“A criminal regime that transformed PDVSA from one of the companies with the best industrial safety indices into one of the most dangerous in the world, now pretends to blame the workers for this new spill,” wrote Machado in an official Twitter post. “It’s monstrous. My support for oil workers. Resist!,” she added.
(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Foreign Direct Investment (FDI) in Latin America and the Caribbean fell for a third straight year in 2017, reported the Economic Commission for Latin America and the Caribbean or CEPAL by its Spanish acronym.
(OilPrice.com, Nick Cunningham, 12.Jul.2018) – Venezuela’s oil production plunged by another 47,500 barrels per day (bpd) in June, compared to a month earlier. An exodus of workers and field shut downs were reported for the month, pointing to a grim near-term future that could see total production dip below 1 million barrels per day (mb/d) by the end of the year.
According to OPEC’s secondary sources, Venezuela’s output fell to 1.34 mb/d in June, which, aside from a brief interruption of output due to a strike in 2002-2003, puts production at its lowest point in nearly seven decades.
The problems plaguing Venezuela’s oil industry are well-publicized, but the situation continued to deteriorate in June. Two officials from state-owned PDVSA told Argus that workers are fleeing operations. “More production wells are being shut down, the skilled oilfield labor force declined in all upstream divisions by at least a combined 1,000 workers in June, and scheduled maintenance continues to be postponed,” a PDVSA official from the western division said.
A separate official from the eastern division told Argus that production continued to fall in the first 11 days of July as more rigs were scrapped and more wells were shut down. PDVSA is “dying operationally,” the official said.
You wouldn’t know that if you went by government statistics, however. While OPEC’s secondary sources estimated average output at 1.34 mb/d in June, the Venezuelan government reported production figures at 1.531 mb/d, flat from May levels. Those figures defy belief and are not credible, but PDVSA’s leader, Manuel Quevedo, is “cooking the official data sent to OPEC to hide the truth about [PDVSA] from president Maduro and from the public,” an official from the energy ministry told Argus.
Venezuela’s production is now down nearly 800,000 bpd from a year ago, and falling.
“Output from Venezuela’s ageing conventional oil fields is in rapid decline and upgraders operated by foreign joint-venture partners in the vast Orinoco heavy oil belt are malfunctioning and running below capacity,” the IEA said in its latest Oil Market Report. “At the end of June, PDVSA and Chevron restarted the 210 kb/d Petropiar upgrader after almost a month-long closure.”
“In total, upgrading projects in Venezuela can turn roughly 600 kb/d to 700 kb/d of extra-heavy Orinoco crude into export grades. Recently they have been largely out of action due to bottlenecks at loading facilities.”
China has decided to invest $250 million to help slow the decline underway in Venezuela, but it isn’t at all clear that that amount of money will have a significant impact. After all, China has poured $50 billion in loans into Venezuela over the past decade, and the trajectory of Venezuelan oil production has only gone in one direction.
There is also the possibility that the June figures might look a bit better than should be the case because PDVSA drained inventories. Reuters reports that Venezuela’s crude exports to the U.S. recovered a bit in June, compared to May, but that PDVSA drew down on stocks in Curacao and Aruba ahead of ConocoPhillips’ seizure of the facilities. As Conoco presses its case against PDVSA, Venezuela has largely lost control of its facilities on those Caribbean islands.
There is no shortage of reasons to believe the situation will continue on a downward spiral. Oil wells are being shut down and the worker exodus will put an even deeper strain on operations. More than $9 billion in bond payments fall due this year, and it is hard to imagine the government and PDVSA marshalling the resources to meet those payments. Inflation is set to top some 13,000 percent this year, a mind-boggling figure, while GDP could shrink by a further 15 percent. By the end of the year, GDP will have contracted by nearly 50 percent since 2013.
The lack of payment to PDVSA’s joint venture partners threatens to accelerate production losses. The rig count fell to just 26 in June, according to Argus, down from 70 in the first quarter of 2016.
Venezuela has been losing around 50,000 bpd each month so far this year, which means it could lose another 300,000 bpd before the end of 2018. The losses are tightening the oil market, and Saudi Arabia is now forced to ramp up production – and cut into its spare capacity – to make up for the declines.
(Energy Analytics Institute, Piero Stewart, 11.Jul.2018) – The subway system serving the Venezuelan capital is on the verge of collapse due to lackluster maintenance amid ongoing economic, political and humanitarian crises.
Daily occurrences now include but are not limited to: armed robberies, shootings, petty thefts, fights, and of course power outages. It wasn’t always this way. We’re not pointing figures, but we beg to ask the question: who’s to blame?
(Energy Analytics Institute, Piero Stewart, 8.Jul.2018) – Venezuela’s Oil Minister General Manuel Quevedo prayed to God in search of divine assistance to boost Venezuela’s oil production.
The prayer was made by Quevedo during his participation in a special mass held at the headquarters of PDVSA and Venezuela’s Oil Ministry in the company of workers from both entities, reported PetroGui@, citing an official statement from the Oil Ministry.
“The recovery of PDVSA is also the recovery of the whole country,” said Priest Pablo Urquiaga of the Church of the Resurrection of the Lord in Caricuao, during the ceremony in La Campiña.
(Sputnik News, 5.Jul.2018) – China is lending its helping hand to Venezuela to stabilize the country’s oil sector, analysts told Sputnik, adding that Beijing’s economic activities in Latin America are apparently getting on Washington’s nerves.
China is about to breathe new life into Venezuela’s collapsing oil sector regardless of Washington’s displeasure: On July 4, 2018, Bloomberg reported that the China Development Bank is going to invest more than $250 million in the country’s crude production.
Liu Qian, analyst at the China Institute of Strategic Energy Studies, hailed Beijing’s move, stressing that Venezuela has long been one of China’s largest oil suppliers: “China’s direct investment of $250 million in Venezuelan national oil company [Petróleos de Venezuela, S.A.] will positively affect the stabilization of oil production in Venezuela and ensure delivery of crude oil to China,” he told Sputnik China.
