HA HA! Take that Chavez!

[chequita guevara]

Originally posted by Oerdin


But you're thinking rationally. Don't you know to be a good commie means you have to stop doing that?

You should talk.

[chequita guevara]

I think many people here are divorcing this discussion from historical context. It needs to be kept in mind that the Venezuelan government has, historically, been a really nasty piece of work, and that until Chavez was elected, did not represent the interests of anymore than a tiny sliver of Venezuelan society. In the mid90s, this rather non-democratic government decided to sell the people's treasure at pennies on the dollar.

If someone comes along and sells you stolen goods, and the original owner comes along and takes them back, you don't have much of a leg to stand upon.

Now, in our world, the fact that a government wasn't representative of the people generally isn't considered a valid reason for a new government to back out of bad deals. However, there has been some movement in this direction, with countries getting loans that were taken out by dictatorships wiped clean.

So it was hardly unreasonable for the government of Venezuela to decide to renationalize part of the oil fields now that it was, at long last, actually democratic and representative of the majority. Frankly, the imperialist corporations are lucky they get anything back, since generally speaking, those who buy stolen property aren't entitled to reimbursement.

[Lancer]

So who can and can't cut a deal on behaf of the people?

[onodera]

Originally posted by Lancer
So who can and can't cut a deal on behaf of the people?

People and anyone else respectively.

[Kidlicious]

Originally posted by Lancer
So who can and can't cut a deal on behaf of the people?

You want to send us all checks, or just the crazies?

[Agathon]

Originally posted by Flubber

No trick. Just curious. So no company should do business in or with China at the moment on your view-- or with about half of Africa . . .

Man, you lawyers are easy to thrash in an argument. Nothing I said entails that they should stop doing business with any country they want to. They simply have to accept that deals made with corrupt, criminal regimes are risky and that they have no comeback if such regimes are overthrown by democratic forces. If they have any brains, they should factor this in to their costs in the first place. In fact, they almost certainly do, but that doesn't stop them from running to the courts to extract even more loot from third world people.

Ya the lack of any outside investment-- that would really help those people.

Actually, foreign investment is not necessarily good for developing economies. It can often be worse. Only the free trade idiots think so, but the facts don't support them, and they are a bunch of subhuman idiots in any case.

And that's what this is about. The free trade rapists wanting to **** over developing countries, and looking for wiling quislings to help them.

Pathetic commie turn of phrase-- How plants, pipes compressors, dehys, etc etc are "already yours" when someone else built them at great cost boggles my mind

You build your house on my land without my permission, I will do whatever the hell I want with it, and you can go cry in a corner. Your fault for building without the proper permission.

[Agathon]

Originally posted by chegitz guevara

So it was hardly unreasonable for the government of Venezuela to decide to renationalize part of the oil fields now that it was, at long last, actually democratic and representative of the majority. Frankly, the imperialist corporations are lucky they get anything back, since generally speaking, those who buy stolen property aren't entitled to reimbursement.

I'd go further and say that it was morally required for the Venezuelan government to renationalize. The whole Washington Consensus has proved to be an idiotic joke foisted on the third world to its detriment. History has demonstrated that the best way to prosperity is to build up your national economy until it is capable of benefiting from free trade. The Asian Tiger economies proved this over and over again, and the Chinese are proving it again right now.

The absolute best thing that could happen for Latin America is to have a developed and independent country there. Venezuela is the obvious choice, since the oil money can be used to kickstart development.

[Kidlicious]

Originally posted by Agathon

History has demonstrated that the best way to prosperity is to build up your national economy until it is capable of benefiting from free trade.

Even then the only benefit of free trade is getting other countries to open up their economies.

[Flubber]

Originally posted by Kidicious


When you accept a risk there is usually payment involved and indeed Exxon got a very good deal.

What are the details of that deal? I don't know the specifics but from your comment obviously you do so I would appreciate the details.

[Flubber]

Originally posted by Agathon


Man, you lawyers are easy to thrash in an argument.

Only in your mind, nowhere else.

Originally posted by Agathon


Nothing I said entails that they should stop doing business with any country they want to. They simply have to accept that deals made with corrupt, criminal regimes are risky and that they have no comeback if such regimes are overthrown by democratic forces. If they have any brains, they should factor this in to their costs in the first place. In fact, they almost certainly do, but that doesn't stop them from running to the courts to extract even more loot from third world people.

Actually what you said would kill much investment. If there is a moderately high risk that you can lose everything for essentially nothing, the possible returns HAVE to be astronmically high to justify the risk. I know that the ability to get recourse outside the jurisdiction that wronged you is a key factor in companies being able to do any business in some places. . . IT reduces the chances of a severly negative rate of return. So yes they factor in these types of things-- They call it 'political risk'-- but part of that assessment is their ability to use worl, US or UK courts/tribunals to obtain recourse

Originally posted by Agathon


Actually, foreign investment is not necessarily good for developing economies. It can often be worse. Only the free trade idiots think so, but the facts don't support them, and they are a bunch of subhuman idiots in any case.

Another debate for another day and your last comment there shows your bias in any event.

