The new PDVSA President
Dr. ANDRES SOSA PIETRI has been named PDVSA's new President and will take possession on 12th. March. Sosa Pietri was born on this same date in 1943. He was educated to secondary level in Europe and graduated Cum Laude as a lawyer in the
Sosa Pietri: "l wíll respect absolutely the Industrys administrativa and rinancial autonomy ... my obligation ls to push forward the plans and programmes of the National Executive, for example raising production potential to 3.2 mill. b/d and later to 3.5 for 1993 and 1995 as well as petrochemical expansion and other important programmes". Other topics including domestic hydrocarbon industrialization he will touch on after taking presidency. "PDVSA has got to be on par with the biggest oil companies in the world – a place where ¡t already ¡s. lt is a commercial enterprise and should be administered as a commercial enterprise."
Facts and figures of the opening up of PDV seen by Andrés Sosa Pietri According to the ex-President of. PDV the opening up of the o¡¡ industry to foreign multinationais will increase
Estimates from PDV show that production leveis should reach 6 million b/d by the year 2003, from this amount 1.5 million b/d will correspond to production from the multinationais and the remaining 4.5 million b/d to PDV and its subsidiarias. Sucha leve¡ of production will practically duplicate income generated by the o¡¡ industry taking ¡t up to $36 billion, almost twice as much as current leveis if an average price of $16.50 per barre¡ is considered.
Evidentiy, if such an expansion is to take place a huge investment effort will be required. In this sense Sosa Pietri estimates that total investments necessary to consolidase the opening up process will be around $55 billion, of this amount $35 billion will come from PDV and the remaining $20 billion will be invested by the foreign"multinationais in their specific areas of interest.
PDV will be able to make such a contribution thanks to the elimination of the Export Value Tax (impuesto sobre el Valor de Exportaciones) which had previousiy proved to be a heavy burden for the corporation.
Petroanalysis
May 1989
PDVSA Vice-President Reimpell said that the changes that had been produced in the international petroleum market appeared to be irreversible in the sense that it would cost a great deal to return to the extremely high prices of the late-seventies and early-eighties. Continued economic growth and stable prices have stimulated petroleum demand further than was projected two years ago, and that increase could be maintained if there is continued stability and reasonable supply is assured. Offering a panoramic view of the current petroleum situation, he noted that for the first time in various years OPEC production is growing again, and depending on the scenario that is chosen future OPEC production could be between 24 and 26 mill. b/d. "With these production volumes there will be countries both within and outside OPEC that will not be able to continue participating in the market. Other countries with sufficient resources, if they do things well, will be able to increase production and even to participate in a greater degree. Amongst these nations are those of the Middle East and of course
Petroanalysis
March 1989
In order to raise reserves of light and medium crudes and condensates there are to be investments in exploration of Bs 1,862 million during the year. Bs 1,316 million going to exploratory drilling (17 wells), and Bs 546 million to seismic lines and gravimetric data. Two stratigraphic wells are to be drilled in the North-Andean Flank and one in the Cutufito region in the Venezuelan-Colombian border area.
Seismic lines are to be laid in the Chama area of the Flank and the Ceuta-Tomoporo area. Gravimetric data is to be taken in the El Tejero-El Carito area. Resulting from these efforts, petroleum reserves are expected to increase by 1,800 million barrels and natural gas reserves by 3 million cu. ft. In terms of production the following levels are expected: petroleum, 1,636,000 b/d; condensates 190,000 b/d; NGLs 107,000 b/d. Natural gas production estimates are the equivalent of 639,376 b/d of petroleum. Petroleum and products exports 1,585,000 b/d.
The country's production potential is to be maintained at 2,700,000 b/d.
Petroanalysis
October 1989
Minister Armas speaking after PDVSA's Extraordinary Assembly... Destinations of exports: North America 54%, Central America and the Caribbean 26%, Europe 14%, South America 3%, and other countries 3%. Domestic market sales averaged 523,000 b/d of which 335,000 b/d were liquid hydrocarbons and 188,000 b/d equivalent were natural gas. Of the liquids total 162,000 b/d were gasoline, 59,000 b/d gasoil, 44,000 b/d fuel oil, and 70,000 B/d others. Purchases made by PDVSA and the operating companies came to Bs 16,291 mill. of which nearly 53% were made domestically. The Industry's foreign exchange earnings added up to US$ 4,948 mill. a rise of US$ 914 mill. over the first 6 months of 1988.
Petroanalysis
July 1989
Dr. Alirio Parra, Director of PDVSA and Head of the company’s office in
Petroanalysis
June 1990
Twelve of
All the terminals run by PDVSA's subsidiaries have been adapted to handle the most modern tankers and are equipped with all necessary safety facilities. Detailed contingency plans have been strictly defined.
The leased refinery on Curazao (Refineria Isla) and the acquisition of the terminal at
Isla allows for the transference of crude and products from ship to ship, and for the blending of various crudes so that the customer is provided with the exact product formulation requested.
Over the last years, PDVSA and its operators have developed a comprehensive renovation and maintenance programme for all its oil terminals. The terminal at Puerto Miranda on the eastern shore of Lake Maracaibo, for instance was adapted to receive larger ships and it continues to be one of the principal oil terminals in the
handle up to four tankers simultaneously and load up to 20,000 barrels of crude per hour. At others, such as the San Lorenzo and Punta de Palmas terminals, on
EXPORT MAX.DWT MAX.DRAF JETTIES SUBSIDIARY TERMINALS (Thou. Tons) (feet)
Amuay 130 43 4 Lagoven
Puerto
Puerta Miranda 115 39 2 Maraven
Punta de Palmas 100 39 Buoys Maraven
Punta Cardón 90 45 4 Maraven
Jose 75 39 1 Corpoven
Caripita 61 33 3 Lagoven
El Palito 60 39 2 Corpoven
Punta Cuchillo 60 Variable 1 Lagoven
Bajo Grande 55 39 3 Maraven
El Tablazo 50 30 2 Pequiven
The water depth at the jetties of
The oil industry also runs three river terminals,,, located at Caripito, an the San Juan River, and at Paradero and Punta Cuchillo, an the
During 1988, the company’s major oil terminals handled 893 tankers at Punta Cardón, 730 at Amuay, 396 at Puerto
PDVSA's oil-tanker fleet consists of 19 ships with a total deadweight of 748,000 tons. The tankers are distributed among the various subsidiaries.
In 1989,
Of the total exports, an average of 203,000 barrels per day were shipped in PDVSA owned oil tankers and the rest was shipped on rented or leased tankers or tankers owned by customers.
The figures show PDVSA was able to ship more than 20 percent of its traffic on company-owned ships, significantly higher than the 13 percent company-owned shipping capacity average for other oil companies around the world.
PDVSA also has plans to expand its fleet to around 40 ships during the next 10 years.
PetroAnalysis
March 1989
“THE NEW VENEZUELA , 1989: ECONOMIC POLICY REORIENTED”
The exchange rate modification promised by Head-of-State Carlos Andrés Pérez came into force on the 12th March. Gone now are the preferential dollars and the parallel free market. By the end of the week before unification the Bolivar had reached over 40 to the
The 27th and 28th of February saw the blackest days of civil unrest in 30 years: looting, burning, and leading to a curfew and suspension of civil liberties Why was all this? Obviously there are different opinions: the New Economic Package is to blame; the shopkeepers are hoarding goods to sell them at highly inflated prices; subversive groups; the Debt; bus drivers put up their prices 100% instead of the decreed 30%... it’s a proof that the Old Economic Policies had brought the country to ruin. But one thing for certain is that now there is even more pressure on President Pérez to turn the country round, and correct once and for all the serious imbalances that have distorted economic, financial and social life.
But what if the policies fail? Serious consequences no doubt.
The NEW ECONOMIC MEASURES now being pursued by the current Administration:
FOREIGN EXCHANGE POLICY:
-Single unified exchange rate.
- Partially respect letters of credit at 14.50 Bs to the dollar.
FOREIGN DEBT:
-Suspension of capital and interest payments of the public and private foreign debt until 30th September 1989. Reopening of renegotiations. The same treatment for the private foreign debt as the public debt.
-Decision to go to the IMF and accept its conditions to obtain approximately US$ 4,500 million in the next 3 years.
