Venezuela's Chavez Grabs $30 Billion Oil Field in Orinco River Basin

Major oil companies on Tuesday transferred operational control of one of the world’s richest oil fields to Venezuelan President Hugo Chavez, CNBC’s Trish Regan reported.

The Orinco River basin is believed to have deposits that rival Saudi Arabia’s reserves. But the Venezuelan field produces a thick, tar-like oil that requires processing to make it into marketable crude.

Oil companies active in the region include ExxonMobil, Chevron, ConocoPhillips and BP. France’s Total and Norway’s Statoil also have stakes in the field, which is valued at $30 billion.


Chavez demands a 60% stake in the oil companies’ holdings and he may nationalize the field, Regan said. Chavez planned an elaborate ceremony on May Day, the international workers’ holiday, with red-clad oil workers, soldiers and a fly-over by Russian-made fighters.

Chavez wants the companies to remain as minority partners. Both sides are engaged in tough negotiations. The companies appear to be demanding compensation and assurances that future assets won’t be seized.

It remains unclear whether Venezuela has the ability to develop the oil field on its own if the oil companies leave.

IMF, World Bank Pullout

On Monday, Chavez said Venezuela will withdraw from Washington-based lending organizations the International Monetary Fund and World Bank, in a symbolic move that distances Chavez from much of the international economic community.

Chavez, who plans to create an alternative lending bank run by South American nations and funded in part with his OPEC nation's high oil revenue, said Venezuela no longer needed the institutions dominated by U.S. "imperialism."

Leaving the IMF and the World Bank would sever ties between the fifth largest oil supplier to the U.S. and the world's leading lenders to emerging nations.

"We don't need to be going up to Washington ... We are going to get out," Chavez, who calls Cuban leader Fidel Castro his mentor, said at an event to celebrate May Day workers' rights.

"I want to formalize our exit from the World Bank and the International Monetary Fund," he said.

Chavez blames the organizations' decades-old economic recipes of tight budget control, privatizations and open markets for continued poverty across Latin America.

He wants to build a socialist state based on policies rejected by the institutions in Washington, such as those he announced on Monday -- a 20% minimum wage hike and a gradual reduction in the working day to six hours.

The move to quit the multilaterals is politically symbolic but should have little immediate financial impact.

Debts Paid Off

Since Chavez first took office in 1999, Venezuela has gradually reduced its cooperation with the organizations and, after years of strong oil prices, said it paid off its last debts to the World Bank this month.

Venezuela is one of several countries, particularly in Latin America, that have in the last few years reduced their dependence on the multilateral agencies and so tempered the lenders' global clout.

Some leftist Latin leaders hosted by Chavez at the weekend proposed quitting a World Bank body that arbitrates between foreign investors and states as they seek greater freedom to dictate the terms of foreign investment in their nations.

Chavez is nationalizing huge swathes of the economy this year and on Tuesday will lead a massive rally to take over the operations of multi-billion dollar oil projects run by some of the world's largest companies.

He said it marked the end of an era of Washington-dictated policies and returned Venezuelan resources under the state's control.

"The wheel has turned full circle," he said.