Hugo Chavez is at it again. Having last spring bounced a number of the world's big oil companies from operating positions in his nation's Orinoco basin, Chavez now wants his very own oilfield services company.
It appears from reports surfacing last week that Venezuela's state-run oil company, Petroleos de Venezuela SA, or PDVSA, is chafing under high services costs and a scarcity of certain types of equipment. PDVSA is trying to replace the likes of ExxonMobil
And because it has uncovered the same conditions of scarcity and cost escalation in oilfield services that have plagued publicly held producers worldwide, PDVSA apparently has declared an "operational emergency" and is working with China National Petroleum to begin assembling PDVSA's own fleet of drilling rigs.
Rafael Ramirez, Venezuela's oil minister, says his country already has 13 of the Chinese-made rigs. It appears that PDVSA also will try to use the rigs in other Latin American oil-producing nations.
Apparently, Chavez's nationalization effort for energy ultimately means that, in addition to operating its own drilling rigs, PDVSA -- or an affiliate company -- will also perform the energy service functions now provided by big services companies such as Schlumberger
But Chavez's privatization of all aspects of Venezuela's energy production may already be resulting in a sharp slide in that production. While both Ramirez and the official OPEC website maintain that Venezuela's crude production still is 3.1 million barrels a day -- much of which is exported to the U.S. -- the Energy Information Administration arm of the U.S. Department of Energy believes the figure now is down to about 2.4 million barrels.
Add that to reduced production in places like the U.S., Nigeria, the North Sea, Mexico, and Iraq, and I'm compelled to remind my Foolish friends not to neglect the energy sector in their portfolios. As something of a "starter kit" for those who are underrepresented in energy, ExxonMobil and Schlumberger can provide solid, internationally diversified foundations.
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