Originally posted by Agathon

You build your house on my land without my permission, I will do whatever the hell I want with it, and you can go cry in a corner. Your fault for building without the proper permission.

The problem on your formulation is that there would have been NO ONE at all from whom to get such permission, Right ??

[Kidlicious]

Originally posted by Flubber


What are the details of that deal? I don't know the specifics but from your comment obviously you do so I would appreciate the details.

I do not know the specifics. If you are interested in them go find them yourself.

I just commented that usually a riskier investment isn't worth as much. Also, I'm assuming that Exxon considered that when they made the deal.

[Flubber]

Originally posted by Kidicious


I do not know the specifics. If you are interested in them go find them yourself.

I just commented that usually a riskier investment isn't worth as much. Also, I'm assuming that Exxon considered that when they made the deal.

NO you said "Exxon got a very good deal. "

THats a direct quote. BUt you assumed that-- You actually don't know anything.

I also seriously doubt your ability to identify a good deal or a bad deal when it comes to heavy oil projects ANYWAY. They require massive up-front investment such that it can take years to even recover the capital. BUt of course you wouldn't care about that either since the capital wouldn't matter to you.

[Flubber]

If you care about facts, I found this article

18th October, 2004
Venezuela: Royalty rise raises risk perceptions

Published by Oxford Analytica
©Copyright 2004 Oxford Analytica Ltd. All rights reserved.

"SUBJECT: Implications of President Hugo Chávez's announcement on October 10 that royalties on oil production in the Orinoco belt would rise from 1.0% to 16.67%.

SIGNIFICANCE: The announcement, Chávez's first significant move since his victory in August 15 recal referendum, does not look favorable to international oil companies. It raises the question whether the expected continuity in oil policies will be maintained.

ANALYSIS: On October 10, during his television programme 'Alo Presidente!', President Hugo Chávez announced that his government would end tax exemptions on oil production from the Orinoco heavy crude belt, in effect increasing the tax rate on international oil companies active in the area from 1.0% to 16.67%. The royalty increase applies only to companies working in the Orinoco Belt - among them, ExxonMobil, ChevronTexaco and ConocoPhilips of the United States, French TotalFinaElf and Norvegian Statoil - and relates to the specific terms of the Orinoco Belt contracts.

Orinoco Contracts. The oil field in Orinoco is among the largest in the world, with estimated reserves of some 235 billion barrels of heavy crude. The project to turn the heavy tar-like Orinoco crude into synthetic oil began to be implemented only in the late 1990s. However, international companies were reluctant to invest, given the substantial field and technological risks involved. Oil companies did not have a clear idea of the eventual profitability to be gained from producing large quantities of extra-heavy oil and then upgrading it. Furthermore, the price of Venezuelan oil basket was then around 10 dollars per barrel. As a result, the government was forced to make significant concessions on both royalties and income tax to attract international investment.

However, the companies are reported to have been much more successful than initially anticipated, making a very good return on their investments, in particular through upgrading. Their results have been further enhanced by the dramatic rise in oil prices: with the Venezuelan basket now around 42.67 dollars per barrel, the oil from the Orinoco Belt is priced at between 24-32 dollars. Even if the field risk still exists, the technological risk is far more under control.

The royalty issue. The strategic association contracts signed in the 1990s established a temporary 1% royalty. This rate was supposed to be maintained until such time as the projects would become economically profitable; the contracts stipulated that, thereafter, the royalty would then be established at 16.67%

· The recovery of investment was initially estimated to require nine years, with prices between 18-20 dollars per barrel. However, in the light of current oil prices, recovery has proved to be much quicker.

· In Venezuela, 16.67% is still a preferential level: in 2001, a decree raised royalty rates from 20% to 30%. Foreign investors have criticised the law as excessively restrictive, but investors interest has not faded.

Chávez has used an option left open by the terms of the contracts - a strategy facilitated by the fact that the increasing need for oil reserves has made international oil companies ready to accept tougher conditions of exploitation. He also knows that he can raise royalties without creating real problems for companies that have enjoyed years of extraordinary windfall oil profits. In this respect, it can be assumed that the government has evaluated the risk attached to the move and considered that, given the combination of high prices and Venezuela's location and reserves, companies are not likely to leave the country because of the royalty adjustment. This calculation may prove to be right.

Limited impact? Some analysts have argued that this decision, taken unilaterally, has sent a negative message to international oil companies, which are concerned by sudden changes in the rules of the game. However, while the timing and form of the announcement may have taken international companies by surprise, the decision itself almost certainly did not:

· It was clear from the original contract terms that his option could be exercised at any time.

· One company was already negotiating an extension of its exploration zone, offering voluntarily to adopt the 16.67% royalty rate in exchange.

Oil companies are thus expected to accept the decision without protest, as they acknowledge the fact that the Energy Ministry was empowered to take such a decision by the terms of the original contracts.

Relations between the state and the international oil companies involve an ongoing, complex negotiating process. Oil companies will probably try, in the coming weeks and months, to negotiate some compensatory measures in their favour - possibly the extension of exploitation rights or capital ownership. However, high oil and gas prices and Venezuela's large reserves continue to make the country an attractive investment destination. Some international oil companies have demonstrated clear interest in new heavy oil ventures, despite the fact that the fiscal regime would be less favourable than that in effect for the existing strategic associations.

