Venezuela to nationalise fuel distribution

With the cheapest fuel in the world at $12 cents a gallon (approx Rs 3.90 for 4 litres), Venezuela has announced plans to nationalise wholesale gasoline distribution in the country, a move that will further bring Venezuela's economy under increased state control.

The legislation, which had initially been given the thumbs-up by the National assembly dominated by President Hugo Chávez's allies, will get the approval of the National assembly later this week.

If passed then the state-run oil company 'Petróleos de Venezuela' (PDVSA) will control Venezuela's fuel distribution network but privately owned gas stations have been spared from the nationalisation plan.

The legislation gives distributors including subsidiaries of British Petroleum, Exxon Mobil and Chevron, 60 days to negotiate the sale of their businesses including gasoline pumps and storage tanks and surrender their brand names to the government or face expropriation.

49 per cent of fuel distribution in Venezuela is controlled by subsidiary of Petróleos de Venezuela, local distributors, Trebol and Llano Petrol together control 26 per cent, BP controls 7 per cent while Exxon 5 per cent and Chevron 3 per cent. The remaining 10 per cent is controlled by smaller Venezuelan companies.

Private distributors had coaxed the government that instead of seizing their business they could together form joint companies with PDVSA as they had the expertise to run the business and were also open to the state taking majority control of fuel distribution.

Chavez, a socialist who aims to make the top oil exporter in South America into a "21st century socialist society" has already taken oil, telecommunications, electricity, steel and cement companies from private hands and is also acquiring a the Bank of Venezuela from its Spanish owners, Grupo Santander.

Last month with the aid of troops the government had seized control of Mexican cement giant's plants and offices in Venezuela after both sides failed to reach a deal in cement nationalisation talks.

The Mexican ambassador has now negotiated a deal with Venezuelan authorities that will allow Petroleos de Venezuela S.A to take full control of the local plants of the Mexican cement company Cemex, but the compensation amount has still to be negotiated with the government.