"If they freeze us, the United States will have no more oil (from Venezuela) and the price per barrel will reach $300," Venezuelan President Hugo Chavez warned over the weekend, his latest salvo in the continuing war of words between Caracas and Washington.

The ever-outspoken Chavez was riled by Exxon's second effort to freeze $12 billion in PDVSA money in Europe, this time waging a dispute against South America's largest oil producer in a Dutch court.

The U.S. oil giant is waging a legal battle with PDVSA over the nationalization of its projects in Venezuela.

While most other foreign firms accepted the terms of the nationalization in which Venezuela's state-run energy firm PDVSA assumed majority control of their projects, Exxon refused, leading to the seizure of its stake in the oil-rich Orinoco River.

However, Exxon failed in its previous attempt to force Venezuela's hand into compensating the company for its Orinoco holding when a British court unfroze $12 billion in Venezuelan assets seized in February.

The company sought the assistance of the International Center for Settlement of Investment Disputes in hopes of receiving compensation for the nationalized projects.

The ICSID is a branch of the World Bank founded in 1966 "specially designed to facilitate the settlement of investment disputes between governments and foreign investors," according to its doctrine.

The company's total investment in the Orinoco River reserve of Venezuela is said to be about $750 million. Exxon reportedly is seeking compensation totaling 41.7 percent.

Both ConocoPhillips and Exxon announced in July 2007 they were pulling out of Venezuela despite spending millions of dollars in development over the last few years.

"They won't be missed," Chavez said of the companies at the time, a mantra he repeated throughout the protracted legal tussle that resulted in PDVSA lawyers successfully arguing for the release of the state firm's funds earlier this year.

Conoco, meanwhile, is currently in talks with PDVSA to reach a compensation agreement, according to Venezuelan energy officials.

Exxon's chances of salvaging even a fraction of its investment in Venezuela after its pullout appear slim to none, since Exxon is going it alone while most every other company bowed to the wishes of PDVSA, noted Michael Shifter, vice president of the non-profit Washington organization Inter-American Dialogue.

Venezuela demands a majority stake in every project in the Orinoco and elsewhere as part of its effort to wrest greater control of the country's natural resources from foreign investors.

"I don't think it's going to produce a lot of results �� especially since they are on their own (in their grievance against PDVSA)," said Shifter of Exxon.

Amid the ongoing battle between Exxon and Venezuela, Chavez's repeated threats to cut off supplies to the United States have sent prices higher, though ultimately they ring hollow, even if PDVSA is exporting less oil to U.S. markets in 2008 than it was the same time last year.

According to a report released earlier this month by the U.S. Energy Information Administration, Venezuelan oil exports to the United States are continuing to decline at a record rate.

In 2007 Venezuela exported 1.28 million barrels per day of oil and other petroleum products to the United States from January through April. During the same period this year, export levels dropped to 1.13 million bpd, the EIA reported.

As the fourth-largest exporter to the United States, Venezuela can hardly afford to shut off supplies to the United States, even for a short while, said Patrick Esteruelas, a Latin America analyst for the New York-based think tank Eurasia Group.

"The Venezuelan government has become more and more dependent on oil, and oil exports to the U.S. in particular, making it highly unlikely that Venezuela will cut off oil supplies to the U.S. despite the latest threats," Esteruelas said in reference to the Exxon-PDVSA standoff.

(e-mail: energy@upi.com)

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