Venezuelan Oil Losing Share of Key U.S. Market

CARACAS, Venezuela -- When the state oil company recently took over the last privately run oil fields in Venezuela, President Hugo Chávez declared it a victory against Washington and a giant leap toward a new energy policy that would diversify the market for Venezuelan crude to include rising powers like China.

"Down with the American Empire!" shouted Chávez, who often warns that he'll shut off the oil spigot to the United States if the Bush administration invades Venezuela or hatches an assassination plot against him.

But new study of trade and oil consumption data shows that Venezuela appears ever more dependent on selling its oil to the country Chávez calls "the cruelest, most terrible, most cynical, most murderous empire that has existed." And U.S. government energy trade data show the United States is slightly less dependent on Venezuela, which at one time challenged Canada, Mexico and Saudi Arabia as the No. 1 provider of foreign oil but now tussles with up-and-coming Nigeria for the fourth spot.

"Venezuela is losing its privileged position," said Alberto Quiros, an energy consultant and former executive at Royal Dutch/Shell and at Venezuela's state oil company, Petróleos de Venezuela S.A. (PDVSA). "The United States' needs have increased and Venezuela's ability to supply has decreased."

The old energy order is, to be sure, being turned upside down in Venezuela by a government intent on showering billions of oil proceeds on social programs as part of Chávez's efforts to transform Venezuela into a model of what he calls 21st-century socialism. Venezuela has taken operational control from Exxon Mobil, Chevron and four other multi-national oil companies of a 4,500-square-mile, oven-hot swath of scrub grass that may contain the largest oil deposit in the world, and multinationals operating in the country are bracing for more change.

Yet the country's once-vaunted oil industry has seen its production and capacity to produce decline over the last decade, according to oil analysts and statistics from the U.S. Energy Department and the International Energy Agency in Paris.

The world's fourth-largest oil exporter a decade ago, Venezuela is now seventh, according to the BP Statistical Review of World Energy. The 1.1 million barrels of crude that Venezuela exports to the United States every day amount to less than 11 percent of American imports, down from 17.3 percent in 1996. By contrast, the No. 1 supplier to the American market, Canada, is now sending more than 1.8 million barrels a day and topped 2 million barrels daily in November.

During most of Chávez's eight years in office, more than 60 percent of the country's total crude exports have gone to the United States, up from 50 percent throughout much of the 1990s, according to Ramón Espinasa, a former chief economist at PDVSA who is now a consultant in Washington. The trend is due to growing U.S. demand, Venezuela's rising consumption and what oil analysts say is the state's inability to diversify its base of clients to include big consumers.

But in an ideologically drawn battle, one marked by constant verbal slings, Chávez has promised to veer sales away from the United States.

He often says that PDVSA is considering selling Citgo, its refining and retail arm in the United States, which processes and sells the extra-heavy brand of crude mined in Venezuela. His government has also increased sales to China, with 300,000 barrels a day now headed there, Rafael Ramirez, the energy minister and PDVSA's president, said in an interview this month.

With a goal of providing 800,000 barrels daily to China as early as 2009, Ramirez said China National Petroleum Corp. will work with Venezuela to explore for oil and create a transport company to ship crude. He said the Chinese government also has approved a plan to build three refineries to process Venezuelan crude.

"We have a position we have not considered abandoning -- supplying the United States," he said. "But we also have plans for an expansion and a necessary diversification, which is common among all oil producers."