Venezuelan President Hugo Chvez attends an event with supporters to promote the new United Venezuelan Socialist Party in Caracas, March 24. - Reuters

Venezuela is in talks to convert two privately run natural gas projects to state majority joint ventures, an energy official said on Monday, as the government moves to nationalise the OPEC nation's natural resources.

Jorge Luis Sanchez, head of the National Gas Entity (Enagas), said two onshore natural gas projects run by Spain's Repsol and France's Total are in talks to possibly cede a majority stake to state oil company PDVSA.

The announcement comes amid doubts over whether Venezuela will allow companies to continue holding a majority stake in gas projects amid a two-year campaign to take oilfields back from foreign companies.

Call for state majority

Leftist President Hugo Chvez in January added to the doubts about Venezuela's intentions for the natural gas sector by calling for state majority across the entire energy industry.

"PDVSA needs to keep strengthening its presence in gas exploration and production, and there is a big opportunity to do that with the onshore projects," Sanchez said during a telephone interview.

"I think - and I'm only providing the opinion of the president of Enagas - that the state should have a majority stake in natural gas projects," he said.

Repsol holds a 51 per cent stake in the Barrancas project, which produces around 20 million cubic feet per day for power generation.

Repsol, Total and two small energy companies produce over 100 million cubic feet per day at the 100 per cent privately owned Ypergas facility.

The projects are among the few examples of Chvez's early efforts to woo private investment in gas by offering companies complete control over upstream projects.

Exploration licences

Several exploration licences granted to companies such as Chevron and Norway's Statoil were designed to allow companies a majority stake once they make commercial gas finds.

Analysts say changing the terms of the production licences after exploration would complicate the projects.

Chvez in January called for a legal reform requiring 100 per cent state control over gas projects as part of a nationalisation drive meant to deepen his self-styled socialist revolution.

Energy Minister Rafael Ramirez later said the government would not change the conditions of existing licences but that future gas projects would require a majority stake.

- Reuters

Oil prices drop

Crude oil prices plunged more than US$1 a barrel yesterday as tensions eased in the standoff between Britain and Iran over captive British military personnel.

Prices had risen steadily since 15 British sailors and marines were detained March 23 by Iran for allegedly entering Iranian waters. On Monday, crude fell below US$66 a barrel after Iran's chief international negotiator called for an end to "the language of force" in the dispute.

Light, sweet crude for May delivery dropped $1.79 to US$64.15 a barrel in late morning trading on the New York Mercantile Exchange. Two weeks ago, the contract was trading under US$60 a barrel.

On London's ICE Futures exchange, Brent crude for May sank $1.57 to US$67.17 a barrel.

"The market seemed to believe statements by Iran's secretary of the Supreme National Security Council, Ali Larijani, could ease tensions between the Islamic Republic and the U.K.," said Vienna's PVM oil Associates.

Still, oil analyst Victor Shum of Purvin & Gerz in Singapore warned of potential market volatility.

"There's no clear indication one way or the other how it's going to be resolved," Shum said. "There could be price swings in either direction depending on how this situation develops."

In other Nymex trading, heating oil futures for May delivery fell 4.9 cents to US$1.8134 a gallon, and natural gas prices dropped 14.6 cents to US$7.525 per 1,000 cubic feet. Gasolene prices fell 5.2 cents to US$1.9905 a gallon.

- AP