Previous governments in Caracas had signed sweetheart contracts with oil companies in the 1990s to develop four extra-heavy crude (syncrude) projects—known as Petrozuata, Cerro Negro, Sincor, and Hamaca. The government at the time justified contracts providing for the meager 1 percent royalty payments on the basis of needing to attract investors to production in these fields. “However, refining concerns have since been surmounted,” notes the Business News Americas news service. “The market has welcomed syncrude and the partners in these projects are making handsome profits with oil at US$53 a barrel.”

U.S. oil giants ChevronTexaco and ConocoPhillips each have a 30 percent stake in Hamaca; the balance is held by PDVSA, the Venezuelan state oil company. Other international oil companies that will have to pay the increased royalty are ExxonMobil, France’s Total, Norway’s Statoil, and British Petroleum.

With the largest known oil reserves in the Western Hemisphere, Venezuela is the fifth-largest oil producer in the world. Generating $46 billion in yearly sales, PDVSA provides 80 percent of Venezuela’s export revenue. More than 50 percent of exports go to the United States and Canada.

In addition to government programs, PDVSA has budgeted $1.7 billion in 2004 for public works projects such as sinking wells for potable water and irrigation, and piping natural gas to working-class neighborhoods that had previously gone without. The management before 2003 had allocated only $40 million per year for social programs. That year, the Chávez administration installed a completely new management at PDVSA after company officers joined other capitalists in a two-month “strike” aimed at bringing down the government. The lockout failed, even though it did succeed in curtailing oil production for months, because of large-scale defiance by oil and other workers.

Weighty sections of the capitalist class, with Washington’s backing, have tried unsuccessfully to unseat the Chávez administration three times since 2001. That’s when the government passed measures that would cut into the profits of many capitalists and landlords, if implemented. The employers’ failed efforts have included the April 2002 military coup, the bosses’ “strike” seven months later, and a presidential recall referendum this summer. The measures in dispute included a hydrocarbons law that increased most production royalties payable by local capitalists and international companies investing in oil and natural gas exploration and extraction from 16 percent to 30 percent.

Earlier government increases in royalty payments in oil angered most of the capitalists in Venezuela and their imperialist allies. But as it became clear prior to and after the defeat of the August 15 recall referendum, international capital in oil, and a minority of Venezuelan capitalists, act on the hope they can continue to do business with the Chávez administration and profit from their operations.

“We haven’t pulled the plug on anything based on this,” said one ChevronTexaco official after Chávez’s October 10 announcement. “But we have to see what the longevity of the royalty change is and how it affects our long-term plans. Anytime you go from 1 percent to 16 percent in royalties, that comes right off your bottom line.”  
 
 
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