However, according to Liu, Venezuelan economic difficulties could hardly be resolved by a one-time financial injection: “China does not exclude the provision of loans or other types of assistance to stabilize and boost oil production [in Venezuela] within the framework of a ‘loan-for-oil’ model of energy cooperation,” he highlighted.
The Chinese analyst underscored that the ongoing economic crisis in the Latin American country and the subsequent slump in oil production had affected the global energy market. Hence, the revival of the country’s energy industry might stabilize crude output, bring more oil to the market and thus prevent global oil supply shortages, he suggested.
China’s Economic Expansion in US’ ‘Backyard’
Washington is keeping a wary eye on China’s activities in Latin America, which the US has long seen as its “backyard,” with Venezuela being the White House’s major irritant.
“As usual, the US reacts very painfully to the fact that China is conducting nothing short of economic expansion in Latin America,” Vladimir Sudarev, professor at Moscow State Institute of International Relations (MGIMO) and expert on Latin America opined. “They throw a scare into Latin American countries saying that while their cooperation with China is profitable today, the day after tomorrow they will be completely dependent on China.”
However, neither Latin American states, nor China are falling for Washington’s gloomy prognoses, the Russian academic remarked.
While the US is taking measures to isolate Venezuela, China is not following suit, boosting its ties with the Caribbean country. In December 2017, Beijing invited Venezuelan Foreign Minister Jorge Arreas on an official visit. Furthermore, Finance Minister Simon Zerpa, who has recently held a meeting with officials from the China Development Bank and China National Petroleum Corporation, was subjected to US sanctions.
Commenting on the Chinese initiative, Sudarev cast doubt on the assumption that China was seeking to support the Maduro government through the massive investment in the country’s oil sector.
“They have been investing [in Venezuela] for a long time, and, of course, in a certain sense they are interested in supporting a bankrupt Venezuelan state [oil] company so that it could regularly supply crude to China. They are being guided by pragmatic interests and not [the desire] to support the government of Nicholas Maduro,” he opined.
Sudarev envisioned that it will take time for Petróleos de Venezuela, S.A. (PDVSA) to regain its footing. According to the academic, it is unlikely that the company will manage to immediately absorb the Chinese multi-million loan and begin production at the levels it did 10 years ago. Moreover, he did not rule out that China’s investments in the Venezuelan oil sector could result in financial losses.
According to the International Energy Agency, in June 2018, Venezuelan oil production fell to 1.36 million barrels per day. For comparison’s sake, in 2013 the country’s output amounted to 2.9 million barrels a day. Now Maduro is promising to increase the daily crude output by 1 million barrels, while his critics are predicting a drop in production to 1 million barrel per day.
It is expected that the oil loan and another financial agreements will be officially inked by Beijing and Caracas in the coming weeks.
The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.
(Energy Analytics Institute, Ian Silverman, 5.Jul.2018) – The heavy oil project is currently producing 10,000 barrels per day, according to PDVSA.
PetroVictoria, is a joint venture comprised of Venezuela’s PDVSA and Russia’s Rosneft to develop heavy oil reserves in Venezuela as part of the Carabobo-2/4 project.
In May 2013, Rosneft and Venezuelan Corporacion Venezolana del Petroleo (CVP), a subsidiary of Caracas-based PDVSA, signed an agreement to establish the PetroVictoria joint venture. PDVSA holds a 60% interest in the venture, while Rosneft holds the remaining 40%
(Energy Analytics Institute, Ian Silverman, 5.Jul.2018) – The land transfer of two from Bolívar to Anzoátegui states, for oil crude desalination has successfully been completed.
The main function of both desalination plants is the subtraction of water and salt contained in heavy oil crude.
The two mega-structures were constructed with local Venezuelan talent in VHICOA workshops, a joint venture of the subsidiary PDVSA Industrial, with aim to boost productive capabilities, announced Petróleos de Venezuela, S.A. in an official statement.
The two identical containers, weighing 149 tons and spanning 25 meters long and 6.5 meters high, where built in a period of time of 11 months. The containers aim to guarantee processing of 52,000 barrels per day (b/d) of crude oil, in addition to the current production of the Petromonagas Operational Center (COPEM), presently estimated at 130,000 b/d, according to PDVSA.
Both desalters were certified by inspectors from the American Society of the Mechanical Engineers (ASME). Inspectors from Colombia, Mexico, Brazil and the USA certified the work on the structures, which have 22 millimeters thick steel sheet joints with a capability to withstand very high pressures and temperatures.
The VHICOA teams will be an important part of the PetroMonagas (PDVSA/Rosneft) Early Production Facility Center. The project, with has a registered process report of 65 percent, is located in the Carabobo Division of the Hugo Chávez Orinoco Oil Belt, also known as the Faja, and includes the participation of oil field service giant Schlumberger.
The oil crude processing modular center will be added to COPEM, once Schlumberger, the main contractor, ends the Engineering, Procurement and Construction (EPC), in February 2019. PDVSA aims to leverage early production from PetroVictoria, a joint venture comprised of PDVSA and Rosneft, which is currently producing 10,000 b/d.
(Bloomberg, 4.Jul.2018) – Venezuela’s distressed oil sector may get some much needed financing from China, Finance Minister Simon Zerpa said after meetings with officials from China Development Bank and China National Petroleum Corporation.
China Development Bank will invest more than US$250 million to boost Venezuela oil production in the Orinoco Belt, Zerpa, who is currently in Beijing for bilateral talks, said in a ministry statement.
“We’ve received the authorisation for a direct investment of more than US$250 million from China Development Bank to increase PDVSA production, and we’re already putting together financing for a special loan that China’s government is granting Venezuela for US$5 billion for direct investments in production,” Zerpa said.
The two countries will sign an additional three or four financing deals in the coming weeks, he said.
Venezuela’s oil output averaged 2.9 million barrels a day in 2013, when President Nicolas Maduro was first elected.
In June, output dropped to around 1.36 million barrels per day, according to International Energy Agency data.
