Venezuela is soliciting bids from the world's major oil companies to extract heavy crude from vast deposits in its Orinoco River region. Despite President Hugo Chavez's criticism of U.S.-style capitalism, it has become clear that state-owned Petroleos de Venezuela SA needs both the cash and expertise of Big Oil.
These international oil companies have made windfall profits in recent years, but analysts doubt many will want to invest again given Chavez's history of seizing foreign stakes in Venezuela's oil.
"When it comes to Venezuela, there's still going to be a lot of skepticism," said Greg Priddy, a global oil analyst at the Eurasia Group in Washington D.C. "Chavez is still there and you haven't had a change in government."
Venezuela's oil wealth funded a bonanza of social spending that has made Chavez a populist hero not only in Venezuela, but across much of Latin America.
But times have changed since Chavez nationalized Venezuela's last privately run oil fields in Orinoco in May 2007, shouting "Down with the U.S. empire!" as Russian-made fighter jets streaked overhead.
The government took majority control of those projects, siphoning off more of the profits and reducing private companies to minority partners. Exxon Mobil Corp. and ConocoPhillips pulled out altogether, while Chevron Corp. and others begrudgingly accepted the new terms.
Venezuela's oil industry has stagnated under Chavez. Thousands of veteran employees with critical expertise were fired for backing an oil strike in an attempt to oust Chavez from office, even as the payroll expanded by more than half since 2002 to 70,400. Chavez has turned PDVSA into an all-purpose social service agency. An urban development arm builds houses, and a subsidiary sells milk, chicken and beans at metro stations and plazas.
Chavez even gave PDVSA the task of training Venezuela's Olympic team.
The neglect of the company's core business is evident along the eastern shore of Lake Maracaibo, where for every few pump jacks pulling crude, another one hovers motionless above an abandoned well. Here in the petroleum heartland - home to 78 billion barrels of Venezuela's most accessible reserves - machinery lies broken amid the weeds along muddy lakeside roads. Steam hisses from rusted pipes.
PDVSA insists output is steady at an average 3.3 million barrels a day. But according to the Organization of the Petroleum Exporting Countries, to which Venezuela belongs, production has dropped 16 percent since Chavez won office in 1998 and averaged 2.4 million barrels a day last year.
"There is no international financing in sight for Venezuela," said Heliodoro Quintero, Venezuela's former OPEC representative, who says the only option left is to seek help from the very companies Chavez spurned.
PDVSA is in an extremely tight spot, with oil prices plummeting more than 70 percent since July. Venezuela's heavy crude is particularly expensive to extract - not a problem when prices were sky-high. Now shrinking profit margins make it harder to finance production.
Venezuela also needs new upgraders to make this extra-heavy crude refineable - which is why PDVSA is requiring bidders to help build three of the facilities. Oil Minister Rafael Ramirez each would cost $6 billion, to be completed by 2014.
PDVSA says it has invited bids for minority stakes in projects to explore seven areas of the Orinoco delta, and that 19 companies, including Chevron Corp., Total SA, Royal Dutch Shell Plc and Petroleo Brasileiro SA, spent $2 million each for a "data package" of technical information about the deposits.
But it remains unclear whether any have actually presented bids. Chavez's history of nationalizations and tax hikes is surely fresh on the oil executives' minds.
The companies themselves aren't saying - "We don't comment on bids," Total spokesman Kevin Church in Paris said Thursday, in a typical statement.
The world's major oil companies may end up bidding on the Venezuelan projects in the end, simply because global supplies are dwindling, and much of the remaining reserves are locked up by governments from Iran to Mexico.
But first, Chavez may have to find ways of reassuring them that he won't seize their investments again.
"As a long-term project, companies are more concerned about legal insecurity than oil prices," said economist Asdrubal Oliveros in Caracas.