We've all seen the drop in the price per barrel of oil drop precipitiously in the past few weeks, losing more than half it's value from the year's high of $147.
OPEC correspondingly announced a mandatory reduction of output for it's cartel members of 1.5 million barrels (or so), and are calling for a further output reduction if oil prices don't stabilize between $70 and $90.
So where does that leave Venezuela? See Miguel Octavio's blog entry on current Venezuelan oil output and it's affect on oil revenues collected from oil. To summarize, Venezuela already doesn't produce as much as it's allotted by OPEC, because revenue from PDVSA has been siphoned off "for the people". Investment back into oil drilling just isn't there, and it's hurting output.
So Venezuela is looking for partners to help develop the heavy crude fields of the Orinoco basin. This oil requires much more investment to develop because it has to be preprocessed before it can be refined.
But the funny thing is, no one is really clamoring to bid on this project, because of not only the investment requirements and the current economic climate affecting the world, but the craziness that is Chavez. Who is to say that Chavez won't change the terms of the deals when times are tough and he needs more money? As it is with the terms in place (own only 40% of the project, pay royalties and taxes reducing your revenue by 85%, sharing proprietary technology, PDVSA running the show and hiring the workers), I would shy away from a deal like that. I wonder why the private companies like Chevron stayed in Venezuela. Maybe they figured their getting raked over the coals was a small price to pay in the interim until someone with more sense gained control of the government there.
With his nationalization projects, Chavez has effectively closed off investments in the Venezuelan economy from private corporations. Sure, he's got the Russians and the Chinese and even the Iranians, but those are like minded governments looking for a strategic partner.
Could the US be headed in the same direction? Let's hope not!!