State oil company PDVSA has been struggling to send oil shipments to China after a legal order granted to ConocoPhillips froze its assets in Caribbean ports and terminals.
Maduro has vowed to boost production by 1 million additional barrels, while critics say output will plummet to 1 million barrels a day by the end of this year.
Venezuela and China officials will continue meetings on Wednesday, the ministry said in its statement. Zerpa, who has served in the post since October, was sanctioned by the US Treasury Department before his appointment.
(Reuters, Marianna Parraga, 3.Jul.2018) – Venezuela’s crude shipments to India, its third largest export market, fell 21 percent in the first half of the year, according to internal documents from state-run PDVSA, adding to supply troubles for Indian refiners as they are increasingly pressed to diversify oil imports.
Venezuela’s production decline to a 30-year low and export woes stemming from mismanagement, lack of investment and payment delays are affecting almost all of the OPEC-nation’s customers.
But the impact on India is notable and comes as its refiners are now preparing for a “drastic reduction to zero” of oil imports from U.S.-sanctioned Iran.
Last week, PDVSA officials met with executives from India’s Reliance Industries and Russia’s Rosneft, which owns a majority stake in India-based Nayara Energy, to discuss trade issues, the state-run company said.
The talks focused on how to remedy export delays, according to a person familiar with the matter.
Venezuela sent almost 280,000 barrels per day (bpd) of heavy crude to India in the first half of the year, a 21 percent drop versus the 355,500 bpd shipped in the same period of 2017, according to PDVSA trade documents.
The decline is the second steepest after the United States, which has suffered a drop of about 30 percent in crude imports from Venezuela this year, the documents seen by Reuters show.
If crude supplies from Iran and Venezuela, two of India’s top five oil suppliers, cannot be secured in coming months, some of the nation’s refiners would have to rely almost entirely on sourcing the heavy barrels they need from Iraq, according to analysts.
“Indian refiners are very worried about supply from Iran, but also from Venezuela,” said Robert Campbell from consultancy Energy Aspects.
Saudi Arabia is expected to boost supply to India in the short term, but those barrels would not match the quality of the missing Venezuelan crude, he added. “The lack of heavy barrels is not a problem only in the Atlantic Basin but in Asia as well,” he added.
PDVSA and Nayara did not reply to requests for comment. India’s Reliance declined to comment.
India is the world’s fourth largest refiner after the United States, China and Russia. While Chinese and Russian firms resell a large portion of the Venezuelan crude and fuel they receive to monetize oil-for-loan agreements, Indian refiners need the barrels they get through crude supply contracts with PDVSA.
FEWER BARRELS FOR EVERYBODY
Venezuela’s crude output is declining faster than expected amid insufficient investment, attempts to seize its overseas assets over payment disputes and skilled workers leaving its oil industry due to low salaries and an extended corruption probe within PDVSA.
The country’s oil production averaged 1.58 million bpd in the first five months of 2018, according to figures reported to OPEC, its lowest annual level since 1985. The fall, which is putting pressure on global supply and contributing to growing oil prices, has also taken a toll on exports.
PDVSA last month requested customers not send tankers to its main port of Jose to alleviate congestion. But vessels have continued arriving mainly for Chinese, Indian and U.S. clients, according to Thomson Reuters vessel tracking data.
The tanker bottleneck has worsened since May, when ConocoPhillips started legal actions to seize PDVSA’s assets to satisfy a $2-billion arbitration award, blocking the state-run firm from using its Caribbean terminals.
In June, PDVSA shipped to India 268,300 bpd after servicing some vessels that had waited for up to a month to load. The Venezuelan firm plans to deliver some 240,000 bpd in July, according to Reuters and PDVSA data.
The unstable crude supply from Venezuela to India in recent months has mainly benefited Iraq, India’s largest crude source, and United Arab Emirates, which in May replaced Venezuela as India’s fourth biggest crude supplier.
Reporting by Marianna Parraga in Houston, additional reporting by Promit Mukherjee in Mumbai; Editing by Tom Brown and Marguerita Choy
(OilPrice.com, Irina Slav) – China’s Development Bank has approved a US$5-billion loan for Venezuela’s oil industry, Bloomberg reports, quoting the troubled South American country’s Finance Minister Simon Zerpa.
“We’ve received the authorization for a direct investment of more than $250 million from China Development Bank to increase PDVSA production, and we’re already putting together financing for a special loan that China’s government is granting Venezuela for $5 billion for direct investments in production,” the official said.
The loan is literally a lifeline for PDVSA, which has been unable to stop an accelerating production decline resulting from years of mismanagement and a cash crunch brought about by the tightening grip of U.S. sanctions.
International Energy Agency figures suggest Venezuela produced an average 1.36 million barrels of oil daily last month. This is down from 2.9 million bpd five years ago. President Maduro vowed to increase production by 1 million bpd by the end of the year, but he admitted that the goal would be difficult to meet.
It became even more difficult after ConocoPhillips seized PDVSA storage facilities in the Caribbean, keeping it from meeting its export obligations and creating tanker bottlenecks at Venezuelan ports.
PDVSA’s exports to China also suffered as a result of the quickly deteriorating situation. Shipping data from Reuters last month suggested that these could have plummeted to an eight-year low. This would have provided additional motivation to China to lend Venezuela a hand with growing its oil production.
As a major creditor and ally, China is sure to benefit from some preferential oil export conditions amid rising international prices that would ensure its continued backing of Caracas.
“One of the best things about Venezuelan oil was its stable volumes for all these years and competitive prices,” a senior Chinese oil industry official with direct knowledge of the Venezuelan supply issues told Reuters last month. “But now they seem in very bad shape, not having the money to upgrade port facilities, no money even to remove the high water content in crude oil.”
(Reuters, 3.Jul.2018) – Venezuela will receive $250 million from the China Development Bank to boost the OPEC nation’s oil production, the South American country’s Finance Ministry said in a statement on Tuesday.
