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Exxon Mobil, ConocoPhillips to walk away from oil business in Venezuela

US oil giants Exxon Mobil and ConocoPhillips effectively ended their business in Venezuela on Tuesday by refusing to sign an agreement that would have given the Venezuelan government majority stakes in their operations.

The deadline for reaching a deal under Venezuelan President Hugo Chavez's nationalization program of the oil sector expired Tuesday, and now the Venezuelan government will begin negotiations with the two oil firms to buy up their oil assets in the South American country. The companies did not send representatives to sign agreements with Energy Minister Rafael Ramirez that would have given Venezuela a 78% share in the two companies' oil operations there. Chavez announced on May 1 his plan to nationalize oil fields in the Orinoco Basin, the largest reserve of heavy crude oil in the Western Hemisphere. Chavez told multinational firms that they could continue to work in the country, but would have to operate jointly with his government.

Experts estimate that foreign companies have invested $25 billion in Venezuela. They currently produce some 600,000 barrels daily. Other foreign firms, including Chevron, British Petroleum, Norway's Statoil and Total, did sign new deals with the Chavez government. Ramirez called the nationalization project “a sovereign act of our country and our people.” “Exxon-Mobil ended its participation in the negotiations for the exploration of risk and divided profits, and we have discussed with both companies continuing the negotiations to establish a solution ... to finalize the negotiations,” he said.

ConocoPhillips has the most assets of any Western oil company in Venezuela, valued by Wall Street analysts at more than $10 billion, and stands to lose about 130,000 barrels of oil in production, or 5.5% of its overall oil-equivalent output, The Wall Street Journal report said Tuesday. The United States has been critical of Chavez's socialist policies and the relations between the two countries have soured badly during populist president's tenure. The US State Department has insisted that Venezuela provide fair compensation to foreign firms. “While that government of Venezuela, like any other government, has the right to make these kinds of decisions to change ownership rules or other kinds of regulations ... we want to see them meet their international commitments in terms of providing fair and just compensation,” US State Department deputy spokesman Tom Casey said Tuesday. (