The U.S. remains by far Venezuela's biggest crude oil customer

The Petroleum Intelligence Weekly (PIW) regards what Exxon appears to have done in Venezuela as a straightforward business decision - that in light of the changes in contract terms, there are better places for it to invest its money. On this basis, it has been able to take a tough legal stance on securing compensation for the assets it has lost. So, while it seems more dramatic, Exxon's dispute with Caracas is essentially playing out along the same lines as other recent resource nationalism rows, suggests PIW, such as the Kashagan controversy in Kazakhstan or TNK-BP's collision with state Gazprom last year over Russia's Kovykta gas field. It all comes down to who stands to lose the most.


Caracas is not in a strong position vis-a-vis Exxon, believes PIW. As retaliation for what it sees as "legal-economic harassment", Petróleos de Venezuela (PDV) has cut off crude exports to Exxon's U.S. refineries, but this only actually affects some 0.045 mbd - not quite the 0.9 mbd contract the two parties had inked at the time of Exxon's previous encounter with Venezuelan resource nationalism in the 1970s.


The dispute has also provided some more immediate matters to consider. Chavez's threat to suspend all crude exports to the U.S. not only got the oil price jumping, but also focused attention on how vital the U.S. market is to Venezuela - and therefore how unlikely Caracas would be to follow up on its threat. While Caracas has grand plans for shipping more oil to China, the U.S. remains by far its biggest crude oil customer, taking roughly 1.4 mbd last year, or more than half of Venezuela's overall export volumes of 2.2 mbd.


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*50-50 joint venture between PDV and Hess. Located in US Virgin Islands, products sent to US.

**50-50 joint venture between PDV and Exxon. Figures for January-November 2007. Source: US Energy Information Administration.

Source: PIW


Contact: Erik Ranheim