(Energy Analytics Institute, Piero Stewart, 3.Jul.2018) – PDVSA Petrozamora, a joint venture comprised of PDVSA and Russia’s Gazprom, completed recovery and incorporation of two steam generators.
The generators, Simón Bolívar 24 (SB-24) and Simón Bolívar 40 (SB-40), are located in located in the state Zulia at the Lagunillas Field in an area denominated location U74, reported PDVSA in an official statement.
The actions by CVP form part of a plan to recover lost production, and includes reincorporating eleven (11) boilers designed to improve the artificial lift processes at the Bachaquero and Lagunillas fields, both of which are operated by the joint venture.
(Energy Analytics Institute, Piero Stewart, 3.Jul.2018) – Work on the upgrader concluded four days ahead of schedule, according to Caracas-based PDVSA.
Operational activities at the upgrader included substitutions in the naphtha and light vacuum gas oil (LVGO) lines, maintenance of interchangers, internal drum replacements (Demister), and replacements related to the value 48 sealing system (Metax System), as well as the repair of atmospheric furnace tubes, announced PDVSA in an official statement.
The PetroPiar mixed company enterprise partners PDVSA, as the Venezuelan state oil company is known, and US-based Chevron Corporation.
(Energy Analytics Institute, Piero Stewart, 29.Jun.2018) – A delegation from Trinidad & Tobago traveled to Venezuela to discuss joint projects and gas related issues.
The meetings were aimed at guarantying the supply of Venezuelan natural gas to the Trinidad & Tobago domestic market, announced PDVSA in an official statement. The officials also discussed plans for gas trading in foreign markets.
Venezuela’s Oil Minister and PDVSA President Manuel Quevedo hosted the meetings.
The Trinidad & Tobago delegation consisted of Stuart Young, Minister of Procurator’s General Office and Legal Matters; Selwyn Lashey, Minister of Energy and Energy Industries; Mark Loquan, President Gas National Company and finally Paul Byam, Trinidad & Tobago Ambassador in Venezuela.
Other Venezuelan officials present during the meetings included: Venezuela’s Vice Minister of Gas, Douglas Sosa as well as Nemrod Contreras, Vice President of Gas.
(Reuters, 28.Jun.2018) – Citgo Petroleum, the U.S. refining arm of Venezuela’s state-run oil company PDVSA, said it appointed two senior executives to new positions as it works to refurbish an idled Aruba refinery.
Luis Marquez was named vice president and general manager at the refinery, a 235,000-barrel-per-day plant in San Nicholas that has been awaiting an overhaul. Edward Oduber also was appointed interim on-site project manager for the refurbishment of the refinery, during Phase II of the project, the company said.
Citgo in 2016 signed an up to 25-year lease with the government of Aruba to refurbish and operate the plant as part of a $685 million project. Earlier this year, it had slowed work on the overhaul due to a lack of credit.
Marquez, who replaced interim general manager Raymond Buckley, began his career in 1981 at the Amuay Refinery in Venezuela and has held positions at PDVSA International Refining, PDVSA Argentina, PDVSA Ecuador, and Petrocedeño, the company said.
Edward began at the San Nicolas refinery in Aruba in 1990, and held positions with Citgo Aruba, Valero Aruba, and Coastal Aruba.
Citgo said that Joe Crawford Jr will continue as general manager maintenance and operations overseeing the operating portions of the facility along with the loading facilities, terminal and distribution network. (Reporting by Gary McWilliams; Editing by Amrutha Gayathri)
(Energy Analytics Institute, Piero Stewart, 28.Jun.2018) – Officials from both oil companies held meetings in Caracas to discuss partnerships.
PDVSA President Manuel Quevedo, who also serves as Venezuela’s Oil Minister, conducted a meeting with Rosneft Vice President Didier Casimiro to discuss joint projects between the Venezuelan and Russian companies, respectively, and consider new opportunities to strengthen strategic relationships, announced PDVSA in an official statement.
(Energy Analytics Institute, Piero Stewart, 27.Jun.2018) – OPEC’s recent agreement in Vienna implies Venezuela’s commitment to comply with oil production of 1.972 million barrels per day for the second semester of 2018.
The agreement was announced at the recent meeting – the 4th Ministerial Meeting of Oil Exporting Countries Organization (OPEC) and Non OPEC countries – held in Vienna, Austria with the view to continue joining efforts to achieve world oil market stability through 2016 Production Adjustment Cooperation Statement continuity, announced Petróleos de Venezuela, S.A. (PDVSA) in an official statement.
“The agreement to achieve 100 percent of production level, according to Resolution dated November 30th, 2016, implies to keep the present adjustment and the commitment of Venezuela to comply with 1.972 million barrels a day for the second semester 2018,” announced PDVSA, citing PDVSA President Manuel Quevedo.
Venezuela, the country with the world’s largest oil reserves, produced 1.392 million barrels per day (MMb/d) in May 2018, according to OPEC’s most recent Oil Market Report, citing data from secondary sources. This compares to oil production of 1.911 MMb/d in 2017 and 2.154 MMb/d in 2016, according to the OPEC data.
The Joint Monitoring Ministerial Committee plans to follow up with compliance of production adjustment levels by the OPEC nations, announced Quevedo, who also serves as Venezuela Oil Minister, without provide details.
(Reuters, 27.Jun.2018) – Venezuela’s 645,000 barrel-per-day (bpd) Amuay refinery has halted its catalytic cracking unit and its distillation unit No. 5, a refinery worker and a union leader said on Wednesday, while state oil company PDVSA said the units were operational.
The cat cracker was halted on Saturday while the distillation unit was taken off line on Tuesday, said union leader Ivan Freites.
“There’s not enough steam to keep that plant in operation,” he said about the distillation unit.
“The cracking and distillation units are operational,” PDVSA said in a response to a message sent by Reuters.
A refinery worker, who asked not to be identified, said problems with steam compression and electricity generation had forced the cat cracker offline, adding that one of the two distillation units in service may soon suffer the same problems.
