Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Tuesday, April 25, 2006

Hurricane Hugo

Hugo Chavez, President of Venezuela, continues to endear himself to the big oil companies. The Wall Street Journal reports today(subscription required)...


Venezuela's Congress, made up entirely of Mr. Chávez's allies, is considering sharply raising taxes and royalties on foreign companies' operations in the Orinoco River basin, the country's richest oil deposit. Major oil companies like Exxon Mobil Corp. and ConocoPhillips of the U.S. and Total SA of France have invested billions of dollars there to turn the basin's characteristically tar-like oil into some 600,000 barrels a day of lighter, synthetic crude
....
The stakes are high because Venezuela, the world's fifth-largest oil exporter, holds the world's biggest oil reserves outside the Middle East and is the third-biggest supplier of crude to the U.S.
So we have two kinds of fallout from this. One is that big multinational oil companies working in Venezuela will see lower profits. Don't weep for them; it's not like they can't afford it. The other, more serious issue is that this could slow down development of Venezuela's heavy oil resources. An oil-hungry world might take issue with that.

But it's difficult to pressure Chavez. He's a populist, and he doesn't seem interested in landing a job with the Carlyle Group when/if he retires. And the Bush Whitehouse has already tried to overthrow him twice, to no avail.

Still, Chavez needs that heavy oil developed to pay for his grand plans. How will he do it if Big Oil goes home? Well, I beleive that's why he's becoming best buddies with Iran.

See links http://tinyurl.com/zo9cjand http://tinyurl.com/llll4

As the second story linked above explains: "Iranian oil companies are taking part in joint projects to develop Venezuela’s oil rich areas such as the Orinoco belt."It would really, really suck if Venezuela and Iran form an anti-US alliance. More bad news: Both countries are really chummy with China, too.
Check out my new gold and energy blog at MoneyAndMarkets.com