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Last Updated: Monday, 3 April 2006, 15:11 GMT 16:11 UK
Venezuela takes back oil fields
Oil pump in Lagunillas at the west coast of Lake Maracaibo, Venezuela
Venezuela has been trying to tighten its grip on the oil industry
Venezuela has taken control of two oil fields operated by French firm Total and Italy's Eni.

The government said it had taken the step after failing to agree a deal with the two firms which would give it a majority stake in new ventures.

President Hugo Chavez has been working to strengthen state control over oil production in the country.

So far, 16 oil firms have agreed to change their operations into joint ventures with state oil firm PDVSA.

US based Chevron, Royal Dutch Shell and Spain's Repsol are among the companies that signed the agreement on Friday.

Eni believes that this action by PDVSA is a violation of Eni's contractual rights

In an interview on state television, Minister Rafael Ramirez said the government took over the fields operated by Total and Eni on Saturday.

"We are waiting for a resolution with these operators after they exhausted the possibility of entering into the mixed companies," Mr Ramirez added.

Legal action?

Total's Jusepin field produces about 30,000 barrels of oil a day, while Eni's Dacion field produces almost 60,000 barrels per day (bpd).

Eni has vowed to fight the takeover which it declared illegal.

"Eni believes that this action by PDVSA is a violation of Eni's contractual rights," it said in a statement.

The company added it was considering possible legal action and would be seeking compensation.

Total confirmed its oil field had been taken over, but declined further comment.

Tighter controls

Last year, Mr Chavez declared 32 oil exploration deals in the country illegal - prompting the change to the contracts.

PDVSA officials had voiced fears that the previous agreements were disguised attempts to privatise the country's oil industry.

However, some oil firms have refused to sign new deals, arguing that they have pumped millions into operations in Venezuela, and now may not see any return on their investment.

Venezuela is currently the world's number five crude oil exporter.

The government has been tightening its grip on the oil sector to raise additional funds to fight poverty in the country.

As well as demanding firms give up majority control of their Venezuelan oil ventures, the government is also demanding firms pay more taxes.

Last month, BP was slapped with a back tax bill of $61.4m (35m) covering 2001 to 2004.

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