US Firms See Venezuela's Oil As Aladdin's Cave of Wonders

OILMEN are used to foreign delegations that promise petroleum-prone acreage and slick profits to entice private capital for drilling.

Yesterday such a roadshow in Houston played to a packed house because the host was Venezuela. The founding member of the Organization of Petroleum Exporting Countries (OPEC) has the richest petroleum reserves in the Western Hemisphere. Yet foreign companies have been locked out since 1976, when Venezuela nationalized its oil industry.

Venezuela's change of heart was cheered on by United States officials. It advances the US energy strategy of developing oil outside the Persian Gulf, where exports have been disrupted three times since 1973.

But whether alternative supplies will fulfill the underlying twin goals of dampening future oil-price shocks and denying revenue to Iraq and Iran is a tougher question.

''Nobody set out to say: 'Oh, how do we limit the market share of Iraq and Iran?' '' notes Bill White, deputy energy secretary. Instead, US energy policy targets ''nations which pose the greatest risk.''

Nonetheless, that amounts to a ''wanted'' poster for the Mideast troublemakers. Washington regards Iraq and Iran as ''international outlaw states'' bent on ''militarization,'' says Matt McManus, a State Department expert on Latin American petroleum. Iraqi oil exports remain under an international embargo imposed during the Gulf War, while Iran is believed to be seeking nuclear weapons.

Asia leads oil demand

So the US seeks other oil exporters to play bounty hunter, gunning for $110 billion a year. That's the approximate value in today's dollars of the additional oil the world will consume by 2010. It amounts to some 15 million barrels a day. Hustling Asian economies are leading the demand, driving up consumption from today's 70 million barrels per day (bpd).

''There's a race on in OPEC as to who will supply those barrels,'' Mr. McManus says. The industry has only so much money to invest - whoever attracts it first wins. ''We would ... hope that Venezuela gets out of the gate before Iran and Iraq,'' he adds.

''People will want to drive their cars,'' even if it means buying from Iran and Iraq, Mr. White acknowledges. So he has shuttled about Latin America for two years urging oil ministers to force their stodgy state-run oil companies to make room for the vigorous private sector.

''Nobody thought that the doors could open so soon,'' White says. But it turned out that the ideology of state ownership was already being discredited.

McManus says the process began in 1992, when Argentina's new president sold half of the state oil company on the New York Stock Exchange for $3 billion. As the money flowed into the parched Argentine economy, average people felt a refreshing splash.

The privatization trend spread into Colombia, Brazil, Bolivia, and Peru, White says. Only Mexico retains strict state control over oil exploration. But at least it has begun allowing private companies to join in some refining and transportation activities, freeing up state money for badly needed drilling.

The biggest success came this month, when Venezuela's Congress passed the new apertura (opening) policy. The cash-strapped nation, US officials say, would have embraced the private sector regardless of their cajoling. But McManus says White was especially effective in counseling Venezuelans to make terms of the apertura attractive.

Venezuela is particularly anxious to please the US, given its dependence on revenues largely earned at American gas pumps. When oil imports were evaluated as a potential threat to national security by the Department of Commerce last spring, Venezuela was the lone foreign producer begging to differ.

In a 36-page comment, the South American producer argued that American motorists can rely on petroleum from beneath its canopied jungles as much as if it were bubbling out of a stripper well in the dusty Texas Panhandle.

Aladdin-like feeling

Chicago-based Amoco Corporation is one of the major oil companies that already have offices in Caracas. ''We're going to be a player'' in Venezuela, Amoco spokesman Ray Thompson enthuses.

Given the contrast between Venezuela's already-discovered oil reserves of 64 billion barrels and tarnished prospects elsewhere, executives viewing Venezuela's presentation in Houston should feel like Aladdin in the Cave of Wonders.

One Middle Easterner - Hossein Nosrat, Iran's press secretary at the United Nations - is unimpressed.

Looking for a supplier

Even with the apertura, Venezuela expects its production to rise by just 1.5 million bpd above today's 2.5 million. That leaves 90 percent of the expected worldwide demand increase looking for a supplier.

And McManus admits that Venezuelan oil would rise in price along with Louisiana Light Sweet and oil from every other source if a disruption left the global market one barrel short of demand.

Shrugs Mr. Nosrat: ''The market will have the final word.'' He says he doubts that US-blessed oil developments elsewhere will crimp his country's sales.

President Clinton yanked Houston-based Conoco out of a billion-dollar oilfield-development deal with Iran in March. In April, he ordered all American firms to cease business with Iran.

Exxon had been the largest purchaser of Iranian crude, selling it outside the US until Mr. Clinton's edict. Iranian exports now continue undeterred, with non-US companies pocketing the profits.

But geology may be the biggest hindrance to US policy. Iran is ''one of the world's most attractive oil-investment areas,'' says John Lichtblau, chairman of the Petroleum Industry Research Foundation in New York. He predicts US sanctions will have only a ''marginal'' and ''fleeting'' impact.

So far, Clinton has failed to persuade any US allies to join the American embargo on Iran. Last week, the French oil company Total accepted the same contract Conoco had signed. ''I'm sure this oil will be pumped out and find its destination,'' Nosrat says.

''The oil industry knows that by 2010, Iran will be one of the few countries with oil left. The volume is so vast no one can ignore it,'' he adds. ''US companies might be left out [of developing Iranian reserves], but that won't have much effect on Iranian income.''