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Venezuela Cuts Off Oil Shipments to Exxon Mobil

Venezuela's state oil company said Tuesday that it has stopped selling crude to Exxon Mobil and has suspended commercial relations with the U.S.-based oil company.

Hugo Chavez
Howard Yanes
Hugo Chavez

State-run Petroleos de Venezuela SA, or PDVSA, said in a statement that it "has paralyzed sales of crude to Exxon Mobil." It said the decision was made "as an act of reciprocity" for the company's "judicial-economic harassment."

President Hugo Chavez also has shaken oil markets with broader threats to cut off oil supplies to the United States, responding to a drive by Exxon Mobil to seize Venezuelan assets through U.S. and European courts in a dispute over the nationalization of oil ventures in Venezuela.

The impact of the decision on Exxon Mobil was not immediately clear. Both Chavez and Oil Minister Rafael Ramirez previously said the Irving, Texas-based company is no longer welcome to do business in Venezuela.

Earlier in the day, Oil Minister Rafael Ramirez told the Venezuelan newspaper Ultimas Noticias that “we’re ready” to cut off oil shipments to the United States, echoing a threat by President Hugo Chavez.

Chavez first made the threat Sunday in response to a drive by Exxon Mobil to seize Venezuelan assets through U.S. and European courts in a dispute over the nationalization of lucrative oil ventures in Venezuela.

A British court issued an injunction last month temporarily freezing up to $12 billion in the assets of state oil company Petroleos de Venezuela SA, or PDVSA.

Ramirez accused Exxon Mobil of having political motives and being “very closely linked to the (U.S.) State Department.”

“Clearly there is an intention to start an economic war with our country,” Ramirez was quoted as saying.

Exxon Mobil is challenging the Chavez government’s nationalization of one of four heavy oil projects in the Orinoco River basin, one of the world’s richest oil deposits.

Other oil companies including Chevron, France’s Total, Britain’s BP and Norway’s StatoilHydro have negotiated deals with Venezuela to continue as minority partners in projects, but ConocoPhillips and Exxon Mobil balked at the tougher terms and have been in compensation talks with Petroleos.

“Only Exxon maintains an aggressive and hostile attitude,” said Ramirez, who is also PDVSA’s president. “The action by Exxon doesn’t surprise us, and ... we’re ready to fight the legal battle.”

Speaking at an energy conference in Houston on Tuesday, Exxon Mobil senior vice president Mark Albers declined comment on any court proceedings with Venezuela, though he said the company is eager to negotiate fair compensation for its assets.

Ramirez called the Irving, Texas-based Exxon Mobil an “imperialist” company, saying it and other multinationals “don’t accept that governments make sovereign decisions.” He accused the company of being “linked to the invasion of Iraq” and having a sullied environmental record of “deplorable actions.”

Meanwhile, state television has begun airing short anti-Exxon segments, with a message appearing on the screen in red text reading: “Exxon Mobil turns oil into blood.”

The U.S. remains the No. 1 buyer of Venezuelan oil, and Chavez relies largely on U.S. oil money to stimulate his economy and bankroll social programs that have traditionally boosted his popularity.

Some analysts say it would make little sense for Chavez to follow through on his threats because Venezuela owns refineries in the United States that are customized to handle the South American country’s heavy crude.

But Ramirez suggested that the United States would be hurt more by any cut in oil supplies, “that would be for them ... a very complicated situation.”

Ramirez said Venezuela is ready to diversify its oil market, including by selling more to China. He noted that Venezuela and China have signed accords to jointly build three refineries in China to process 800,000 barrels of Venezuelan oil per day.

Chavez said in November that Venezuela aims to increase oil sales to China to 500,000 barrels of oil a day in 2008, up from 350,000 barrels per day.

By comparison, Ramirez said Venezuela is selling the U.S. a daily average of 1.5 million barrels of crude and other products derived from oil. Venezuela is currently the fourth largest oil supplier to the United States.

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