FOREIGN TRADE:
-All foreign transactions with abroad (imports, exports transfers, etc) at the free rate. Eliminate import permits and quotas (the RECADI system).
-Rationalization of customs tariffs, reducing their number in order to ensure an effective but decreasing protection for national production.
-Elimination of customs tariff relief.
INTEREST RATES:
-Freeing of interest rates.
-Preferential treatment for agricultural and housing loans: agricultural rate to be 7% below the market rate; preferential mortgage rate for social-need housing initially fixed at 15% but subject to periodic Banco Central (BCV) revision.
FISCAL POLICY:
-Reduction of fiscal deficit to no more than 4% of GNP (approximately Bs 35,000 million).
-Freeze on jobs in the public sector.
-Establish a sales tax in 1990.
-Raise taxes and tax thresholds.
-Establish formulas to allow firms to depreciate assets on their present value.
TARIFFS AND PUBLIC SERVICES:
-An annual increase over three years of petroleum derivatives in the national market. First increase an average of 100%.
-General increase in public transport tariffs of 30%.
-Increase in electricity and telephone tariffs (an estimated 50%).
-General adjustment of prices of public firms which produce goods and services.
SOCIAL POLICY:
-Increase in the minimum wage to Bs
-Increase in public sector salaries: 30% increase for the first Bs 5,000, 10% from Bs 5,001 to Bs 10,000, 5% over Bs 10,000.
-Private sector increase of Bs 2,000 for each worker or employee.
-Top wage limit for subsidies on transport and food raised to Bs 6,500.
-Price regulation and direct subsidies for 18 products in the basic food basket. -Food transfer programme for children up to 14 years, pregnant and nursing mothers.
-Creation of 42,000 infant day-care centres.
Economic strategy section of the IMF Letter of Intent...
FUNDAMENTAL OBJECTIVES:
-Strengthen internal savings.
-Promote the influx of foreign capital.
-Diversify the economy towards exports on the base of comparative advantages.
-Eliminate the fiscal deficit within 2 years.
FINANCING GROWTH:
-Obtaining between US$ 5,000 and 6,000 million per annum in foreign finance until 1993.
-Repatriation of approximately US$ 3,000 million of private capital within 3 years.
-Refinancing and reduction of the foreign debt.
-Surpluses in public firms’ finances.
MACROECONOMIC POLICIES FOR 1989:
-It is fundamental to establish a single floating exchange rate at which all transactions will be realized. The only exception will be payments on the private foreign debt until 28/2/89 (US$ 250 million) and 50% of letters of credit pending from 1988 (approx. US$ 3,000 million) which are at Bs 7.50 and Bs 14.50 to the
-Liberalization of import policy: progressive elimination (until December 1989) of quantitative restrictions on imports, elimination of customs tariff relief in March 1989, simplification and reduction of customs tariffs.
-There is to be a prudent wages policy which contributes to strengthen competitivity, raise the level of employment and reduce inflationary pressures. After the 1st March increase there are to be no other wage increases during the year. Private sector wages are to be fixed by broad agreement or collective bargaining.
-Price increases in public goods and services. The internal prices of State firms should move closely towards international prices within 2 years. ALCASA and VENALUM will increase 40% in 1989, PDVSA 94%, CADAFE 5001,o, CANTV 50%. Obligatory Social Security base to rise from Bs 3,000 to Bs 10,000.
-Elimination of the previous system of price control with the sole exception of 25 essential products and services which will be adjusted to the rhythm of inflation.
-Liberalization of interest rates and restrictive monetary policy. Peal positive interest rates approx. 40% i.e. 5 points above the estimated rate of inflation). Liquidity increase of 26% (9 points below the estimated rate of inflation). 32% increase in bank credit (3 points below the estimated rate of inflation).
-Social subsidies on: 7 products in the basic food basket (Bs 1,4,800 million), mortgage interest on housing with a social need (Bs 2,000 million), on fertilizers by 50% (Bs 5,000 million), and on direct food and social transfers (Bs 9,000 million). basic economic disequilibria that the new policies attempt to correct
-Balance of Payments. Current Account accumulated deficit of USD 7,376 million between 1986 and 1988. Total exhaustion of international reserves (excluding gold).
-Fiscal. 1988 deficit of around Bs 60,000 million (7% of GNP).
-Monetary. Real negative interest rates of around 20% below the inflation rate.
-Exchange Rate. Overvalued official rate, undervalued free rate with a 170% gap between them.
PetroAnalysis
March 1992
“
Officials denied reports from Zulia state, the heart of the nation's oil industry, that oil installations had been assaulted.
After word came of the attempted coup against President Carlos Andrés Pérez. PDV bonds registered an 8-point loss but regained 4 points later in the day once the news of the coup's failure was learned. The recorded losses were considered lighter than expected.
Officials from multinational oil companies said they still feel safe putting their money in
The country has political stability as one of its major advantages for investors, distinguishing itself from its OPEC colleagues in the
Energy and Mines Minister Celestino Armas, however, expressed concern that the coup most likely damaged the nation's reputation, and indicated that the nation's image would need some time to recover its former status internationally.
Petroanalysis
February 1991
CAP: "
ARRIAS: "We can not assume as a dogma our participation in organizations like OPEC... the only dogma that
SOSA: "The structure existing in the international economic system should be complemented with a new world petroleum agency which would serve as a permanent consulting mechanism between producers and consumers in order to create a more favorable environment for the development of business activity in the petroleum area."
"We want moderate and stable prices which, mean high production to keep income stable ... we will produce as much as we can."
President Pérez speaking at tlie National Defence Higher Studies Institute: "Petroleum's future now depends on the industrialized countries' energy policy and that depends on how OPEC manages petroleum @plicy." At a later date he stated that he was prepared to use Article 5 of the Petroleum Nationalization Law to establish petroleum and refining plailts in conjunction with domestic and foreign private capital so that the Industry continuas to be strengthened and to assure internacional markets. (Art.5 allows for the participation of prívate entities "in special cases and when ¡t is in the public interest").
Enfoque Petrolero
April 1996
Fourteen companies from eight countries took part in the bidding round for the ten marginal fields. Twenty-nine offers were received from forty-four companies associated in twenty-three consortia. Fourteen companies from the
Table 1: 1995 Bidding Round Results
Area | Winner | Offer | Bonus |
La Ceiba | Mobil,Veba, Nippon | PEG 50% | US$ 103,999,999 |
| Conoco | PEG 50% | US$ 21,197,844 |
Guanare | Elf, Conoco | PEG 50% | - |
| Enron, Inelectra | PEG 29% | - |
El Sombrero | - | No offers | - |
Guarapiche | BP, Amoco, Maxus | PEG 50% | US$ 108,987,510 |
San Carlos | Pérez Companc | PEG 40% | - |
Punta Pescador | Amoco | PEG 50% | US$ 10,658,910 |
Catatumbo | - | No offers | - |
Delta Centro | | PEG 41% | - |
Note: The Bonus is offered as a tie breaker when equal PEG percentages have been offered.
Table 2: Fields assigned in previous bidding rounds
| Company/ Consortium |
Corpoven: | |
| Mosbacher Energy Company |
East Guárico | Teikoko Oil de Venezuela |
Oritupano-Leona | Pérez Companc- Norcen- Corod |
Quiamare-La Ceiba | Astra-Quiamare de Venezuela- Ampolex- Tecpetrol- Sipetrol |
Sanvi-Guere | Teikoko Oil de Venezuela |
Lagoven: | |
Jusepín | Total Oil and Gas de Venezuela |
Pedernales | BP de Venezuela |
Quiriquire | Maxus de Venezuela- BP de Venezuela- Otepi |
Uracoa-Bombal | Benton- Vinccler |
Urdaneta West | Shell de Venezuela |
Maraven: | |
Colón | Tecpetrol- Corexland- Wascana de Venezuela- Nomeco |
Zulia West Development | Compañía Occidental de Hidrocarburos |
Falcón Offshore | Olympic Oil and Gas Corporation- Clayton |
Falcón West | Samson- Vepica- Ingenería 5020- Petrolago |
Falcón East | Pennzoil- Vinccler |
Table 3: Companies operating in
Amoco |
Atlantic |
Continental |
Creole |
CVP (Venezuela Petroleum Company) |
Gulf |
Las Mercedes |
Mito Juan |
Mobil |
Phillips |
Shell |
Sinclair |
Talon |
Texaco |
Note: Under nationalization, all of these companies were renamed and eventually grouped into what is now Corpoven, Lagoven and Maraven. Creole and Amoco became Lagoven; Shell and Philliips, Maraven; the rest were grouped into Meneven and Corpoven. Later Meneven was fused with Corpoven, some of Corpoven being integrated into Maraven.