(Reuters, 26.Jun.2018) – Venezuela’s PDVSA and Chevron have begun to restart their 210,000-barrel-per-day (bpd) Petropiar heavy crude upgrader after a nearly month-long, repair-related shutdown and a fire, according to the state-run company and two sources close to the facility.
Venezuela’s crude upgraders, which can convert near 700,000 bpd of extra-heavy crude from the country’s Orinoco Belt into exportable grades, have been mostly out of service in recent weeks while PDVSA focused on easing a tanker backlog that has delayed exports.
The country’s oil production fell to 1.39 million bpd in May, according to secondary sources cited by OPEC, the lowest level since the 1950s. Oil is Venezuela’s main export and the decline has only served to deepen an already severe economic crisis.
Workers attempted to restart Petropiar earlier in June, but quality issues that were ultimately solved delayed the process, one of the sources said. The restart typically takes several days to be completed while the upgrader’s performance is evaluated.
A fire early on Tuesday at one of the upgrader’s furnaces left one worker injured, but had no material impact on operations, PDVSA said in a statement.
“The event was immediately controlled,” the company said in the statement, adding that crude production and upgrading were not directly affected by the fire.
If Petropiar fully restarts in the coming days, the neighboring 190,000-bpd Petrocedeno facility would be the only upgrader completely shut for maintenance while the 160,000-bpd Petro San Felix complex works intermittently, according to the sources.
But the 150,000-bpd Petromonagas, operated by PDVSA and Russia’s Rosneft, is expected to be out of service later this month due to a planned major maintenance project.
Reduced crude upgrading means PDVSA and its partners in the Orinoco Belt, the country’s largest producing region, have to mix Diluted Crude Oil (DCO) for export, but the volume of the replacement grade is typically lower.
That could help to ease a bottleneck of tankers waiting to transport oil exports. As of June 26, there were more than 75 tankers anchored off Venezuelan ports waiting to load some 24 million barrels of crude and refined products, according to Thomson Reuters vessel tracking data, near flat from earlier this month.
(Argus, 26.Jun.2018) – Venezuelan state-owned PdV is restarting its 210,000 b/d PetroPiar upgrader this week after completing month-long repairs, PdV and energy ministry officials said.
Chevron, which has a 30pc stake in Petropiar, is “working closely” with PdV to restart the facility, the PdV executive said.
Chevron regularly declines to comment on its minority-held operations in Venezuela.
PetroPiar is one of four PdV-run upgraders at the Jose industrial complex in Anzoátegui state.
Following the restart of PetroPiar, PdV is also expected to resume operations at its 160,000 b/d Petro San Felix upgrader, the two officials said. But several Petro San Felix processing units are still undergoing repairs, making a full restart unlikely until the second half of July, they added.
Petro San Felix, formerly called PetroAnzoátegui, is 100pc owned and operated by PdV.
PdV’s 200,000 b/d PetroCedeño upgrader remains shut down for major works that likely will not be completed until August, the PdV and ministry officials said. France´s Total and Norway’s Equinor hold a combined 40pc stake in PetroCedeño.
PdV’s 150,000 b/d PetroMonagas upgrader is currently operating at roughly 50pc of nameplate capacity and is scheduled for maintenance starting in July, the officials added. Russian state-controlled Rosneft owns 40pc of PetroMonagas.
The four upgraders, which have a combined synthetic crude production capacity of more than 600,000 b/d, have been mostly off line for repairs since May, when exports started backing up.
The backlog of close to 30mn bl of mostly heavy Merey crude and diluted crude oil (DCO) began after US independent ConocoPhillips imposed debt-related liens on PdV´s Dutch Caribbean assets, prompting the Venezuelan company to pull its tankers into Venezuelan waters and shift exports to an fob basis, a strategy that has so far failed to restore exports to their former rhythm. Among the operational challenges is transshipment, which PdV traditionally carried out in the islands.
ConocoPhillips is seeking to collect $2bn from PdV that it was awarded by an international arbitration tribunal in April for the 2007 expropriation of the US firm´s stakes in two of the upgraders.
The liens on PdV´s assets were partially lifted last month to allow PdV to supply fuel to the islands and start paying the debt through escrow accounts.
(Energy Analytics Institute, Piero Stewart, 26.Jun.2018) – The early morning incident occurred at the José Antonio Anzoátegui Industrial Complex (CIJAA) in Barcelona, Venezuela.
The fire occurred at the hydro processing unit furnace 14 F-001, announced PDVSA in an official statement.
The PetroPiar joint venture upgrades crude oil from the Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja.
The state oil company is looking into the causes of the fire. A PDVSA employee, Pedro Flores (38), injured during the incident, was transported to a local facility to receive medical care, the company reported.
(Energy Analytics Institute, Piero Stewart, 25.Jun.2018) – Ministers from the Oil Exporting Countries Organization (OPEC) announced during meetings in Vienna, Austria that the 5th OPEC+ countries Ministerial Meeting will take place in the same city on December 4, 2018.
(Energy Analytics Institute, Piero Stewart, 23.Jun.2018) – PDVSA’s El Palito refinery has been in service now for 58 years.
Operations at the refinery commenced on June 23, 1960. The refinery, with two units: a primary crude distillation unit and catalytic reform unit, had an initial processing capacity of 55,000 barrels per day, according to PDVSA data.
Today, El Palito has a processing capacity of 140,000 barrels per day. The refinery, located along the Morón – Puerto Cabello national highway in Carabobo state, has four plant sections, which can supply the demands of the local and international markets.
El Palito is a medium conversion refinery that processes crude oil of 28 degrees API. The refinery supply comes primarily from Apure and Barinas states via a 600-plus kilometer oil pipeline, the longest in Venezuela, and from Monagas and Anzoategui states via tanker shipments.
(Energy Analytics Institute, Piero Stewart, 22.Jun.2018) – Venezuela’s Oil Minister Manuel Quevedo spoke out in Europe against U.S. sanctions against Venezuela.
“[These sanctions] represent a direct attack against the oil market stability, due to a non-conventional war undertaken by the largest world oil crude consumer,” reported PDVSA in an official statement, citing comments from Quevedo during the “World Economy and Oil Future” panel, within the framework of the 7th OPEC Seminar held in Vienna, Austria.
