May 7 (Bloomberg) -- Petroleos de Venezuela SA took over the contract of energy services company John Wood Group Plc, as the Venezuelan state oil company moved to seize greater control of the petroleum industry.

The takeover was announced the same day lawmakers in Venezuela’s National Assembly gave final approval for a law that would allow PDVSA, as the company is known, to nationalize services provided in the energy sector such as water injection, gas compression and dock control.

PDVSA is squeezing foreign services companies to lower rates as growing debts and problems hamper oil production, Patrick Esteruelas, a Latin America analyst at Eurasia Group in New York, said in a research note. Venezuela’s output may fall below 2 million barrels per day for the first time in 20 years, Esteruelas said.

“PDVSA will use the law for added leverage in its negotiations,” Esteruelas said before the passage. “Growing cash flow and supply-chain problems, coupled with the lack of meaningful new private investment, will cast a dark cloud over Venezuela’s oil production prospects.”

Energy and Oil Minister Rafael Ramirez said yesterday that the government would publish a list of companies that would be taken over after the law was passed today.

“We’re renationalizing activities that in the past belonged to the country,” Ramirez said.

Venezuela, the biggest oil exporter in the Americas, saw crude output decline 8.4 percent last month from a year earlier, to an average of 2.13 million barrels per day, according to data compiled by Bloomberg.

Default Notice

The Wood Group takeover occurred after the Aberdeen, Scotland-based company submitted a notice of default to PDVSA on non-payment and contractual disputes, Bobbie Ireland, a spokeswoman, said today in an e-mailed statement. The dispute is over a water injection operation in which Wood Group is a minority partner.

Wood Group, which manufactures submersible pumping systems and pressure controls, is a 49.5 percent partner in the project and is in a “strong contractual position” to recover money it is owed, Ireland said.

The list of services companies that have suspended work in Venezuela because of overdue bills is growing. Houston-based Boots & Coots International Well Control Inc. said today in a statement that it suspended operations in Venezuela in the first quarter.

PDVSA seized a rig owned by Dallas-based Ensco International Inc. in January after it was idled, while Tulsa, Oklahoma-based Helmerich and Payne Inc. said it has idled seven rigs.

Write-offs

Williams Cos. said on April 29 that it wrote off $241 million for uncollectible Venezuela payments, while Helmerich said it may not be able to collect $116 million.

“Smaller companies that cannot afford a substantial write- off, such as Helmerich & Payne, Williams and Ensco are maintaining a hard line at the risk of being forced to leave the country and their assets behind with poor compensation prospects,” Esteruelas said.

Larger companies such as Schlumberger Ltd. and Halliburton Co., the world’s largest and second-largest oilfield service providers, are still negotiating with the government, Esteruelas said.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Matthew Walter in Caracas at mwalter4@bloomberg.net

Last Updated: May 7, 2009 17:04 EDT