Exxon, Conoco Reject Chavez

Oil giants Exxon Mobil (XOM) and ConocoPhillips (COP) are poised to walk away from investments in Venezuela after negotiations with Hugo Chavez's government broke down, according to published reports.

Among Western firms, ConocoPhillips has the largest assets in Venezuela's oil; valued at more than $10 billion and risks losing approximately 5.5% of its daily production, The Wall Street Journal reported. The firm is prepared to abandon its stakes in two Orinoco projects as well as its interest in the Corocoro field in the Gulf of Paria, Reuters reported.

Exxon's exposure represents only about 1% of its total production, via the Cerro Negro project in the Orinoco region, according to Reuters.

Earlier this year, Venezuelan president Hugo Chavez declared his intent to nationalize Venezuela's oil fields and gave foreign energy firms a June 26 deadline to turn over at least 60% of their ownership of projects in the South American nation. On May 1, Venezuela seized control of the operations of the Orinoco projects, but gave Exxon, ConocoPhillips and four other foreign energy firms extra time to negotiate a new ownership structure.

Both Exxon and ConocoPhillips rejected Venezuela's offers, judging them as insufficient compensation for the value of the assets, according to published reports.

Venezuelan officials say Chevron (CVX), BP (BP), Statoil (STO) and Total (TOT) plan to agree to the government's terms and will maintain a presence in the Orinoco reserves, Reuters reported.

The news from Venezuela did not seem to be having a big impact on energy stocks in early trading. Shares of the aforementioned energy giants were mixed in recent trading as crude prices were recently down 41 cents to $68.78.

>To order reprints of this article, click here: Reprints