Political announcement: The fact that the decision was announced on the president's popular television programme indicates that Chávez wanted to maximise the political benefits of the royalty rise. The announcement in front of a national audience allowed Chávez to appear to be defending national interests against multinational companies. He has good reasons for wishing to do so: some of his 'nationalist' supporters have recently denounced what they call a clandestine plan to privatise state oil company PDVSA. They claim there are plans to weaken PDVSA through reorganization, and to offer generous contracts to international oil companies. Chávez thus needed to send a clear message to his supporters that he was defending national interests.

This measure also had an additional political side effect: in early October, Ali Rodriguez, president of PDVSA, was apparently pressing for an increase in oil prices on the domestic market, because the retail business is said to be facing problems of profitability. Chávez opposed this measure, for social reasons. The public differences between the two men may have been reduced by the royalty increase, which Rodriguez has been seeking since 1995.

Political risk perceptions. International oil companies may have voluntarily agreed on this measure, especially in the context of complex negotiations. If Chávez decide to make a blunt public announcement, this may in part be due to the fact that any leak of the content of negotiations would have weakened its political effect (…).

CONCLUSION: Oil companies originally signed contracts which stipulated that the recent royalty increase would be implemented when investments had been recovered. As such, the companies involved will not withdraw, despite irritation over the handling of the announcement. Chávez's unorthodox style will be tolerated as long as oil prices remain high".

A 1% royalty is exactly what is paid in Canada for oilsands projects or offshore projects. To an ignorant person it may seem 'too low' but this rate only survives until the proponents of a project achieve "simple payout" and then escalates to rates in the 25 to 30 percent range. An upper range of 16.67% IS lower obviously but may or may not be a "sweet deal" depending on the size of the resource, technical issues, other fees and income taxes etc etc. The political risk would absolutely be higher in Ven. than Canada so even that could account for a few percentage points difference

[Kidlicious]

Originally posted by Flubber


NO you said "Exxon got a very good deal. "

THats a direct quote. BUt you assumed that-- You actually don't know anything.

Oh, Ok. They didn't get a good deal? Why did they sign on to it then.

I also seriously doubt your ability to identify a good deal or a bad deal when it comes to heavy oil projects ANYWAY. They require massive up-front investment such that it can take years to even recover the capital. BUt of course you wouldn't care about that either since the capital wouldn't matter to you.

I'm just assuming that Exxon didn't accept a risk and pay for it. Something wrong with that? I can see why you are trying to bring up meaningless details though.

[Flubber]

Oh and top you revisionists, you need to recall that some of the assets Chavez has expropriated came from his very own government itself

Venezuela energy: Total "surprised" by Sincor royalty hike

French energy company Total is 'surprised' by the announcement that Venezuela's government will levy a higher royalty on a large part of its crude production from the Sincor extra-heavy crude upgrader, newspaper El Universal quoted a Total spokesperson as saying.

State oil firm PDVSA president and energy and oil minister Rafael RamÃrez told the national assembly on Wednesday that the government will increase royalties to 30% on oil produced by Sincor above the amount authorized in its original contract.

The royalty on crude produced by Sincor and the three other extra-heavy crude upgraders in the Orinoco belt is currently 16.7%, which was increased from 1% six months ago.

RamÃrez accused Sincor of violating its contract by 'overproducing' and evading taxes, saying the company was only authorized to produce 114,000 barrels a day (b/d) and is now producing 210,000b/d, which it plans to increase to 250,000b/d in the short term.

'We have absolute confidence in the firmness of the contracts and agreements we signed as well as in our legal and financial position. We have received formal approval from congress as well as from the energy and oil ministry and we have respected them completely,' the spokesperson said.

Total 'calmly awaits ' any request for information from Venezuelan authorities. 'We are open for consultations to clear up the misunderstandings,' the spokesperson said.

Both Total and Sincor officials in Caracas declined to comment on the article or on Ramirez's statements when contacted by BNamericas.

The administration of President Hugo Chávez, frequently accused of singling out US oil companies, has until now enjoyed a good relationship with Total, which partners with Norway's Statoil and PDVSA in Sincor.

Chávez has met with Total's president Thierry Desmarest twice this year, once in Caracas and once in Paris. The meetings were always cordial, with Chávez announcing Total's investment in new energy ventures as proof of the confidence his governance has inspired in foreign investors.

For those of you that missed it

Chávez has met with Total's president Thierry Desmarest twice this year, once in Caracas and once in Paris. The meetings were always cordial, with Chávez announcing Total's investment in new energy ventures as proof of the confidence his governance has inspired in foreign investors.

Chavez was dealing with oil companies. Then when the price of oil went up he decided he could make a huge cash grab. IT did enrich his company/country in the short run but the loss of investment and expertise has hurt them badly. There are hundreds of Venezuelan engineers now helping develop the Canadian oilsands . Oilsands are very technical and in no way simple to develop.