Hugo Chavez seizes oil service companies

Venezuelan President Hugo Chavez sent troops to seize oil service companies yesterday, tightening his grip on the oil industry as low crude prices pinch the Opec nation's finances.

Mr Chavez is a socialist and former soldier who has already nationalised large chunks of the Opec nation's economy, including most of the energy sector and telecommunications companies.

Williams Companies said the government seized two natural gas facilities in eastern Venezuela after building up millions of dollars in debts for services, adding it could demand payment through international arbitration.

Military vehicles rolled through the streets of Ciudad Ojeda, on the shores of oil heartland Lake Maracaibo, where the government seized hundreds of boats and shipyards after Mr Chavez signed a law to nationalise a group of oil service companies.

"We have started to nationalise all these activities connected to oil exploitation," Mr Chavez said from a confiscated boat sailing across the lake. "This is a revolutionary offensive."

Williams said the government took over the El Furrial and PIGAP II gas compression facilities, which are crucial for boosting the production of fields that produce Venezuela's most valuable crude.

Flush with cash amid an oil boom, the President in 2007 nationalised oil projects worth billions of dollars, leading oil giants Exxon Mobil and ConocoPhillips to quit the nation and sue for compensation.

Crude revenues have fallen in recent months and Mr Chavez is now moving against smaller service companies the government has struggled to pay. The new law gives the government the option to pay compensation in bonds rather than cash.

The move could lead to further declines in oil production by risking slowdowns in key services following years of under-investment by state-owned oil company PDVSA, which bankrolls the social programmes that keep Chavez popular after a decade in office.

The law makes it easier for the government to later seize assets owned by service giants such as Halliburton and Schlumberger as PDVSA builds up billions of dollars in debts with contractors.

It appears to be targeted at specific service companies that have been hampered by severe cash flow problems due to lack of payment by PDVSA, which as of last year, owed at least $8 billion to contractors and providers.

Mr Chavez told hundreds of oil workers dressed in the red shirts that identify his supporters that the takeovers included a water injection project part-owned by British company John Wood Group.

Six people demonstrating near Maracaibo, across the lake from Chavez's rally, suffered gunshot wounds when unidentified gunmen fired on them, the investigative police in Maracaibo said.

Wood Group said yesterday it was in a strong position to extract compensation for the loss of its 49.5 per cent interest in a 16-year, $800 million contract in Lake Maracaibo.

According to Williams' filings with the US Securities and Exchange Commission, it has three gas compressor facilities in Venezuela with a net book value of $324 million.