation tax to 50pc, while the US Congress has just revoked royalty exemptions on more than 1,000 contracts in the Gulf of Mexico.
Crude oil near $72 a barrel is going to everybody's heads.
telegraph.co.uk |