British Ambassador Wilkinson Interview
These are times of high technology and investments. Is there a particular British approach in this regard in this fast growing region?
1’11 be frank, ¡t is very regrettable that British investment - which up until the Second Worid War was larger than that of any other country in Latin America - disappeared almost totally, first of al¡ in the Second Worid War and then in the following two or three decades. As you probabiy know we built the infrastructure in much of
And looking at Venezuela specifically?
One of the areas which we really do understand and know weil is o¡¡ and gas. That explains 1 think why British investment in this country is either in the o¡¡ and gas field, or carried out by major multinational compa-nies that have global expertise - the Lasmos, the Glaxos., the Unilevers, the Weilcome’s, the United Distiller’s, the British American Tobaccos: the big British multinationais to whom Venezuela is a significant market that they don’t ignore.
Trade missions are clearly very important.
Could you brief us on the most recent ones and on those coming up?
The number of trade míssions this year has been very encouraging. There are two kinds of trade mission. The first kind is the one which is a means for very often smali and medium sized enterprises to get to know a market that they aren’t yet aware,of, and to assess a market in a cost-effective way They taik among themselves and they get, as ¡t were, a group vision of what the market is like. Then they go back home and decide whether it’s worth putting resources into that market. They are often led by a geographical focus. The mission that we had from Kent Chamber of Commerce and the Kent and South-East England Trade Association was a good example of a geographically-based group covering various sectors. The other kind is more specialised. There are people who have already identified
This is the first time for the last fifty years or so that British oil co ‘Mpanies are present in
The Apertura involves basically the reactivation of the marginal fieids. Now this is something where the British are particularly weil placed... not just with their o¡¡ majors, but with their oil mediums like Lasmo. Also with the kind of experience that their equipment companies have, and in the final transfer of technology because of the
Weil, let me just give an example. 1 think ¡t illustrates both the advantages and opportunities in
¡t is a fifty million dollars investment, but how many people are going to work in it? Ten. That shows the kinds of problems that face
1/ Reporte Petrolero
No. 9, 1995
“ORIMULSION FACTS”
This new boiler fuel will make excellent use of the vast bitumen reserves in the
The extra-heavy crude of the
To convert a conventional fuel oil burning plant, today not in use because of lack of competitiveness, takes around six to eight months, modifications being necessary in the handling system.
Experts see the fuel targetted against coal. In thermal equivalent terms 50 metric tons of Orimulsion is equivalent to 60 metric tons of South African steam coal, which in 1986 represented 34% of internationally traded steam coal or 43% of that carried by sea.
(Source: Petroanalysis Venezuela no.1, September 1988.)
The Orinoco Oil Belt, a giant heavy and extra-heavy crude oil and natural bitumen province in central
Bitúmenes Orinoco, or “Bitor”, is the PDVSA subsidiary company responsible for the exploitation and emulsifying of natural bitumen, and for the supply and trading of the resultant boiler fuel Orimulsion. Bitor has operational agreements with other PDVSA subsidiaries who carry out activities associated with bitumen extraction, emulsification, transportation, storage and shipping.
Trading activities are performed through the company itself as well as through Bitor America Corporation,
Plans are that by the end of the century twenty million metric tons per annum of Orimulsion should be produced and marketed – an increase of over fifteen million metric tons compared with the current 4.7 million.
Orimulsion sales are growing: exports in 1994 were two million five hundred thousand tons, 28% up over 1993. Contractual deliveries were initiated to
Last year saw a record 49 Orimulsion shipments from the BOPEC terminal in Bonaire and from the Punto Cuchillo terminal on the
reduction in operating costs.
A study was completed on defining strategies and alternatives forthe marine transportation of Orimulsion to North America, and a team was formed to undertake a similar study targetted at
In
Construction was completed of the integrated storage, transport, and loading system known as Morichal Patio de Tanques Oficina (PTO) Jose. Initial annual capacity of the system is 8,100,000 tons and replaces the previous system whereby Orimulsion was dispatched from the Punta Cuchillo terminal on the
Various projects in the areas of process and industrial engineering were completed resulting in the satisfactory testing of operations in the production and emulsification plant MPE 1 at its designed capacity of 5,800,000 tons. Improvements were made in the emulsification system throught the installation of the new Intevep designed dynamic mixers (Orimixers). A new 17,300 ton storage tank was constructed increasing available reserves of diluted bitumen; a new fresh water storage tank of the same size was also built to increase reserve capacity; and a new high tension electricity link was put in to increase power supply reliability to the MPE 1 module.
Production levels had to be increased to keep up with Orimulsion sales contracts commitments as can be seen by the year end increase in production capacity of 1,046,000 tons of natural bitumen. This came through the drilling of nine new wells, the completion of an additional twenty two, the workover of another five, and the horizontal redrilling of seven existing wells.
1994 production of natural bitumen reached 1,877,000 tons and that of Orimulsion 2,589,000 tons. Available year end production of natural bitumen increased to 2,500,000 tons and that of Orimulsion to 3,600,000 tons.
During the year, the first turnaround of the emulsification plant encountered no major problems resulting in the decision to plan future turnarounds at three year intervals instead of two year intervals.
Bitor America made the first shipment of Orimulsion to the New Brunswick Power Corporation (NBP) of Canada under the long-term contract signed in 1990 to supply up to 800,000 tons per annum; the conversion of NBP’s 310 MW plant in Dalhousie to Orimulsion was completed with burning starting in September; a 20 year contract with Florida Power and Light (FPL) was signed to supply the 1580 MW Manatee plant - annual requirements will be 4,000,000 tons, and a contract was signed with Pure Air (a partnership of Air Products and Chemicals and Mitsubishi Heavy Industries) for the construction and operation of a flue gas desulphurization plant for the two 790 MW plant units at Manatee. This success with FPL and the incorporation of Citizens Lehman Power in a joint marketing effort have given added impetus to Bitor America’s business expansion...increasing interest has been shown by numerous other electricity utilities in the US, Canada, and Puerto Rico.
The European affiliate of Bitor is the London-based Bitor Energy PLC (BEC). Its main business subsidiary is Bitor Europe Ltd (BEL) which is responsible for developing, supplying, and managing Orimulsion supply contracts in Europe and
After a two-year debate over the customs classification of Orimulsion, at the beginning of last year the European Union defined Orimulsion as a natural bitumen suspended in water, thus assuring the fuel’s viability as a competitive option in the fossil fuel market.
During the year, BEL delivered 1,450,000 tons of Orimulsion to
clinker.
Two single burner trials were completed during the year: one to evaluate the performance of the low NOx burners installed in the SK Power Asnaes 700 MW unit near Kalundborg (
MC Bitor, an equal share partnership between Bitor and Mitsubishi Corporation, exported to its Japanese customers Kashima Kita Electric Power Corporation, Mitsubishi Kasei Corporation and Kansai Electricity Power company approximately 700,000 tons of Orimulsion. Kashima Kita consumed approximately 355,000 tons in 1994, Mitsubishi Kasei 215,000 tons, and Kansai 120,000 tons.
Hokkaido Electric Power company began construction of a new 350 MW capacity plant which will consume approximately 200,000 tons of Orimulsion per annum, to be burned alternately with heavy fuel oil starting in 1996.
In
In the
In Malasia, the state owned Tenaga Nasional Berhad utility is undertaking feasibility studies for the use of Orimulsion in its power plants of approximately 900 MW, either new ones or those under consideration for conversion.
Finally, research is under way by MC Bitor to promote the use of
deepwater terminals in order to improve the competitive position of
Orimulsion in the region.
Orimulsion is the opportunity for the country to develop the Orinoco Oil Belt on a grand scale, since it is the product which allows the immediate placement in international markets of those hydrocarbons which until now have had no commercial uses, except for some limited applications like asphalts and heavy lubricants, and which would never have received the investments required for their exploitation.
