The Venezuelan government on Friday started the process to nationalize 60 oil service contractors and place them under the control of the state oil company, Petroleos de Venezuela.

President Hugo Chavez was greeted by workers dressed in red and waving the company’s flags on the Lake of Maracaibo in the oil rich state of Zulia, as he toured the newly expropriated installations.

"We are advancing the construction of socialism," Chavez told state television, as he spoke and shook hands with employees. "The profit will now stay with the workers," he added.

Chavez said the takeover would lead to an "around-20-percent" cut in production cost as a result of better management and improved efficiency.

With the move, 300 boats, several ports and more than 8,000 workers will now be absorbed by the state oil giant, according to Oil Minister Rafael Ramirez, who accompanied Chavez in touring around the facilities.

The expropriations followed the approval of the Organic Law by the National Assembly on Thursday which cleared the way for the nationalization of the service companies in all primary hydrocarbons operations.

The law will affect contractors dealing with water, vapor or gas injection, gas compression, staff and materials transportation, replacement of pipelines and vessel maintenance.

Chavez said that the measure represented a "socialist offensive" which would eliminate the monopoly of the contracting companies and guarantee the welfare of thousands of Venezuelan workers.

Venezuela, which relies on oil income for over 93 percent of its export earnings, has been greatly affected by the rapid decline in oil prices.

Petroleos de Venezuela has recently begun seeking for previously unsolicited foreign investment in the oil rich Orinoco Belt as well as renegotiation of current contracts with some foreign companies to reduce costs.

Following the victory in a February referendum which will allow him to run for president again when his term expires in 2012, Chavez has pushed forward a series of similar reforms.

In March, the government nationalized several rice factories apart from taking over some key ports previously run by state governments to bring them under the control of national government.

In 2007, Chavez nationalized oil projects worth billions of dollars, leading oil giants Exxon Mobil and Conoco Phillips to quit the nation and sue for compensation.