Venezuela threatened to expel ConocoPhillips, the American oil company, as it attempted to bulldoze through the nationalisation of the stakes held by foreign investors in the country’s Orinoco heavy oil operations.

The news comes as President Chávez yesterday accused Sidor, Venezuela’s largest steel-maker, as well as the country’s banks, of unscrupulous practices and threatened to nationalise them.

ConocoPhillips has refused to sign an agreement which will give PDVSA, the Venezuelan state oil company, control over its share of the production and refining of Orinoco crude, a vast resource of very poor quality oil which needs extensive upgrading. Conoco is the largest player among the foreign investors that include ExxonMobil, Chevron, ENI of Italy, Total of France and Norway’s Statoil.

Rafael Ramirez, Venezuela’s Oil Minister, suggested that ConocoPhillips would face the same fate as ENI and Total, which suffered the seizure of oilfields last year when they resisted the imposition of a new contract.

Mr Ramirez said yesterday: “There is a conflict with a company that opposes us. If this company, ConocoPhillips or any other company, does not accept the terms. . . they will have to leave the country.”

In a two-stage campaign that forms part of President Chávez’s Bolivarian revolution, Venezuela is attempting to reassert state control over its oil industry.

Last year, Mr Chávez forced foreign oil companies to sign new contracts giving PDVSA control over conventional oil operations. In the second stage, launched in February, the President targeted the Orinoco belt, which produces some 600,000 barrels per day of crude from four strategic associations.

He wants to lift PDVSA’s interest in Orinoco, which is valued by some analysts at more than $30 billion, from 40 per cent to 60 per cent. He said he would nationalise the oil industry.

Jim Mulva, chief executive of ConocoPhillips, has described the President’s nationalisation by decree as “a difficult situation” for the company. The company is the most exposed to heavy oil projects, with 50.1 per cent of Petrozuata and 40 per cent of Hamaca, totalling an interest in 128,000 barrels per day.

High oil prices have improved the profitability of Venezuela’s Orinoco crude, a viscous oil that is expensive to produce. Better profits have encouraged Mr Chávez to put a squeeze on the foreign multinationals. However, analysts reckon that PDVSA, a highly inefficient company whose cashflow props up the Venezuelan economy, would struggle to operate the Orinoco facilities without foreign assistance.

Venezuelan oil output is in decline and the country struggles even to produce as much oil as it is allowed under Opec quotas. Mr Chávez began the transfer of the Orinoco operations on May 1 and gave foreign companies until June 26 to sign agreements. He refuses to pay compensation.

Reserve power

Venezuela

— Conventional oil reserves of 79 billion barrels

— Produces 2.7 million barrels a day

Orinoco oil belt

— World’s biggest deposit of heavy oil with estimated recoverable reserves of 270 billion barrels, greater than Saudi Arabia

Investors

— HamacaConocoPhillips, Chevron, PDVSA

— Petrozuata ConocoPhillips, PDVSA

— SincoTotal, Statoil, PDVSA

— Cerro Negro ExxonMobil, Veba, PDVSA

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