(Sources: Bitor 1994 Annual report, PDVSA Contact No.43, Rippet Jan-Feb. 1992) □
2/ Enfoque Petrolero
October 1997
“ORIMULSION FIGHTING SETBACKS”
Despite major setbacks in
According to Bitor President Carlos Borregales, the company will ship 2.1 million metric tons to Europe, of which 1.5 million tons will be sold to
With these sales, Bitor seems to be compensating the big losses it suffered in September when two British power stations, Pembroke and Richborough, failed to renew their contracts for Orimulsion. The contracts involved 1.5 million tons of Orimulsion per year which accounted for US$50 million in revenues.
That same month, Bitor was dealt another major blow when a
The environmental question...
Both the cancellation of the British contracts and the decision by the
Dubbed “liquid coal” by its Venezuelan makers, Orimulsion consists of unrefined bitumen mixed with 30 percent water and a small amount of surfactant to blend the two together.
The fuel is attractive to electricity generators because it is far cheaper than coal or burning oil. But it has come under harsh criticism from environmentalists who call it “the world’s filthiest fuel”. Opponents to Orimulsion say the fuel emits a fine dust which is heavily laden with heavy metals that can affect crops and even penetrate into the blood stream.
Bitor officials have admitted that Orimulsion does contain high levels of some toxic substances, but they have also said that power plants can significantly cut emissions by installing high-tech filters.
Looking at the bright side...
Other clients have downplayed the allegedly polluting effects of Orimulsion. For example, in
Kashima Kita, the first company to use Orimulsion in Japan, said it converted its plant to use the Venezuelan fuel in 1991 and so far it has shown optimum performance. Moreover, in the light of these excellent results, the company decided to build another Orimulsion-fueled plant, which will become
The Japanese government gave its go-ahead to the companys construction plans last July. On that occasion, Mitsuo Ohi, general manager of Kashima Kita, even recommended the use of Orimulsion: “In víew of Kashima Kitas plans for power supply and the successful use of the Venezuelan fuel, we expect to continue using Orimulsion and widely recommend its use” he said.
Among its plans for the future, Bitor has signed a contract with a consortium made up of China Steel, Intergen, Taiwan Synthetic Rubber and APED to supply an annual 3.4 million tons of Orimulsion by the year 2000 to fuel a power plant currently under construction in Taiwan. And according to Bitor by that year the company aims to produce 14 million tons of the fuel, rising the output to 32 million by 2006.
In a shorter term, China’s National Petroleum Corp. is expecting to sign this month a $1.2 billion deal to produce and consume 5.2 million tons per year. The agreement involves a strategic association to build one to three plants to manufacture Orimulsion in
Another potencial client for Bitor might be
3/ China Country Analysis Brief, EIA
July 2004
COAL
Coal makes up the bulk, 65%, of
the world total. The Chinese government has made major upward revisions
to coal production and consumption figures covering the last several
years. The new figures show coal consumption rising sharply in 2001-2002,
reversing the decline seen from 1997 to 2000. The decline during that
period also is much less than the previously reported data.
years, particularly in the late 1990s, and the government has begun
implementing major reforms aimed at reducing the oversupply, returning
large state-owned mines to profitability as a prelude to possible future
privatization, and reducing mine accidents. Large state-owned coal mines
had experienced buildups of unused inventories in the mid-to-late-1990s,
and many were operating at a financial loss. A large number of small,
unlicensed mines also have added to the oversupply. In 1998, the
government launched a large-scale effort to close down the small mines.
Many small coal mines were ordered closed. It has become clear, however,
through much anecdotal evidence, that not all of the “closed” mines have
actually ceased operation, and the upward revisions to the
Statistical Bureau’s production and consumption figures appear to reflect
this.
way of dealing with its surplus production, and as of 2002 it was the
world’s second-largest coal exporter.
primary markets, and
to
modest quantities of Chinese coal. Increased domestic demand for thermal
coal in 2004, however, has led to a sharp dropoff in coal exports,
reversing the price decline in the Asian coal market which had taken place
in response to the expansion of Chinese exports.
Over the longer term,
significantly. While coal’s share of overall Chinese energy consumption
is projected to fall, coal consumption will still be increasing in
absolute terms. Several projects exist for the development of coal-fired
power plants co-located with large mines, so called “coal by wire”
projects. Other technological improvements also are being undertaken,
including the first small-scale projects for coal gasification, and a coal
slurry pipeline to transport coal to the
production also is being developed, with recent American investors in this
effort including BP, ChevronTexaco, and Virgin Oil, which was awarded a
concession for exploration in Ningxia province in January 2001.
ChevronTexaco is the largest foreign investor in coalbed methane, with
activities in several provinces. Far East Energy of the
approval from Chinese authorities in April 2004 for a farmout agreement
with ConocoPhillips, under which it would undertake exploratory drilling
for coalbed methane in
West-to-East Pipeline route.
In contrast to the past,
in the coal sector, particularly in modernization of existing large-scale
mines and the development of new ones. The
Export Corporation is the primary Chinese partner for foreign investors in
the coal sector. Areas of interest in foreign invesment concentrate on new
technologies only recently introduced in
benefit, including coal liquefaction, coal bed methane production, and
slurry pipeline transportation projects. Over the longer term,
plans to aggregate the large state coal mines into seven corporations by
the end of
out of state assets. Such firms might then seek to pursue foreign capital
through international stock offerings.
would like to see liquid fuels based on coal substitute for some of its
petroleum demand for transportation. A coal liqufaction facility is under
construction by the Shenhua Group in
startup date of 2005. Despite the high costs, Chinese officials have shown
increasing interest in further research into improving coal liquefaction
technologies, in the hope that it may eventually provide an economically
viable domestic source of liquid fuels.
ELECTRICITY
As with coal,
oversupply problem in the late 1990s, due largely to demand reductions
from closures of inefficient state-owned industrial units, which were
major consumers of electricity. The Chinese government responded to the
short-term oversupply in part by implementing a drive to close down small
thermal power plants and by imposing a moratorium (with a few exceptions)
on approval of new power plant construction, which ran through January 1,
2002. Until recently, the backlog of projects approved in the mid-1990s
had kept pace with demand increases. In 2003, however, the Chinese
government has approved 30 major new electric power projects, with a total
of around 22 gigawatts (GW) of capacity. With the surge in economic growth
in 2003 came a surge in electirc power demand, which has outpaced previous
demand forecasts, leading to a shortage of generating capacity and even
load-shedding in some areas. A shortage of rainfall in some areas in 2003
and early 2004 has worsened this problem.
The largest project under construction, by far, is the Three Gorges Dam,
which, when fully completed in 2009, will include 26 separate 700-MW
generators, for a total of 18.2 GW. Plans were announced in March 2002 to
reorganize the Three Gorges project into the China Yangtze Three Gorges
Electric Power Corporation. The reservoir created by the dam began to
fill in June 2003, and it began operating its initial turbines in July
2003.
Another large hydropower project involves a series of dams on the upper
portion of the
joined to create the Yellow River Hydroelectric Development Corporation,
with plans for the eventual construction of 25 generating stations with a
combined installed capacity of 15.8 GW.
Many of the major developments taking place in the Chinese electricity
sector recently involve nuclear power.
for nuclear power generation increased from 2.1 GW at the beginning of of
2002 to 8.7 GW as of June 2004. The first generation unit of the Lingao
nuclear power plant in
May 2002, with a capacity of 1-GW. The second 1-GW generating unit began
operating in January 2003. An additional 600-MW generating unit at the
Qinshan nuclear power plant in
February 2002, and another 600-MW unit at the same site came online in
December
Yangjiang in
second generating facility also is planned for
A major issue for
generation among power plants.
create a unified national power grid, and to have a modern power market in
which plants sell power to the grid at market-determined rates. In the
short term, though, traditional arrangements still hold sway, and
state-owned power plants which have government connections tend to have a
higher priority than independent private plants. Additionally, some
private plants with “take-or-pay” contracts, which provide for guaranteed
minimum sales amounts, have had trouble getting the provincial authorities
running the local grids to honor those terms. In the short term, the
strong growth in electricity demand in 2003-2004 has lessened this
problem.
