THE WALL STREET JOURNAL: Venezuela Pres Confirms Talks To Buy Shell Argentina Ops: “"We have a common interest," Chavez said of Venezuela's "advanced" stage negotiations with Shell, noting that the latter wants to get out of Latin America while PdVSA wants to expand in the region.” (ShellNews.net) 2 Feb 05

DOW JONES NEWSWIRES

BUENOS AIRES -- Venezuelan President Hugo Chavez confirmed Tuesday that state-owned Petroleos de Venezuela SA (PVZ.YY) is in talks to buy the Argentine operations of the Royal Dutch/Shell Group (RD) and said it wants to sell refining operations in the U.S.

"We have a common interest," Chavez said of Venezuela's "advanced" stage negotiations with Shell, noting that the latter wants to get out of Latin America while PdVSA wants to expand in the region. PdVSA's Latin American expansion is also consistent with a desire to extract itself from operations in the U.S., the left-wing leader said, underscoring the strained relations between Caracas and Washington.

"Our strategy is to look for businesses in the North to sell, such as refineries," Chavez said, adding that there are eight that PdVSA wants to sell.

"We are subsidizing Mr. Bush," Chavez said, arguing that PdVSA's U.S. operations don't serve Venezuela because they employ few Venezuelans and bring in little tax revenues to his country. He likened the system to "economic colonialism."

Chavez meanwhile inaugurated two service stations run under a joint venture with Enarsa, the newly formed Argentine state-owned oil company Energia Argentina SA, and said PdVSA wants to have 600 in total. Later, Chavez held a press conference for foreign journalists. Chavez is on a two-day visit to Argentina.

One of the fastest ways for PdVSA to have 600 Argentine service stations would be to buy Shell 's Argentine service stations, which Chavez confirmed were part of the two sides' discussions, along with refining, lubricants and transportation.

Speculation over PdVSA's interest in Shell 's Argentine assets has been rife ever since Shell announced plans to divest Latin American assets as part of a worldwide restructuring in the wake of an accounting scandal last year.

Shell has already sold some operations, such as its fuels marketing businesses in Peru and Venezuela, and analysts have long thought that Argentina could be next.

Heavy Argentine taxes on oil and fuel have cut into the company's margins and make it a less attractive place to do business. However, a unique situation in Argentina may also have complicated the prospects of sale - Shell and other refiners have racked up large debts with oil producers operating in Argentina because of a pact aimed at keeping domestic fuel prices low.

Last year, Venezuela Energy Minister Rafael Ramirez said in an interview with a financial newswire that a purchase of Shell Argentina's downstream operations in Argentina was a "possibility." Those comments were later played down by both Venezuelan officials and others from Shell .

However, Venezuela has continued to make its interests in an Argentine presence clear, signing memoranda of understanding with Enarsa. The latest of those, signed Tuesday, makes a sweeping reference to joint ventures in energy operations at all levels of the oil production and supply chain.

Shell officials weren't immediately available for comment.

A spokesman for Shell in Buenos Aires contacted after Chavez spoke declined to comment.

After the news conference, Ramirez told Dow Jones Newswires that "we should know the results of the negotiations (with Shell ) in a few months."

As for assets in the Northern Hemisphere, he called such operations "very bad business for us."

"We are negotiating a sale in Germany," he said.

Ramirez cautioned that selling operations in the U.S. "is more complex" because in some cases PdVSA supplies the crude oil and in other cases it doesn't.

Separately, Ramirez confirmed Venezuelan media reports that the government has named Felix Rodriguez as the new head of PdVSA subsidiary Citgo.

"He was named last week ... he starts this week," Ramirez said.

-By Drew Benson and Michael Casey, Dow Jones Newswires; 5411-4311-3127; andrew.benson@dowjones.com