President Hugo Chavez's government took over Venezuela's last privately run oil fields Tuesday intensifying a power struggle with international oil companies over the world's single largest known petroleum deposit.

Newly bought Russian-made fighter jets streaked through the sky Tuesday as Ch?vez shouted "Down with the U.S. empire!" calling the state takeover a historic victory for Venezuela after years of U.S.-backed corporate exploitation.

"The nationalisation of Venezuela's oil is now for real," said Chavez, who declared that for Venezuela to be a socialist state it must have national control.

Chavez accused foreign oil companies of bad drilling practices due to their hunger for quick profits, and said Venezuela could sue them for causing lasting damage to oil fields.

May Day takeover

The takeover was timed to coincide with May Day, the international workers' holiday, and thousands of state oil workers cheered on Chavez at the Jose heavy crude refinery near the eastern city of Barcelona.

Venezuelan flags fluttered from lamp posts and enormous red balloons dotted the sky.

The companies ceding control included BP Plc, ConocoPhillips, Exxon Mobil Corp, Chevron Corp, France's Total SA and Norway's Statoil ASA. All but ConocoPhillips signed agreements last week agreeing in principle to state control, and ConocoPhillips said Tuesday that it too was cooperating.

While the state takeover was planned well ahead of time, the oil companies remain locked in a behind-the-scenes struggle with the government.

Chavez says the state is taking a minimum 60 per cent stake in the Orinoco operations, but he is urging foreign companies to stay and help develop the fields.

They have until June 26 to negotiate the terms.

The companies have leverage with Chavez because experts agree that Venezuela's state oil company, Petroleos de Venezuela SA, cannot transform the Orinoco's tar-like crude into marketable oil without their investment and experience.

Joint ventures

Multinationals pumping oil elsewhere in Venezuela submitted to state-controlled joint ventures last year because they were reluctant to abandon the profitable operations.

Patrick Esteruelas, an analyst at the New York-based Eurasia Group, said since those takeovers, Venezuela's overall output has declined by close to four per cent, or 100,000 barrels a day, with some companies complaining they have not been paid for the crude they have been pumping. "I expect to see a repeat of that in the Orinoco," he said.

The Orinoco River basin, though not yet fully explored, is recognised as the world's single largest known oil deposit, potentially holding 1.2 trillion barrels of extra-heavy crude.

If the big oil companies were to pull out, Ch?vez says state firms from China, India and elsewhere can step in, but industry experts doubt they have either the needed expertise or capital.

The companies have invested more than US$17 billion (?13 billion) in the projects, now estimated to be worth US$30 billion (?22 billion).

- AP

Year of nationalisation

Here are Hugo Chavez's main takeovers of private companies' investments this year:

On February 8, Venezuela inked a deal to buy U.S.-based AES Corp.'s 82 per cent stake in the country's top private power company for US$740 million Electricidad de Caracas.

Last month, the government launched a public offer for the remaining shares based on the same accord it made with AES.

February 12, Venezuela agreed to buy U.S.-based Verizon Communications' 28.5 per cent stake in the country's No. 1 telecommunications company, CANTV, for US$572 million. Verizon was the leading stakeholder in the company.

Venezuela launched a public offer for the remaining shares of CANTV last month based on the same price deal with the American company.

On February 13, Venezuela signed an accord to pay U.S.-based CMS Energy Corp US$106 million for its 88 per cent stake in its takeover of local electricity company Seneca.

On May 1, the government sent workers backed by troops to take over installations following a Ch?vez decree to nationalise four projects run by foreign companies that are valued at more than US$30 billion.

- Reuters