Growth in Chinese electricity consumption is projected at an average of
4.3% per year through 2025. The largest future growth in terms of fuel
share in the future is expected to be natural gas, due largely to
environmental concerns in
provinces, though the largest increase in absolute terms is likely to be
coal. If a truly competitive market for electric power develops as
planned, the Chinese market may once again become attractive to foreign
investment. At present, foreign direct investment is allowed only in power
generation, but loan financing has been obtained for some power
transmission projects.
The Chinese government is in the early stages of formulating a fundamental
long-term restructuring of their electric power sector, embodies in the
National Power Industry Framework Reform Plan promulgated by the State
Council in April 2002. As with many other countries reform programs,
generating assets are being largely separated from transmission and
distribution. The State Power Corporation (SPC) divested most of its
generating assets and was split into 11 regional transmission and
distribution companies in December 2002. Electricity prices will still be
regulated, but there are likely to be major changes in tarriffs and the
overall regulatory structure for electricity pricing. The process is at an
early stage, and many of the details remain to be worked out. A new
electricity law, superseding the one established in 1995, is expected to
be probulgated within the next year.
URL: http://www.eia.doe.gov/emeu/cabs/china.html
4/
| ||||||
Year | 1999 | 2000 | 2001 | 2002 | 2003 | Share of World Total 2003 % |
Volume | 770.3 | 766.0 | 837.9 | 1035.7 | 1178.3 | 12.1 |
Source: BP Statistical Review 2004 |
5/ ORIMULSION HELPS CUT COSTS AT POWERSERAYA (June 7, 2005) :
MD POWERSERAYA says its alternative fuel, Orimulsion, puts it in
a position to withstand pricing and supply shocks, which will
become more important as the prices of traditional fossil
fuels remain high and volatile.
‘Fuel is about 70 per cent of our cost structure, so having
alternatives helps us mitigate the risk of fuel supply
disruption,’ said PowerSeraya MD Neil McGregor. ‘It also helps
us move away from reliance on natural gas and conventional
oil.’
Orimulsion is a fuel that is 70 per cent bitumen suspended in
30 per cent water, allowing the bitumen to be stored and
transported like conventional liquid fuels. Orimulsion is
produced by
40 million tonnes of the fuel since 1987.
PowerSeraya has upgraded its three units of 250MW steam plants
and invested more than $100 million in emission control
equipment which reduces the emissions of pollutants such as
sulphur dioxide by 95 per cent and particulate matter by 97
per cent.
The company said the Orimulsion generation unit helps reduces
overall emissions in the power-generation operation by half.
It hopes to have three units of 250MW steam plants operated by
Orimulsion by year-end, adding to its current capacity of six
units of 250MW steam plants which run on conventional fuel oil
and two units of 370MW combined cycle plants which run on
natural gas. ‘Orimulsion as an alternative can produce
electricity at the same price as the current cheapest way,’ Mr
McGregor said.
‘SerayaPower has three alternatives and our competitors do not
have Orimulsion. So we can reduce our costs by hedging supply
and price risks, and pass that on to our customers.’
(Source: Business Times, 12 April 2005)
6/
June 2004
ORIMULSION
Orimulsion® is a branded product that is used as a boiler fuel. It is a
mixture of approximately 70% natural bitumen, 30% water, and less than 1%
surfactants (emulsifiers). Bitumen is considered a non-oil hydrocarbon and
is not counted towards
(Bitumenes del Orinoco), a subsidiary of PdVSA, manages the processing,
shipping and marketing of Orimulsion. Bitor operates one Orimulsion plant
in Cerro Negro, with a capacity of 5.2 million metric tons per year.
According to Bitor, economically recoverable reserves are estimated at
about 267 billion barrels.
The future of Orimulsion production, however, is unclear. In September
2003, PdVSA announced that it was dissolving Bitor into PdVSA’s eastern
operating division and not expanding production of Orimulsion. The reason
behind PdVSA’s decision was reportedly based on economics, namely, the
company decided that it could make larger profits by selling fuel oil than
Orimulsion. PdVSA also announced that it intended to fulfill long-term
contracts which Bitor had with utilities in
and
contracts under negotiation. PdVSA’s shift in policy has not been without
controversy, notably a botched deal with New Brunswick Power in
Power thought it had a deal with PdVSA to supply Orimulsion to its Coleson
Cove power plant, which had been reconfigured to burn the low-cost fuel,
but PdVSA officials said they never signed the fuel-supply contract with
NB Power.
Sinovensa
In December 2001, China National Petroleum Corporation (40%) (CNPC),
PetroChina Fuel Oil Company, a subsidiary of CNPC (30%), and PdVSA,
through Bitor, (30%) created
partners invested $330 million to develop blocks to produce 6.5 million
metric tons annually of Orimulsion by the end of 2004. Construction of
Sinovensa project reportedly began in April 2004, with Inelectra as its
general contractor. On November 26, 2003, CNPC began constructing
first Orimulsion-fired power plant located in
ELECTRICITY
In 2003,
shortfalls. The immediate reasons for this included reduced hydropower
capacity and electricity theft. Low rainfall had diminished levels in
reservoirs, reducing
example, low water levels reportedly had resulted in six significant power
failures. Rampant electricity theft had also compromised the country’s
supply, with illegal hookups accounting for an estimated quarter of
likely avoid power shortfalls with higher reservoir levels at the Guri
hydroelectric dam and new generation units coming onstream, namely the
Caruachi hydroelectric dam. EDC also plans to begin construction of the
200-MW
URL: http://www.eia.doe.gov/emeu/cabs/venez.html
7/
Electricity generation in | ||
| 2002 | 2020 Planned |
Thermal | 37% | 59% |
Hydro | 63% | 41% |
Source: |
8/
Venezuelan social hunger needs extra income
President Chávez is well known for his extreme interest for the poor majority of the Venezuelan population and has repeatedly shown his desire to eradicate the serious problems affecting them in the shortest possible time. However, to do this does not only need cash – it needs energy.
At the moment the country burns 200,000 b/d of oil equivalent in its power generation stations. Why can the government not export these barrels, substituting them in the Venezuelan power plants with Orimulsion, thus reaping large and important foreign exchange income?
If Orimulsion is good enough for the Chinese to produce electricity for their population’s needs why is it being neglected for power generation in
In fact, Orimulsion could just as well serve towards energy integration in the “greater Bolivarian community of countries” and later towards the energy integration of South America and the
Several technocrats and scientists have been in contact with PetroAnalysis. The persons in question are pro-Chavist and consider Orimulsion to be a Venezuelan creation, and they coincide in the following: they can not find any justification for the country to share its Orimulsion patent with any other nation or company. One of them even expressed his frustration in by saying: “When the Chinese invented gunpowder, would they have accepted sharing this strategic knowledge with anyone else?”
A source close to the official position of the Venezuelan government said on this question: “This is part of the country’s new strategy of diversifying its markets and diminishing its dependence on just one market: the
“Communist”
With this being said, it is difficult to see any difference between the present situation and the pre-Chávez oil policy that was characterized by the expanding volumes of crude and labelled the “rentist” model.
The present Orimulsion deal indicates that the State is happy with being a tax collector of a 16 2/3 % royalty, accepting that the sacrifice of the loss of a valuable patent that has allowed the conversion of very low grade oil into a “fungible” product suitable for power generation.
Will all the other countries that are waiting for ratification of their Orimulsion supplies be treated the same way as
Director, PetroAnalysis Centre For Oil Studies
PetroAnalysis
Volume 4, 7th June 2005.
SPECIAL DOCUMENT
Orimulsion is a Venezuelan patent, and those people who argue against the use of the fuel anywhere but in
However, as may be appreciated from the following extract, the argument that “Imperialism”, in other words the International Energy Agency, was behind PDVSA’s launching of Orimulsion with the intention of increasing the supply side and thus weakening prices further during the early 1990s does not match reality. It can be clearly seen that it was the same “Anglo-Saxon Imperialism” in the
That same month, Bitor was dealt another major blow when a
Orimulsion vetoed in Venezuela …
At the moment the country burns 200,000 b/d of oil equivalent in its power generation stations. Why can the government not export these barrels, substituting them in the Venezuelan power plants with Orimulsion, thus reaping large and important foreign exchange income?
