How does Chavez convince oil companies that he won't re-nationalize their assets right after they make their investments? How can they trust him that he won't create all sorts of other problems for them? It makes sense to sell the leases because you get all the money now, but even if he asks for bids, Venezuela will only get a fraction of what it otherwise would have gotten because companies won't trust his government very much. I have seen multiple news stories
on Chavez's actions, but no one seems to mention this point.
Dip in oil forces Venezuela to court Western companies
Journal Staff and Wire Report
Published: January 15, 2009
CARACAS, Venezuela - President Hugo Chavez, buffeted by falling oil prices that threaten to unravel his efforts to establish a Socialist-inspired state, is courting Western oil companies once again.
Until recently, Chavez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices and imposing higher royalties. But faced with the drop in prices and a decline in domestic production, senior officials here have begun soliciting bids from some of the largest Western oil companies in recent weeks, according to energy executives and industry consultants here.
Labels: Economics, Energy