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A beacon for the oppressed

Venezuela's President Hugo Chavez has taken on the world's major oil companies by increasing the government's stakes in the country's petroleum assets. Foreign-owned multinationals were set a March 31 deadline to comply with new rules under which the state would get a 60 per cent stake in the 32 relatively marginal fields they were managing until then. While most of the firms, including giants such as Chevron and Royal Dutch Shell, complied with these terms, two European companies failed to meet the deadline. The Chavez Government promptly took control of the fields managed by Total of France and Eni of Italy. With this action, Caracas has signalled the end of an era in which foreign firms were paid generous production fees for operating in the marginal fields that account for a fifth of the country's total output. Earlier, the Chavez Government substantially raised the royalties payable by companies that have invested in the oil-rich fields of the country's eastern region. A more ambitious plan that can transform the global petroleum market is on the anvil. Caracas is trying to strike long-term agreements with consuming countries under which it will supply oil at $ 50 a barrel. Although this price is well below current levels, such long-term contracts will enable Venezuela to make the most of its extra-heavy crude deposits. Oil of this grade needs to be converted to synthetic light crude before it can be refined. Long-term agreements for supplies at $50 a barrel will make the process economically viable. If Venezuela is able to make its extra-heavy crude marketable, it can ask the Organisation of the Petroleum Exporting Countries (OPEC) to formally recognise that its proven reserves have swelled to over 300 billion barrels. That will change the global oil order because Saudi Arabia is currently estimated to have the largest reserves at 260 billion barrels. Since OPEC allocates production quotas to different countries on the basis of their proven reserves, Venezuela will then have a major say in setting prices.

Hearteningly, Mr. Chavez has used oil revenues to fuel what he calls a Bolivarian Revolution in Latin America. With funding for social welfare programmes increased from $8 billion to $10 billion this year, larger sections of the Venezuelan poor will have access to the schemes for community health care and adult education. The Chavez Government has also provided heating oil for poor homes in the United States free of charge, and flown down indigent Mexican peasants for treatment of eye diseases in Venezuelan hospitals. Substantial aid has been given to other countries in the region. Cuba and several other Caribbean countries have been assured oil supplies at cut-rate prices. Venezuela bought $2.5 billion worth of Argentinian bonds after Mr. Chavez took office. This helped Buenos Aires pay off its debt to the International Monetary Fund. President Chavez is becoming a beacon for the oppressed of the world.

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