Energy Generated and Consumption of Fuels, 2001-2002 | |
Thermal | 27,077 GWh |
Of which: | |
HFO | 6,093 GWh (28.5 x 10³ b/d) |
Gasoil Diesel | 3,153 GWh (22.96 x 10³ b/d) |
Gas | 17,831 GWH (577.94 MMGCF/d) |
Hydro | 60,442 GWh |
TOTAL | 4.56 x 106 BOE/month |
Electricity generation in | ||
| 2002 | 2020 |
Thermal | 37% | 59% |
Hydro | 63% | 41% |
If Orimulsion is good enough for the Chinese to produce electricity for their population’s needs why is it being neglected for power generation in
A source close to the official position of the Venezuelan government said on this question: “This is part of the country’s new strategy of diversifying its markets and diminishing its dependence on just one market: the
Will all the other countries -
“Communist”
| ||||||
Year | 1999 | 2000 | 2001 | 2002 | 2003 | Share of World Total 2003 % |
Volume | 770.3 | 766.0 | 837.9 | 1035.7 | 1178.3 | 12.1 |
Source: BP Statistical Review 2004.
The present Orimulsion deal, if ratified by President Chávez, would indicate that the State is happy with being a “tax collector” of a 16 2/3 % royalty, accepting the sacrifice of the loss of a valuable patent that has allowed the conversion of very low grade oil into a “fungible” product suitable for power generation.□
Mazhar Al-Shereidah
Director, PetroAnalysis Centre For Oil Studies
A finales de 1998
'Keeping out of the way of the hall is the national sport... nobody wants to catch it'. So reads a TV commercial that ends by saying:
'Take on your responsibility". Unintentionally, the creators of this commercial have summarized the ideological and intellectual platform prescribes by the detractors of the theory of the
State undergoes serious surgery
For such purposes, the activists of the affluent sector of society - 4% of the population - based on the theoretical knowledge provided by a group of scholars who believe ¡t is immoral and inappropriate to keep on allowing an "inefficieiit, corrupt and greedy" State to take over resources which will be eventually squandered. So, they recommended downsizing the civil service, privatizing the public sector and restricting the States' functions to education, health and security. In short, they proposed and partially achieved to impose a model inspired in Adam Smith in a country like
lt was not the mercy of the "medical team" (made up by the government staff and congressmen of both houses who acted as diagnosing physicians, lab analysts, surgeons, anesthesiologists, and nurses) that was the reason why everything was not mutiláted. The fact was that they simply did not find stretcher-bearers willing to take the nearly dead Treasury to the intensiva care unit. The outcome of such PDVSA-led surgery is similar to a billboard in which a monkey in a black tie utters the motto of the company: "We earn little but we sell a lot". The PDVSA-Governmentlawmakers alliance that voted for dramatically reducing the contribütion to the treasury by the oil industry seems not to have considered the effects of its "süccess" in a very low price scenario. What will the State's capacity to respond be? And, will the system be able to survive?
Within the framework of an affluent and peaceful context, there would be various choices. But that is not the case under the present circumstances of poverty and emergencias. Now, with such low prices, the Government can not see the light at the end of the tunnel despite the short time in which power has to be transferred to the new government. And the congressmen who were the champion lobbyists of the oil industry in the recent past are making desperate efforts to achieve a successful result for their respective parties or to get a slice of the cake of power for their individual projects. The moss does not let voters see who is taking on the responsibility vis-á-vis the country.
Rest in peace?
Covered behind the armor provided by the actual Government-Congress, PDVSA sails safely on board of the only lifeboat left for the country. lt recognizes that we are going through a storm, but that is not its problem but the Republic's! PDVSA is in charge of a profitable business. "Clients are desperately knocking at our doors with orders at hand", says the chairman of the State-owned holding. It is "low price season", there are many purchasers in integrated and profitable systems. But the treasury does not receive a penny from such business. lt is the case of a patient who is about to receive the extreme unetion, whose children abroad own the laboratorios manufacturing and distributing the necessary medicines, and who make juicy profits to moderniza their labs and purchase new ones.
Old men die and tradicional congressional alliances do not work anymore. Nevertheless, over twenty million Venezuelans, young people most of them, need education, health and security, even in the Adam Smith fashion. Only a State with a healthy Treasury can meet this need.
---The Republic has becorne a shipwreck. In the meantime, the PDVSA chairman speaks about "reasonable economies" for his corporation, placing them over and above the country.
Who takes responsibility?
The World economy is on the brink of a recession, according to the OECD, and the oil supply surplus continuas.
Venezuelan Finance Minister,
Maritza Izaguirre, refers to a 1999 budget based on an 'export volume which slightly surpasses three million b / d'.
To such a figure is to be added some 350,000 b / d for domestic consumption, so totalling 3.4 million b /d. This was the production figure used in February to come to an accord on the cuts that, in the Venezuelan case, represent 525,000 b /d. This means that we must be producing 2.875 million b / d and exporting 2.525 million b / d, and such should be the figures aplicable for 1999.
Now, ¡t is understandable why prices do not rise as expected? Does anyone want to catch the ball? There is an umpire in OPEC, but we will have the toughest umpire on December 6. E
December 1996
What can we say about what is happening at home, behind our own doors?
The struggle today in
Towards Sustained Growth...
What will oil’s role be? Without doubt it will play a fundamental role. Oil will exert its influence through sustained growth, but not according to the traditional model: it will not simply be that oil exports increase, but it will be together with both the overall growth in the economy necessary to improve our external accounts and give them permanent stability, and with the design of essential policies so that we can multiply the benefits of oil within our borders.
You know, at the age of seventy-two, I’m old enough to remember what it was like in the late ‘thirties when we neglected our responsibilities to our friends, when we pulled back into selfish isolation... the results, I think, was our contribution to a world war. It took millions of lives and inflicted untold devastation and the cost we paid to learn that lesson should never be forgotten, and at aged seventy-two I haven’t forgotten it.
Third is demography...by 2025 every major industrial democracy in the world will have a majority of people over the age of 65. We are going to have the first human society on the face of the Earth dominated by the elderly. This is almost impossible to exaggerate, it is going to change sociology, psychology, government and business in some very profound ways.
Entrevista a “Ronald Pantín, Vice-president of Corpoven”
Ronald Pantín, Vice-president of Corpoven, builds up a very positive picture for the country with oil-led economic growth at 3% to 4% a year for the next ten years.
In your opinion, what have Corpoven’s major achievements been in recent years?
- Corpoven has a very impressive history. I always like to compare Corpoven with the story of the ugly duckling because when we had the nationalization there were two main companies here in
In the oil industry we say if you want to send a man to the moon you send a Maraven man because they are risk takers, but if you want to come back you need a Lagoven man because they are very reliable, and if you want to plan it well and do it efficiently you call in a Corpoven man. This short story more or less tells you where the main emphases are of the different PDVSA subsidiary companies.
And what about gas?
- Corpoven is the major gas company in
Would you outline the role your company will be playing in PDVSA’s business plans over the next ten years or so?
- In ten years’ time Corpoven is going to become the number one subsidiary company of Petróleos de Venezuela in terms of volume. We are also opening our business a great deal - we have now various deals with marginal fields, for profit sharing and also using the CRINE initiative for developing emerging areas with the private sector...what happens with this initiative is that costs are reduced as a result of treating the contractors as partners. We are also working in the natural gas business and also with the private sector developing the Puerta
In terms of the “opening”, from your point of view why are the companies coming to
- Well, the companies are coming to
Everybody must know quite a lot of what is in the ground in
- Well, in some respects
What do you expect the multiplier effect of the opening will be on the economy as a whole?
- Probably not too many people understand the real reason for the opening of the oil sector - the idea is to change the relation between oil and society. Until now
What is impressive is that we started working on this four years ago, when Dr. Luis Giusti was the coordinator of strategic planning in PDVSA, and now all of PDVSA’s businesses have private participation - exploration, production under risk contracts and operational contracts, Orimulsion, petrochemicals, coal, refining and gas. And the other thing that we are also doing is to give to the private sector the outsourcing of non-core activities, for example the information systems where we have already selected the company - SAIC. We are also in the process of outsourcing all the telecommunications of the company; plus gas compression that we have been doing for years, as I have already mentioned pipelines: gas- and oil- lines; ports, all that we consider non-core activities will be given to the private sector.
What about the non-oil sector, what is going to happen there?
