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Oil industry seeks decisive Chávez poll win By Richard Lapper and Andy Webb-Vidal in Caracas Published: August 9 2004 04:00 | Last updated: August 9 2004 04:00
A decisive victory for Venezuela's President Hugo Chávez in next Sunday's recall referendum on his leadership could help pave the way for billions of dollars of fresh international investment in the country's oil and gas sector.
Industry analysts say that international companies, short of opportunities elsewhere, would welcome an end to the extreme political instability that has plagued the last two years in particular of the radical leader's six years in office.
"The companies are a lot more sanguine about the political situation and they have become convinced that Mr Chávez is a man they can do business with," said Fareed Mohamedi, chief economist of Washington- based PFC Energy.
Two months ago, following a protracted campaign, opposition groups forced Mr Chávez to hold a recall referendum. With the economy recovering strongly, however, the president expects to see off the challenge and avoid calling elections before those scheduled for 2006.
To win in next Sunday's referendum, the opposition would need to beat the 3.8m vote total the president secured in his 2000 election victory. Energy analysts most fear a narrow victory for either party since this could be contested and leave the country facing continued uncertainty and the risk of violence. A clear Chávez victory would "create a floor and maybe allow some investment to go ahead", said Michelle Billig, head of political risk at New York-based PIRA Energy Group. "It would take away an obstacle."
International companies have also begun to realise that in spite of his hostility towards Venezuela's traditional business elites, Mr Chávez is anxious to maintain good relations with international companies, particularly in the oil sector.
International oil executives have in the past been very influenced by the "negativism" of local business elites towards Mr Chávez. "It has taken them some time to look beyond that," said Mr Mohamedi.
Companies have begun to attach less importance to Mr Chávez's occasional flourishes of anti-American rhetoric and have been reassured by Venezuelan commitments to continue supplying oil to the US, its biggest market.
Rising prices mean that Venezuela's investment opportunities in natural gas and heavy oil are seen as attractive - even though state-owned Petróleos de Venezuela dominates crude oil production, and despite an increase in royalties on oil and gas production three years ago.
Last week, ChevronTexaco proposed a $6bn (£3.25bn) project to upgrade heavy oil from the Orinoco river belt in the east of the country into lighter exportable crude. ChevronTexaco has also recently drilled its first well on one of two concession blocks it is operating in the Deltana natural gas project.
In addition, investment opportunities elsewhere are being keenly contested or, as in the Middle East, are subject to much greater political uncertainty than in Venezuela.
Mr Mohamedi said that together with Libya, Venezuela was one of the two "sexiest propositions in the world oil market".