[StBernard] Venezuela to Demand Exxon Relinquish Refinery Control (Update2)

[Westley Annis]

Venezuela to Demand Exxon Relinquish Refinery Control (Update2) 

By Steven Bodzin

April 8 (Bloomberg) -- Petroleos de Venezuela SA, the state energy company
embroiled in a multi-billion-dollar lawsuit with Exxon Mobil Corp., will
seek to oust the world's biggest company from its role as operator of
Louisiana's Chalmette refinery. 

Petroleos de Venezuela, or PDVSA, has the right to demand a turn as operator
of the refinery in which it owns a 50 percent stake, Eulogio del Pino, a
board member of the Venezuelan energy company, said today in an interview in
Caracas. 

``We have the right to alternate the operator,'' Del Pino said. ``Under the
bylaws of Chalmette, the partners have the option to alternate operation.
And we're going to use it.'' He said he doubted Exxon would assent willingly
to the change. 

The move is the latest in a shoving match between the two companies that
began last year when Venezuelan President Hugo Chavez demanded a majority
stake and operating control of an Exxon-operated joint venture in Venezuela
because he said prior governments had given up too much control in the deal.
Exxon abandoned the project, filed for arbitration and sought to freeze $12
billion in PDVSA assets around the world. 

Chalmette was built as part of a deal between Exxon and PDVSA that also
created the Venezuelan joint venture formerly known as Cerro Negro and now
called Petromonagas. That project's output of heavy, high-sulfur oil could
only be sold to Chalmette or China, Del Pino said. 

Oil to Exxon 

Amid the legal fight, Venezuela announced it would no longer sell oil to
Exxon. At about the same time, Exxon began to reject Petromonagas crude,
saying it didn't meet quality standards. Venezuela reacted by selling all of
the project's output to China, Del Pino said. PDVSA has since improved the
upgrading process so Petromonagas can market a purer, lighter grade of oil,
which is now being shipped to another Gulf Coast refinery, Del Pino said. 

``ExxonMobil Oil Corp. is the contractual operator of Chalmette Refining
LLC, and we continue to operate the refinery in a safe and environmentally
sound manner,'' Margaret Ross, an Exxon spokeswoman, said in an e-mailed
response to questions. ``It is our policy not to comment on the specifics of
our contracts. We remain open to meaningful discussion with PDVSA.'' 

Exxon gained 69 cents to $89.61 in New York Stock Exchange composite
trading. 

Exxon's effort to freeze Venezuelan assets in the U.K. was defeated in court
March 18. Venezuela is preparing to challenge another order in a
Netherlands' court. Venezuelan Minister of Energy and Oil Rafael Ramirez
called the asset freezes ``judicial terrorism'' and said he wouldn't
negotiate with Exxon while the company pursued the orders.