A Venezuelan oil and gas platform in the Atlantic Ocean.
LONDON: Venezuela’s vast nationalised oil sector needs to open up to foreign investors if it is to develop, but there is little likelihood of a rapid change following the death of president Hugo Chavez, analysts say.
Chavez used oil as a political and propaganda tool and his passing has focused attention on what will happen next to the largest proven crude oil reserves in the world.
Oil prices slid yesterday, having earlier rebounded on uncertainty following Chavez’s death. The market then accelerated losses after signs of weak demand in the United States, the world’s leading oil consumer.
In late afternoon deals, Brent North Sea crude for delivery in April dropped 64 cents to $110.97 per barrel.
New York’s main contract, West Texas Intermediate (WTI) light sweet crude for April shed 72 cents to $90.10 a barrel.
“President Chavez going out of the picture is a big game-changer,” Diego Moya-Ocampos, analyst at IHS Global Insight said.
“He leaves a power vacuum (in Venezuela) which will be very, very hard to fill.”
But Moya-Ocampos said he believed that if Chavez’s chosen successor Nicolas Maduro won elections that could be held within a month, little would change in the short term. “If Maduro is elected, we could expect some policy continuity, and the same sort of nationalist approach,” he said.
Analysts at JBC Energy agreed: “We do not expect large changes to Venezuela’s oil policies and see only a minor chance for greater openness towards foreign investors, especially as current arbitration cases against IOCs (International Oil Companies) are still ongoing.”
The US giant ConocoPhillips is one of the companies in dispute with Venezuela.
Chavez’s rise was closely linked to oil. He nationalised some assets owned by international oil companies and put the state company PDVSA in control of all oil and gas projects.
Following his election in 1998, Chavez profited from the dizzying rise in crude prices, which increased tenfold in a decade, investing billions of dollars of the profits into “social inclusion” projects for the poor.
Chavez also used the oil to keep his allies close. Venezuela supplied 100,000 barrels of crude a day to Cuba at preferential rates in exchange for medical personnel. Chavez also sent Nicaragua 10 million barrels of oil a year and Uruguay received between six and eight billion barrels a year.
AFP
