Alternate sources of capital

Let’s say you’ve recently nationalized major foreign oil assets (not to mention other strategic industries), but you want more foreign expertise and capital to develop your energy sector. Where do you look? China and Russia, of course.

Venezuela's President Hugo Chavez announced that China will invest $16 billion in an oil exploration project in the Orinoco River region, according to media reports.

The news comes only a few days after Venezuela signed a $20 billion joint venture agreement with a group of Russian oil companies to develop the Junin 6 deposit in the Orinoco basin, reports said.

Russian oil pipeline operator OAO Transneft plans to start building a $600 million oil pipeline in Venezuela within three to four years, the company said Friday after signing a memorandum of understanding with Venezuela's state oil company.

Under the memorandum signed with Petroleos de Venezuela SA, or PdVSA, Transneft will build infrastructure for development of the Orinoco oil belt, including a 1,300 kilometer pipeline.

It sure is a multi-polar world out there...

Shoddy energy journalism

Like I said, the media doesn't really get what's going on in Brazil - take for example the latest headline from Green Sheet, "Brazil Opts For Nationalized Oil Production".

No, Brazil is not "nationalizing" oil production in the sense the term is commonly used - expropriating private assets or unilaterally abrogating contracts with foreign companies. That's what Bolivia did in 2006, and what Venezuela did in 2007, which is why foreign oil companies are reluctant to invest in the Orinoco Basin despite its relative technical simplicity (increasingly scarce in new oil reserves).

The shared-production contracts that Brazil is moving to are common practice all over the world. And while Petrosal will be the legal owner of the pre-salt oil reserves (the surrogate state, if you will), foreign oil companies will be allowed to own up to 70% stakes in some fields.

It's a complicated situation, hard for anyone to understand. It doesn't need to be further complicated by imprecise language on the part of the media.