Oil firms face Latin American woe

The government wants to bring down the price of fuel

Foreign oil firms have come under increasing pressure in Latin America as Honduras and Venezuela try to exert greater control over the industry.

US oil companies have said they will stay in Honduras, despite the state saying it will temporarily seize control of oil storage containers.

The Honduran move, made on Friday, will affect firms such as Chevron and Esso.

The news comes as Venezuela refused to negotiate with foreign oil firms over its wider nationalisation plans.

Venezuela's President Hugo Chavez recently promised to nationalise the biggest phone and power companies and on Monday, oil minister Rafael Ramirez said "there was no possible negotiation" with foreign firms.

However, Mr Ramirez conceded that private firms could own minority shares in the Orinoco River basin oil projects, an area known for lucrative contracts.

Even so, Venezuela would retain "an effective majority control", he said.

'Concerned'

In Honduras, the government action was described as an interim plan that would stay in place until Conoco Phillips could supply petrol and diesel at lower prices, as promised when it won the contract.

Honduras produces no crude oil of its own and no longer owns a refinery.

President Manuel Zelaya opted for the move after failing to reach a deal with oil firms Exxon Mobil and Chevron, which own the terminals.

"It is not a nationalisation, it's a temporary use of the storage tanks through a lease and payment of a reasonable price," said the president.

Conoco Phillips is meant to provide cheaper fuel as required under a contract it won last year to import some 8.4 million barrels of petrol and diesel annually.

But it remains unknown how long it will take for its new storage facilities - to supply fuel distribution more cheaply - will take to build.

The move by the Honduran government has faced criticism from those who say it effectively signals a flouting of the law.

"I understand the contracts establish that the government can use the terminals in case of an emergency," US Ambassador Charles Ford said on Monday.

But he added: "The curious thing is there is no national emergency."

Jesus Canahuati, who heads a Honduran business group said: "We are concerned about what the government has done, because it sends a bad message to investors."