Quevedo, who also serves as the president of Venezuela’s state oil company PDVSA, also said exporting countries have the historic duty to guarantee, in a sustainable manner, the energy required for the economic development of the world population, while investments and time required are achieved for the use of other energy sources.
“That is the reason why we need to have a balanced market to allow oil exporting countries to keep a sustainable energy supply, and guarantee the investment levels required for the new oil projects to ensure that future year demand is covered,” said Quevedo.
(Energy Analytics Institute, Jared Yamin, 22.Jun.2018) – OPEC is looking to boost crude oil output by 1 million barrels per day (MMb/d).
The production agreement goes into effect in July 2018, the Organization of Petroleum Exporting Countries (OPEC) announced today in Vienna, Austria. Ecuador’s Hydrocarbon Ministry later published the details in a Twitter post.
(OilPrice.com, Tsvetana Paraskova, 22.Jun.2018 – The U.S. sanctions against Venezuela are affecting consumers worldwide and are an attack on the oil market, Venezuelan Oil Minister Manuel Quevedo said on Thursday.
The minister, speaking at an OPEC International Seminar today—a day before OPEC ministers meet to discuss how much production to bring back to the market to ‘ease consumer and market anxiety’—Venezuela’s Quevedo said, as carried by Platts:
“These sanctions are very strong, the sanctions are practically immobilizing PDVSA.”
“They are trying to asphyxiate PDVSA,” the minister added.
“It affects not just the Venezuelan oil sector but the consumers worldwide,” Quevedo said, referring to the sanctions.
“It’s an attack on the oil market. Oil is an instrument for development, not an instrument for a political attack.”
The U.S. has been stepping up sanctions against Venezuela, after cutting off all access of PDVSA and its sovereign to U.S. banks, and cutting off all refinancing of new debt.
Amid plummeting production, PDVSA fails to honor its supply obligations, and has started to refine imported crude oil.
Venezuela’s production plunged again in May, by 42,500 bpd from April to below 1.4 million bpd—1.392 million bpd, according to OPEC’s secondary sources. Some analysts think that the plunge to 1 million bpd production is imminent.
Quevedo, however, claims that PDVSA has been complying with its contractual and financial obligations, never missing paying “even one dollar.”
According to internal PDVSA reports seen by Reuters, the company’s oil exports plunged 32 percent in the first half of June compared to May.
Amid the desperate state of its oil industry, Venezuela blames the U.S. for its hardships and is siding with Iran in opposing the Saudi-Russia-led proposal for a production boost, aimed at plugging shortfalls in supply from Iran and Venezuela.
“Venezuela’s situation should not be ignored. Venezuela could be any of your countries,” Reuters quoted Quevedo as telling his fellow OPEC ministers today.
(Oilprice.com, Tsvetana Paraskova, 20.Jun.2018) – While oil industry analysts and market participants are watching Venezuela closely for clues about how low its oil production will go, several other countries in Latin America are holding key elections this year, elections that will no doubt shape the countries’ short and medium-term oil policies. These developments could spell trouble for oil supply and oil investment in South America’s biggest crude-producing nations.
A populist leftist candidate pledging to undo energy reforms is widely expected to win Mexico’s presidential election in two weeks. There has been recent turmoil in Brazil’s fuel sector policies ahead of a wide-open presidential race for the October elections. A newly elected president in Colombia is vowing to amend a historic peace deal with the FARC rebels.
All these events add uncertainties to how politics will influence Latin American countries’ oil policies and investment climate for foreign oil companies, Paul Ruiz and Jena Merl write for The Fuse.
In Colombia, a conservative political newcomer, Iván Duque, won the presidential election this past weekend in the traditionally conservative country. The new president, however, has pledged to revise the 2016 deal with the Revolutionary Armed Forces of Colombia (FARC) rebels that put an end to 50 years of armed conflict. Duque wants to re-write the deal that guaranteed the rebels seats in Congress and allowed them to run in elections.
The new president, like the outgoing president Juan Manuel Santos, will have to face another rebel group, the National Liberation Army (ELN)—a Marxist guerrilla group that sabotages oil industry facilities to protest against foreign companies operating in Colombia. In January this year, Colombia suspended talks with ELN after bombings killed police officers. ELN has repeatedly attacked the second-largest oil pipeline in Colombia, Cano Limon-Covenas, causing oil spills and shutdowns.
Mexico is holding a presidential election on July 1, and a few weeks ahead of the vote, all polls point to populist leftist candidate Andrés Manuel López Obrador having a comfortable lead over other candidates. López Obrador pledges to roll back the landmark 2013 energy reform of outgoing president Enrique Peña Nieto, who opened Mexico’s oil sector to private investment for the first time in seven decades. The jury is still out as to whether López Obrador will backtrack entirely on the oil reforms, but uncertainties remain regarding the investment environment in the country—at least for this year.
Brazil is holding elections in October and the race is still wide open.
But in recent weeks, the country came to an economic standstill due to widespread truckers’ strikes over high fuel prices. President Michel Temer announced subsidies on diesel at the end of May, freezing prices for 60 days.
The recent turmoil in the country’s oil industry and renewed anxiety over political meddling in the energy sector add an uncertainty ahead of the election later this year. Pedro Parente, chief executive at state-run oil company Petrobras, resigned on June 1, after the strikes forced the government to cut diesel prices and after oil workers demanded that Brazil end the one-year-old policy to allow fuel prices be dictated by the market and international crude oil benchmarks.
Yet, some of the world’s biggest oil companies—including Exxon, Chevron, Shell, BP, and Equinor—bid aggressively in Brazil’s latest offshore bid round on June 7, snapping up acreage in three blocks in the coveted pre-salt layer.
Nevertheless, uncertainty over how Brazil will handle oil sector policies until and immediately after the October elections has increased.