- The world is now in a global economy and every country has to find their competitive advantages. In
The model is that we should have some superhighways like oil, energy, electricity and some sideroads that go into those highways for the development of the economy. The oil sector in
Furthermore, the balance of payments of the oil industry in ten years’time will have a surplus of around US$ 190 billion - this is enough to pay all the Venezuelan foreign debt and to pay all the imbalance that the non-oil sector has. This leaves around US$ 140 billion, so you can still keep US$ 20 billion for reserves and you will have US$ 120 billion for developing the non-oil sector.
So the development of the non-oil sector would not be on a particularly high-tech basis?
- No, I would not say that. You have these highways, mainstreams, where you link the Venezuelan economy to the rest of the world, and there you will need some core activities to support the mainstream. This concept has been proven to be right in some other countries in
Why are people wanting to privatize PDVSA?
- I do not see any reason to privatize PDVSA now. What we are doing is privatizing the Venezuelan oil sector. We had a state monopololy and now we have some private companies and PDVSA - this is the best one can have. A strong state oil company where you can have some benchmarking with all the international companies, not only benchmarking on prices, on how the business is done and on taxes, but also on the competitiveness of our operations. So I consider that the best situation we could have is this mixed form where there is the private sector and us competing in the same business.
The
- Yes. We have been competing very successfully with the majors outside Venezuela - in the US through Citgo, in Europe through Veba and Ninas - and we have proven to ourselves that we can compete successfully outside Venezuela...so why not in Venezuela where we have more competitive advantages?
As a strategic planning professional, what are the most important comments that you can make regarding the short- to medium-term future of both Corpoven and PDVSA?
- I would say that the most important thing is what is happening with the economy. Remember that when we in Petróleos de Venezuela plan we are not planning solely for the corporation - we are also planning a very important part of the development plan of the nation, because of the importance of PDVSA in the rest of the economy. Now we see the future with a lot of optimism - economic problems are being solved, although some structural changes still need to be made in government, the judiciary and educational systems. But now we will have the economic base to do that. What we expect is that in the future we have again an oil boom but we hope that this time the leaders of the Venezuelan people understand the mistakes of the past and use the income for the development of the country.
And a final comment?
- I am very optimistic about the country. The government and the Congress have been giving a lot of support to PDVSA’s plans; and we have been helping the government with the Agenda Venezuela. The opening - now a reality - will be bringing a lot of foreign investments into the country this coming year, in the oil sector alone we expect US$ 1 billion. All this is very impressive.
Two years ago nobody wanted to do anything with
Curriculum vitae - Ronald Pantín Carvallo
Petroleum engineer, graduate of the
He joined Maraven in
In 1987 he becomes Operations Manager of the Production operations Division, and in 1989 was transferred to the Main Office as Manager of Corporate Planning for Maraven.
In October 1990 he was transferred to PDVSA’s Strategic Planning Coordination as Functional Planning Manager. In 1994 he was named Advisor to the President, and in November of the same year Strategic Planning Coordinator - occupied until he was designated Vice-President of Corpoven effective on the 15th. April, 1996.
Source: Corpoven and an exclusive interview by Stuart Wilkinson
Enfoque Petrolero
September 1996
“BP AND PDVSA: A PARTNERSHIP OF MUTUAL ADVANTAGE AND FOR THE LONG TERM”
“We are the only oil company to have participated in all three of the rounds - we participated in the first round through Pedernales, in the second round through Quiriquire, and most recently in the exploration round through Guarapiche. So we have been very consistent in our approach”.
Anthony B. Hayward, President of BP Exploración de Venezuela, explains more...
Q- British Petroleum was one of the first oil companies established in the world. Could you give a brief outline of your global operations, with specific reference to
A- As you know BP is an integrated oil major - number three in the world, or four depending on how BP and Mobil play off against each other. Mobil and BP are at the top of the second division given that Exxon and Shell are very definitely in the first division.
Today BP is a company dominated very much by US and
We have refining capacity of one point eight million barrels per day and we are in the process of rationalizing that quite significantly - refining is a tough business to be in at the moment. Most of our refining capacity is in Europe or
We operate in around one hundred and thirty countries around the world. In terms of Latin America we have a major presence in Colombia where we have enjoyed a string of significant discoveries for the last four or five years, and are currently producing one hundred and eighty thousand gross barrels per day - this will rise to five hundred thousand gross barrels a day by the end of 1997. And we have a growing presence in
Our activity in Latin America is at the moment focused upstream, we do not have any refining or downstream marketing activity, but we are looking very hard at developing the gas business in
I would like to add something about BP globally: the company’s financial performance is regarded as being the best in the industry - we have a return on capital employed of close to 19% which is the best of our major competitors and we have just announced a record first half
Q- Just a quick question, why did BP rationalise with Mobil?
A- Downstream in Europe... well, when we actually looked at the European market and refining we were either number three or number four everywhere - where we were number three, Mobil were number four; and where we were number four, Mobil were number three, and Exxon and Shell were always one and two. Our view is that one of the keys to retailing success is market share, so in terms of retailing, by combining forces we will have typically twenty-five to thirty percent market share in a position to be able to compete with Exxon or Shell. The refining business in
Q- Now that BP is in
A- Let me start by giving you a thumbnail sketch of BP’s history in
Subsequently we are the only oil company to have participated in all three of the rounds - we participated in the first round through Pedernales, in the second round through Quiriquire, and most recently in the exploration round through Guarapiche. So we have been very consistent in our approach. When we first looked at
Geologically there are many similarities with the area we are operating in
Q- Are they very deep wells out there?
A- No, they’re not very deep - six or seven thousand feet in Pedernales. In eastern Venezuela there are two sorts of plays of interest; one is a Pliocene play which is the Pedernales play and is shallow; and the other one is the extension of the El Furrial trend which is much deeper - eighteen to twenty thousand feet.
So in terms of what we are doing at the moment in
Q- BP will have to contract some engineering services locally. What is your impression of the quality and abilities of the Venezuelan companies that you have seen? As domestic companies, their costs should be more competitive than a company brought in from abroad - is this an important consideration in your choice of contractor?
A- I would say yes we will and yes we are. We have four Pedernales phase two projects which we are currently engineering. We have set up an alliance between Jantessa - a Venezuelan engineering company - and CBS Engineering of Houston, who are doing all of the engineering for our phase two projects on Pedernales. And we will establish an alliance for fabrication which will again be a Venezuelan-US combine, and we will be using a Venezuelan company for installation.
Quality and abilities are very mixed - some of them are very good and some are not so good, but there is certainly plenty of quality and we think that the process of developing relationships between Venezuelan and US-based companies is a very good way of ensuring that we get the best of both - we get the best of the Venezuelan experience and the culture and all the knowledge that Venezuela has about operating in Venezuela, and from the US side the very best technology - in certain cases it may be no different to the technology in Venezuela but in other cases it will be different. Together, we can make sure that we have got the best of both worlds. We think it’s a powerful way to go.
Q- From BP’s point of view, will the new economic policies that are being undertaken in
A- Clearly economic stability and knowing what the economic environment that you are going to be operating in is very important when you are planning something for the long-term - and we are definitely here for the long-term, the Guarapiche contract is for 39 years. So I think that the Agenda Venezuela is great news, and I am very encouraged by the progress made to date. There are very big challenges still to come, challenges that everyone recognises and is working to fix. The progress made in the first three months of the programme is very good and it will be important that momentum continues. And it will be of great benefit to us to plan on a stable economy over the longer term.
In terms of PDVSA, well for me it is the most professional state oil company I have ever worked with (and I have worked with a lot). They have managed the opening in a very transparent way, and have been sensitive to all political opinions, both positive and negative, it would have been difficult to have done it any better. And I have great personal admiration for Giusti who I think has managed the whole process in a remarkable fashion. They are a delight to do business with - and I mean it - when we sit down with PDVSA at the table it’s like sitting down with Shell or Exxon, no different - and its not often you can say that about a state oil company. For my money they are the best state oil company I’ve come across. Everything they do is professional, all the details are worked through, nothing is left to chance, everything is planned, programmed, you know where you are, and when they say something they deliver it, they have a track record of doing what they say they’re going to do. It’s a comforting place to be when you’re doing business with them because when one of them says to me something I know that they’ll deliver it.
