Big fish seeks new ponds: recovered from a crippling strike, Venezuela's PDVSA is looking beyond its No. 1 customer, the United States.

Talk about your good luck: Soaring global oil prices have helped Venezuela's state-owned oil company Petroleos de Venezuela (PDVSA)--on the ropes following a disastrous two-month strike in 2003 that paralyzed the company and the country--literally spring from the ashes.

PDVSA exported US$32.54 billion in products in 2004, 25% more than what it shipped out in 2003. And while the United States has been the traditional market for the oil company--it owns the Citgo chain of refineries and service stations-now the company is looking to drum up business elsewhere by signing energy deals in Russia, China, India, Cuba, Brazil, Jamaica, Canada, and of course, with its neighbors in South America. PDVSA's plan is to create an energy hub that brings private and state-owned capital from across the globe to develop an array of oil and gas activities, with an emphasis on Mercosur and Andean Community countries.

Some researchers believe that Latin America will account for close to a third of global oil production by the end of this decade, up considerably from its current 10%. PDVSA's managers hope to continue the company's reign as the top supplier in this growing market. "The goal is to reach average production of 4.6 million barrels of oil a day from our own projects, operating agreements, strategic associations and shared earnings," said Luis Vierma, PDVSA vice president and a member of the board of directors, in a written statement.

The company now is among the largest oil producers in the world and has signed agreements to strengthen its ties to other Latin American oil companies, such as Brazil's Petrobras and Ecopetrol in Colombia, as well as with governments across the region. The cross-regional deals have been matched by a series of regional energy coalitions, such as Petrosur, PetroAndina and PetroCaribe, associations covering the bulk of Latin America.

Venezuela plays the leading role in these projects due to the size of its crude reserves, the largest in the Western Hemisphere. PDVSA has 730 sites in Venezuela identified as holding oil and natural gas reserves. A seven-year development plan ending in 2010 and investing $24.31 billion will bring many of these projects to reality, according to the company.

Oil isn't the only asset coming up from underground. Natural gas figures big in the company's business models, too. One project involves a $124 million natural gas pipeline linking Venezuela and Colombia. The pipeline will move 150 million cubic feet of gas a day and will give Venezuelan gas direct access to the Pacific Ocean for export. Mexico and the United States are running short on gas, and hungry Asian economies, including China, will need more power plants to fuel economic growth.

Currently, PDVSA exports most of its natural gas to the United States, but it hopes to expand the roster of buyers to Spain, Portugal, Brazil, Mexico, South Korea, Turkey, the Caribbean and Central America. PDVSA and U.S. oil company ChevronTexaco estimate that Venezuela alone can supply 20% of U.S. demand for natural gas.

Investments in maritime infrastructure will be needed to get the natural gas pipeline to Colombia up and running. PDVSA Marina, the company's shipping company, plans to invest $875 million to get the fleet ready to move petroleum around the planet. "Continuing operational flexibility will [enable us] to supply non-traditional markets and reduce the vulnerability of the national maritime sector," according to Vierma.

A new Venezuelan law gives PDVSA more control over joint ventures, be they for exploration, production or refining. Other measures include giving state-owned companies at least a 51% stake in new projects while converting existing operating agreements with private companies into joint ventures controlled by PDVSA.

Some foreign investors, including U.S. oil giant ExxonMobil, want to negotiate alternatives to these measures, although the end result might be simply leaving Venezuela. Others, such as Royal Dutch/Shell, say they will adhere to the new rules. Ownership aside, profits have become an issue as well. The government jacked up royalties applied to earnings to 16.67% from 1% on projects operating in the Orinoco heavy-crude belt. The government said at the time that previous laws were passed when oil prices were low and Venezuela needed an incentive to attract investments. Times have changed. "We want these companies to stay but to obey the law," Venezuelan Energy and Mines Minister Rafael Ramirez told the press recently.

Changes. PDVSA execs aren't worried. It can produce 3.1 million barrels of oil a day for another 285 years, and with oil prices high there's still plenty of reason for foreign producers to remain in the country. Meanwhile, under pressure from changes in Venezuela, Citgo is making headlines of its own. PDVSA has said it might sell refineries in both the United States and in Germany, which it says have been money losers, although chances are slim it will turn its back completely on its biggest customer just yet.

LISETH CAMACARO, CARACAS