Brazil is still expected to be one of the largest contributors to non-OPEC oil supply growth in the coming years. According to the International Energy Agency’s (IEA) Oil 2018 outlook from March, oil production growth from the United States, Brazil, Canada, and Norway “can keep the world well supplied, more than meeting global oil demand growth through 2020.”
According to OPEC’s latest Monthly Oil Market Report, non-OPEC oil supply in the second half of this year is expected to increase by 2.0 million bpd year on year, with the United States leading the pack, contributing 1.4 million bpd to growth, followed by Canada and Brazil.
While uncertainties mount in the political shifts and oil policy choices in other Latin American countries, there’s only one uncertainty left for Venezuela—how fast production from the collapsing oil industry will sink to as low as 1 million bpd. Some analysts reckon the plunge to 1 million bpd is imminent.
(UPI, Daniel J. Graeber, 19.Jun.2018) – Ahead of what could be pivotal talks among OPEC members, production from founding member Venezuela could hit new lows soon, an industry report found.
State-backed oil company Petróleos de Venezuela, known commonly as PDVSA, notified 11 of its international customers earlier this month that it wouldn’t be able to meet contractual obligations of 1.5 million barrels per day. According to commodity pricing group S&P Global Platts, PDVSA had only 694,000 barrels per day available for shipments.
“As workers have fled the country, state-owned oil company PDVSA has had a difficult time maintaining crude output, let alone boosting production,” its report, emailed to UPI on Tuesday, read. “PDVSA’s refining sector has also deteriorated on a lack of funds and manpower.”
PDVSA is facing mounting obligations to its partners, notably ConocoPhillips. Meanwhile, U.S. sanctions pressures have made it difficult to do business with Venezuelan entities, including PDVSA. A digital currency embraced by President Nicolas Maduro was banned under U.S. actions.
Secondary sources reported to OPEC that Venezuela produced around 1.4 million barrels per day last month, down by more than half a million barrels per day from last year’s average. OPEC ministers last this week are expected to decide to put more oil on the market to buffer against the chronic shortages from Venezuela, though the Maduro administration is opposed to those considerations.
Higher oil prices support oil-exporting nations and prices would drop if OPEC decides to make a supply-side move later this week.
According to the International Energy Agency, Venezuelan production could drop to as low as 800,000 barrels per day, though Platts expects output to say above the 1 million barrels per day mark through next year.
The country’s rig count, a loose barometer of future production, was 28 last month, down about half from the start of the year.
“PDVSA has experienced similar drops in the past,” the Platts report read. “In the 1980s, the number of rigs fell to less than 30, causing crude production to fall to 1.3 million barrels per day.”
(The Council on Foreign Relations, Amy Myers Jaffe, 19.Jun.2018) – As energy ministers from major oil producing countries gather in Vienna this week to discuss the stability of global oil markets, the variables that will dictate outcomes have rapidly shifted. Pre-meeting narratives that previously focused on the appropriate level of external private investment—either too much, in the case of U.S. shale producers, or too little, in the case of private sector international oil companies—look woefully inadequate to explain current oil market conditions. Instead, how to deal with the accelerating political and institutional breakdown of several national oil companies across multiple continents now stands out as a pressing structural challenge for the Organization of Petroleum Exporting Countries (OPEC) and U.S. policymakers alike. I highlighted this problem vis a vis Venezuela last March. Stated intentions to replace lost barrels from Venezuela and potentially Iran has brought acrimony back into the OPEC fray. U.S. plans to sanction Iran’s oil exports are the most recent publicly visible geopolitical irritant, but the history has shown that eliminating the endogenous geopolitical swings in the oil cycle takes more intervention and planning capability than even the most well intended partnerships can master, much less nation states whose relations have been punctuated by direct military threats or proxy wars. Talk of a sustained Saudi-Russian alliance that would be effective in eliminating the factors that could cause gyrations in oil prices seem overstated.
All of OPEC’s fourteen members have flagship national oil companies (NOCs), that is, state-controlled entities that oversee their nation’s energy industry. Other important oil producing countries such as Brazil, Mexico, and Russia also have NOCs that dominate their oil and gas sectors. Many of these national firms are facing structural budgetary, corruption, or other internal political challenges, including attacks on facilities by local rebel groups, criminal gangs, terrorists, cyber hackers, and/or armed combatants in ongoing military conflicts.
As a result of these ongoing NOC difficulties, supplies from several OPEC countries, Venezuela, Libya, Iraq, Iran, Nigeria, and Angola have been volatile in recent years. In particular, the collapse of Venezuela’s oil industry and a slide in deep water oil production from Angola have been more instrumental to the market success of OPEC’s agreement with Russia and other non-OPEC oil producers than the producer group’s “planned” cuts in reducing excess inventories by almost 200 million barrels since early 2017 and pushing Brent oil prices up from about $55 to $75 a barrel. Cornerstone Macro noted in a recent report that oil stocks in industrialized countries experienced a counter seasonal decline of three million barrels in April, as compared to the more customary twenty million buildup on the heels of reduced global supplies and more robust than expected U.S. and global economic growth.
While Saudi Arabia, Kuwait, the United Arab Emirates, and Russia did make promised output reductions to help tighten oil supply over the course of 2017, unintended production declines continue to be more material. Not only did oil output declines from Venezuela, Algeria, Angola, Ecuador, and Gabon amount to losses of close to one million barrels a day since early 2017, according to Citibank, markets have come to expect accidental supply disruptions from conflict prone oil regions in Libya and Nigeria. That reality prompted one prominent energy columnist to conclude that OPEC has become “an increasingly unreliable supplier of an essential commodity.”
Whatever the outcome of the OPEC-non-OPEC Vienna group’s deliberations this week, it could turn out to be only a temporary fix to this more structural NOC problem than generally understood. Right now, OPEC spare productive capacity is highly limited. Saudi Arabia and Russia together would probably have difficulty adding much more than 1.5 million barrels a day to markets through the end of the year. Ongoing problems in Libya and Venezuela, combined with renewed sanctions on Iran, could possibly take more than that off the market. And what if a new supply problem emerges? Saudi Arabia and Russia are discussing longer run cooperation. What would that look like in a world where uncertainty plagues many national oil companies around the world, including, perhaps, their own firms?