Q- What is the most important comment that you can make regarding BP’s new relationship with
A- I’d summarise it in one sentence - it’s a relationship based on mutual advantage and for the long term. And that summarises how we see our partnership with
Note:
“Our
Phase 1 production built up rapidly and sucessfully to nearly 200,000 barrels per day. Phase 2 to develop Cupiagua is well under way to bring in another 300,000 barrels per day. We are also working on our plans for a further phase develpopment for the new discoveries.
BP operates this huge development for our partners and our overall share of production will will rise from an initial 125 towards 25% as production comes in from the later discoveries.
Costs in Phases 1 and 2 are fully in line with our global averages for the new developments. Phase
Source: Exclusive interview by Stuart Wilkinson
Enfoque Petrolero
June 1996
“DEBATE ON THE OIL OPENING GOES ON, AND ON...”
Congressional approval has yet to be given to the results of the 1995 Bidding Round. Until this happens the companies and consortia involved in the reactivation of the marginal fields will remain in a state of limbo - they are here but are unable to say that they will definitely be here in the future and so, understandably, a number of them are keeping a low profile avoiding commenting on their specific plans here. This uncertainty will not last much longer since a decision from Congress is expected sometime in July. Rationality and objectivity would lead us to expect Congress to give the green light, but the firms in question do not want to jump the gun.
A recent headline in one of the main national dailies said “The majority of sectors oppose the sale of PDVSA” - perhaps one should ask whether political parties should be read for sectors, and also whether a constant political line should be adhered to when conditions have changed or are changing.
The debate on the opening seems of fallen into black and white terms - when Luis Giusti, the PDVSA president, suggested putting 15% of the company’s shares in the capital market, Erwin Arrieta the Minister of Energy and Mines pounced down hard saying crude deposits were not to be sold, lent or given away. Former Head-of-State Carlos Andrés Pérez and now former member of Acción Democrática, considered that the “privatization” of PDVSA is absurd, adding that in developing countries basic industries should be in the hands of the State. Pedro París Montesinos, a leading member of AD, categorically stated that the country was in real danger from the foreign financial sectors behind the cries for privatization, and criticized heavily political opponents from mainly the Social Christian party COPEI who, he said along with other “decrepit” people, had never accepted the nationalization of the hydrocarbons industry. And Teodoro Petkoff, Planning Minister, considered that the state should not renounce its control over “its main instrument of economic and fiscal policy”.
A very clear point of view comes from oil-expert Alberto Quirós Corradi who stated recently in the conclusion to one of his widely-read articles:-
- The “Petro-State” has to be dismounted and the nature of the relationship between the State, society and petroleum changed.
- It must be clearly established that the country’s natural recources including petroleum are the property of the Venezuelan population and not the State.
- Whatever the operating system used for the exploitation of the country’s petroleum deposits, one can not talk of “de-nationalization” of the petroleum industry if the transfer to private hands of those deposits is not being considered.
- The nationalization of the petroleum industry in
This argument seems to indicate that the analyst would consider that share ownership by the general public in PDVSA would be more in the spirit of nationalization than the state being the sole shareholder. The argument also may well fit into a greater context - that of defining a petroleum policy alternative to the one that exists and is entrenched within the philosophy and principles of the Acción Democrática party. Looking at reality, petroleum policy has been defined by AD over many years and other political parties have not yet produced sufficiently powerful alternatives. Now that changes are coming on an international level - Russia and the petroleum company Yukos, for example - and now that it seems to be becoming accepted that changes must occur in Venezuela, there is an important debate going on here with respect not only to the opening of PDVSA to private investment but also with respect to the privatization of the so-called “strategic industries” i.e. heavy industry, telecommunications. So Quirós’ differentiation between “statified” and “nationalized”, and what “nationalized” implies is an important intellectual and political point in the debate here.
Also, what a Nobel Prize winner recommends surely can not totally be ignored - Douglas North, former advisor to the Caldera government, considered that in the medium and long term PDVSA should convert itself into an energy holding company of international proportions, dedicating itself to the hydrocarbons business but also to other energy-related areas, as well as opening the industry to foreign participants in order to establish comparative efficiency parameters in the areas of exploration, exploitation and domestic marketing.
Closer to home, the well-respected economist Emeterio Gómez commented the following regarding the privatization of PDVSA: the mere announcement, whether formal or informal, from PDVSA that it was going to privatize even only twenty or twenty-five percent would be profoundly significant and would provoke very positive reactions in the international economic community. And specifically he added - “Now at these hights of the twentieth century, nobody in
January, 1989
“
Extract from the speech “Mutual Concerns; Mutual Interest:
As a principal supplier of petroleum and petroleum products to the
Perhaps the most significant, and successful, development to date has been our national oil industry's ability to fortify its resource base. In recent years we have engaged in an intensive domestic exploration program that has been very successful, indeed beyond our initial expectations. During the last decade, our proved reserves of conventional crude oil have increased over threefold to more than 58 billion barrels. In comparative terms,
Particularly noteworthy is the fact that we have recently made the most important discovery of light and medium crudes in the last thirty years. Initial results indicate the existence of giant accumulations of petroleum in the northeastern part of the country which could ultimately rival
Nevertheless, the magnitude of
In addition to the enormous resources of the Orinoco Belt and our greatly enhanced reserves of short-haul conventional crudes, my company has pursued a "flexible response" policy in determining production capacity. Specifically, we maintain a margin of security in the form of idle production capacity which can be quickly utilized to help offset unforeseen international shortages in the oil market.
Our approach to downstream investments, like all of our policies, is fundamentally designed to enhance stability in the oil market. We believe that operational continuity is an important element for this stability. For that reason, we have entered into the downstream sector in association with highly reputable companies that have an established presence in the market.
As you may know, we have made significant investments in the refineries and distribution systems of two companies in the
These joint ventures, although different in refining capacity as well as in marketing reach, provide our national oil industry with dependable markets in
These business operations reflect my company's willingness and desire to link itself to its natural markets in the Atlantic basin through commercial relationships with stable companies. These relationships provide common ground for long-term cooperation between our two countries.
Certainly, it is in the best interests for both nations to foster this cooperation.
To conclude, let me say that at Petróleos de Venezuela, we believe that our nations’ complementary needs can become a source of mutual cooperation in Hemispheric energy affairs: secure supplies for the
21st March, 2002
The Promotion of “Useless Effort”
Mazhar Al-Shereidah
The New York Times editorial of the 18-02-02 arrives at a moral: “it doesn’t matter how many holes are drilled in American territory, we will simply not be able to drill our way to energy independence”.
Competitive costs of production are determinant for the feasibility of projects with strategic importance. This rule has greater validity in the case of countries that do not use force as a resource of power.
On 14-03-91, an oil expert wrote an article in El Universal (
Eleven years have passed since then. Again there is war in Central Asia and perspectives of war in Southwest Asia (the
In 1991 the OPEC oil basket had an average price of $18.62/b, which in constant 1960 dollars represented $3.08/b. At this moment the OPEC basket stands at $3.24/b in real terms and in current dollars is $18.60/b.
We can verify the great similarity of the conjuncture during which the above quoted article was written with the present situation. The values are almost identical. In 1991
In comparison, our quota is now 2,480 million b/d and production capacity is around 3 million b/d. This means that a high level of spending must be destined to the maintenance of something over half a million b/d of shut-in capacity, so inflating PDVSA’s costs and decreasing fiscal income.
The Venezuelan newspaper El Nacional (17-02-02, Section E-8) published an article the author of which proposed that The country should leave OPEC and raise oil production to 8 million b/d.
Looking at the situation, to produce 3 million b/d
The alternative of producing at capacity was the supposed unfitness, which led the author of the article in 1991 to give the sentence “There is nothing more unproductive than useless effort”. To increase production now would be to repeat the painful experience of 1997-98 that ended in Venezuelan crude prices at around $5/b. Against this, the cited expert pronounced in 1991 “(...) the large oil complexes and developments in which we once invested without good judgement are historic or touristic curiosities”.
It is difficult to conceive that the current proponent of the aim to produce 8 million b/d is the same oil executive that emitted the alert against “useless effort” in 1991, since both strategies correspond to Dr. Alberto Quirós Corradi.ÿ
PetroAnalysis, May 1991
“Bush and CAP: A new chapter in the same old story?”
President Bush telephoned Venezuelan Head-of-State Carlos Andrés Pérez again to see if they could meet during CAP's private visit In May to the