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January 16, 2009


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"So why not get back in now that the oil price is low? The oil companies won’t enjoy any future boom, but they are also unlikely to find themselves truly nationalized."

Compared to the Middle East, there's also much less chance of terror attacks against the oil infrastructure or of complete societal collapse. I'm sure that the executives of every oil company operating in Saudi Arabia have nightmares about what will happen if/when the House of Saud falls and Taliban-style fundamentalists take over. Whatever forms of turmoil might arise in Venezuela, it's 100% certain that they'll never be of remotely the same magnitude.

The amazing thing about Saudi Arabia is that its national oil company, Saudi Aramco, is as good as any of the international majors. Amazingly enough, there /aren't/ any western execs operating in the Saudi oil industry.

Truly astounding accomplishment on the part of the Saudis. PDVSA might have been moving that way, but pre-1998 Venezuelan governments opened the industry to international collaboration in order to attract capital faster. (To be fair, there is a good case that this was the right thing to do, although the Orinoco contracts gave the majors far too much of the upside in the event of an oil price spike. Which no one expected, of course, but still.)

Then came the big strike of 2002. PDVSA shot itself in the head during that strike, and in the aftermath the Chávez administration stripped the company of a lot of its technical expertise and ability. That, combined with an rather astounding lack of cash, is why Chávez has to invite the majors back in now. PDVSA just can't expand production on its own.

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