Venezuela Set to Assume Control of Its Oil Fields

Venezuelan officials heatedly reject such arguments, although they are common among oil analysts in the United States and Latin America.

"Of course, it's prepared," Bernardo Alvarez, Venezuela's ambassador to Washington and a former vice minister of energy, said in reference to PDVSA's expanding responsibilities. "PDVSA is very solvent, and it is one of those companies that has a great capacity to carry out big projects, internally or internationally."

PDVSA was considered one of Latin America's few well-run state energy companies, producing about 4 million barrels of oil and derivatives a day in the late 1990s. But by 2002, angered by what they saw as government meddling in the company, thousands of white-collar workers had joined the ranks of an opposition movement that launched a protracted strike in December 2002 to topple Chavez.

The government fired 18,000 workers, saying that the company had been run by elites beholden to the corrupt practices and politicians, not to the Venezuelan people. Now, government officials say, PDVSA is a company of the people that is helping extricate Venezuelans from grinding poverty.

"You don't have a company that gives the shoulder to the country," Alvarez said, "but one that is instead crucial to the development of the country."

The new PDVSA, under control of the president's allies, produces from 2.3 million to 2.5 million barrels a day, according to oil analysts and figures from the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member. (Venezuelan officials insist they produce more than 3 million barrels daily.) Chavez is OPEC's leading price hawk, and his policies have helped sustain the historically high prices that have proved a bonanza to producers.

Still, Venezuelan officials frequently talk about increasing production to as much as 5.8 million barrels a day by 2012.

Many analysts dismiss that as unrealistic, noting that production has been declining for nearly a decade. Indeed, one sign of PDVSA's lower capacity is that it has far fewer operating wells than in the past, and its plans call for fewer exploratory wells than were used in the Orinoco. "My impression is that PDVSA is not in a free fall, like some opponents say," Mares said, "but there are signs that the company is not capable of realizing investments, and it's fallen a lot."

One sign of PDVSA's limitations is that the company is disputing the value of the four projects in the Orinoco, which the multinationals say now top $30 billion. While the companies and Venezuelan officials remain in talks over compensation and PDVSA's exact role in day-to-day operations, the Chavez government has signaled that it will probably pay book value for Big Oil's investments, possibly in oil or by forgiving taxes. That would save PDVSA from having to come up with billions of dollars that analysts say it doesn't have.

The government says such a move is only fair, because until Chavez hiked royalties and taxes, the multinationals had enjoyed a virtual tax holiday in the Orinoco.

"Don't anyone try to abuse our good faith," Chavez warned at a recent news conference. "We know the exact cost of every meter of pipeline, every installation that's been made, every investment made."