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Houston Chronicle: Shell: Joint Venture Won't Affect Jobs

Shell: Joint Venture Won’t Affect Jobs

© 2006 The Associated Press

CARACAS, Venezuela — Royal Dutch Shell PLC said Tuesday that recent state-imposed contract changes that brought a Venezuelan oil field it operates under government control will likely impact its share of earnings but is not expected to lead to job cuts.

Venezuela recently required Shell and other private companies operating 32 fields to convert their oil-pumping contracts into joint ventures majority-owned by state oil company Petroleos de Venezuela SA, or PDVSA. It seized two fields from companies that resisted the changes.

The new contract terms gave PDVSA a 60 percent stake in the Urdaneta West oil field and left Shell with the remaining 40 percent.

Sean Rooney, the head of Shell’s Venezuela operations, said the changes would not affect the overall revenues generated by the field but would impact the company’s share of profits.

“What’s the earnings going to be back to Shell? That’s going to change, that’s going to be different,” Rooney said. He did not elaborate.

“At the moment, we haven’t made any staff reduction. We expect the vast majority of our staff will go into the new (joint-venture) company,” he added.

The contract changes are part of a larger push by President Hugo Chavez’s administration to take greater control of the oil industry and increase the government’s share of profits amid high oil prices.

Aside from giving PDVSA a controlling stake in the fields, the new joint-venture model also sharply raised royalties and taxes on the companies and reduced their potential drilling acreage by almost two-thirds.

Rooney said Shell would return about 50 percent of drilling acreage at Urdaneta West to PDVSA but added that it would not affect the field’s output.

“It was an area that was not operational and we decided not to develop, so it’s appropriate that we give it back,” he said.

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