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Venezuela to pay Eni $700 mln for oil project

Venezuela agreed on Tuesday to pay Eni of Italy $700 million in cash for the takeover of an oil field but hardened its stance in a compensation battle with Exxon Mobil Corp over another nationalization.

Oil Minister Rafael Ramirez said the government would make the payment to Eni for the Dacion heavy crude project over a seven-year period. “The book value of the investments made by the transnational company in the Dacion field are $700 million and we have agreed to pay it over seven years,” he said at a ceremony to sign the accord. He said the agreement left Exxon isolated, as the only company fighting with the government over a drive to increase state control of Venezuela’s huge oil resources. Exxon has won court orders freezing up to $12 billion of Venezuela’s assets, prompting state oil company PDVSA to sever commercial ties with America’s biggest company. A day after Exxon said it was still open to talks with Venezuela, Ramirez said he did not rule out negotiation with the oil giant despite the asset freeze. He said the fight with Exxon was one factor pushing up world oil prices. Crude reached $98 a barrel in New York on Tuesday, lifted in part by concerns over supply.

Venezuela’s socialist president, Hugo Chavez, has threatened to cut off oil shipments to the United States over the conflict and Venezuela stopped some exports to Exxon in retaliation for the asset freeze. Ramirez also warned that Venezuela could pull out of its refinery joint venture in Chalmette, Louisiana, with the Texan company over the dispute. But he played down the idea Exxon could take Venezuela’s stake in a compensation deal for the heavy crude project takeover, which some industry analysts have speculated could be an Exxon goal. The benefits of such a move might be questionable, though, as the joint venture structure currently guarantees the refinery a supply of Venezuelan oil. Venezuela took over the Eni field in 2006 after negotiations with the government of Chavez to convert the Dacion subcontracting venture into a state-majority joint venture fell through. A government document seen by Reuters also showed Venezuela agreed to pay the Italian oil company for unpaid output in the takeover, but there were no further details given at the accord ceremony. (Reuters)