CIUDAD OJEDA, Venezuela — Despite the recent sharp rise in oil prices, Venezuelan President Hugo Chavez last month expropriated 70 oil service companies in western Venezuela, putting some 10,000 Venezuelans out of work, turning local unions against him and forcing production cuts at important oilfields.

The action has drawn little international attention because Chavez stopped short of nationalizing big U.S.-based multinationals such as Halliburton or Schlumberger that carry out technical and highly skilled work in producing oil. Nor have the owners of the 70 Venezuelan firms — in addition to four foreign- owned firms — protested publicly, fearing that doing so might jeopardize settlement negotiations with the government.

Analysts said Chavez seized the private companies, which provide support services such as cleaning and transport across giant Lake Maracaibo, where the oil is located, to save money for PDVSA, the state oil company. It currently owes $5 billion to its creditors. There's a political narrative to the action as well, however.

The companies the government has seized are concentrated in Zulia state, which consistently has opposed Chavez during his 10 years in power.

Now the stage is being set for a confrontation between Chavez and the local power structure, including unions, management and local government, with PDVSA's oil production activities caught in the middle. Oil production, which has fallen 25 per cent during Chavez's time in office, could slide still further and weaken the national economy.

Political unrest could be around the corner. PDVSA has promised to hire 8,000 of the workers laid off from the private companies. But PDVSA is moving at a snail's pace, apparently in part because, according to workers, it's conducting background checks to ensure that they don't have a demonstrated record of opposing Chavez.

The governor, Pablo Perez, charged that Chavez's expropriations have led to a "job massacre." Perez is under pressure from Chavez, with government prosecutors investigating corruption charges against him that he called groundless. It's only two months since Manuel Rosales, Zulia's most prominent politician and Perez's predecessor, fled into exile to avoid similar charges.

Meanwhile, Chavez supporters are accusing Diario La Verdad, the Zulia newspaper that doesn't follow the government's line, of engaging in "media terrorism."

However, it's the prospect of losing their jobs that worries tens of thousands of workers in the oil-dependent towns along the eastern shore of Lake Maracaibo. They ferry workers to the oil rigs, man the docks, work as janitors and the like.

"It could blow up in a month, a month and a half," said German Cortez, who heads a local union. "If people are hungry, they'll hit the streets."

Chavez promised a better day when he came to Ciudad Ojeda on May 8 to celebrate the expropriation.