Does budget-constrained Saudi Arabia agree to divert billions in tandem with Russian firms to expand additional oil fields’ productive capacity down the road to capture future market share that could be available as NOCs in other countries continue to fail? If Saudi and Russia make capacity expansion pushes, what becomes of OPEC as a coherent organization? Will the Vienna group need to shrink in number? Conversely, if Saudi Arabia and Russia choose to make only a quick stop-gap measure just to keep markets from overheating in the next few months and don’t invest in new capacity, will they sacrifice future revenues to private oil and gas investors who can bring on capacity more quickly if NOC capacity continues to falter?
The 2014-2015 price collapse has proven that a year or two of low prices won’t be sufficient to knock out growth in U.S. tight oil. That means restarting a price war in the short run isn’t an ideal option for OPEC, especially if those flooding the market do not appear to be able to survive the prolonged revenue drop that would make a price war option an effective threat. And my guess is that low oil prices also aren’t likely to be sufficient to knock out capital investment by the major international oil companies (IOCs). Those companies have started to pivot their strategies to direct their capital spending to activities that will be more productive than those pursued over the last decade when booking new large reserves was the priority. Rather, companies are focused on spending programs that can bring higher production more quickly, such as directing capital spending to shorter cycle field extensions and satellite field developments that can bring first oil into the market rapidly within one to three years (as opposed to mega-projects that took near a decade to develop). Companies are also developing new techniques to reduce the cycle time and costs on challenging green field projects.
Moreover, innovation in the private oil and gas sector is increasingly de-risking the landscape for future oil and gas investment for private investors. As technology improves, companies are going to be able to squeeze more barrels out of all kinds of existing known in place source rock, not just oil and gas from shale formations. The most recent example is the Austin Chalk where U.S. companies are rushing to test new drilling techniques to positive results.
There’s an additional rub. Saudi and Russian efforts could have trouble influencing intermediate oil demand trends. Even if the Vienna group takes production increase decisions this week that staves off any economically crippling oil price shock that could have sent oil demand into a tailspin, caution signs are already emerging that oil prices even at $70 a barrel are creating some economic headwinds. Markets are already nervous about trade wars. Reports are emerging that high fuel prices are hindering economies within the Euro zone and elsewhere. Rising fuel prices are visibly creating economic and political problems in India and other developing economies. And the United States needs strong demand growth elsewhere to manage its own economic issues. In the case of an unexpected global economic slowdown, OPEC supply disruptions could take a back seat again to “lower for longer” story lines about failing oil demand (potentially in the midst of rising U.S. production in 2019), which could make any discussion of a more permanent, workable Saudi-Russia oil alliance even harder to envision.
(Energy Analytics Institute, Piero Stewart, 17.Jun.2018) – Venezuela’s Oil Ministry and PDVSA reiterated joint plans to boost crude oil output by 1 million barrels per day.
To this end, officials from the OPEC nation’s oil ministry and state oil company meet in Caracas to discuss to jointly review heavy oil recovery plans among others aimed at boosting national oil production, reported PDVSA in an official statement.
“PDVSA divisions in Ayacucho, Boyacá, Carabobo and Junín, as well as with the regional office of the Hugo Chávez Frías Orinoco Heavy Oil Belt aim to develop strategies to increase the oil crude production over 1 million barrels at the national level,” reported PDVSA, citing company president Manuel Quevedo.
(Reuters, 17.Jun.2018) – Reuters) – China’s imports of Venezuelan crude oil could sink to their lowest in nearly eight years in July as the OPEC producer struggles with shrinking output and mounting logistics issues, according to people familiar with the matter and shipping data.
State-controlled PetroChina expects June loadings from Venezuela, mainly the Merey grade, to be half the normal rates, according to two Beijing-based oil officials briefed on the matter. Venezuela’s state firm PDVSA has promised the lost volume would be topped up in July loadings for arrival in August-September, they said.
The plunge in supplies to Venezuela’s most important customer, creditor and political ally is the latest indicator of tough times for the cash-strapped country with the world’s largest oil reserves. Crude output fell to the lowest annual average in over three decades between January and April, while claims on assets by creditors have cut off PDVSA’s access to export terminals.
The slide cuts both ways. China’s growing thirst for oil amid still-sturdy economic growth is increasing its reliance on imports, while Venezuela’s trouble exporting as its infrastructure crumbles means it’s missing out on crude oil prices that have risen to their highest in years.
“One of the best things about Venezuelan oil was its stable volumes for all these years and competitive prices,” said one senior oil industry official with direct knowledge of the supply situation. “But now they seem in very bad shape, not having the money to upgrade port facilities, no money even to remove the high water content in crude oil.”
The officials spoke on condition of anonymity because they weren’t authorised to discuss the matter with media.
Only one supertanker, the “New Pearl” carrying 2 million barrels of Venezuelan crude, is set to arrive in China’s eastern province of Shandong in July, down from this year’s monthly peak of 11 million barrels in March, according to Thomson Reuters Eikon trade flows data.
That would be the lowest monthly import volume since late 2010, according to Chinese customs data C-IMP-VECN-MTH.
PetroChina said it does not comment on market speculation. PDVSA did not immediately respond to Reuters’ requests for comment.
Disruptions in Venezuelan crude supplies to China started in April, and from mid-May through early June PDVSA did not load any crude for PetroChina, said the senior oil official. The Chinese firm lifted an average of around 20 million tonnes a year – or 400,000 barrels a day – in 2016 and 2017 of Venezuelan crude oil under a government-to-government loan-for-oil programme.
“Venezuela remains the biggest and most visible casualty of the (oil) market share war,” analysts at RBC Capital Markets led by Helima Croft said in a note on Thursday.
“We see almost no prospect of a turnaround in the Venezuelan story this year, at least barring a change in government, and even if the country comes under new management, it will still take a considerable amount of time and international assistance to right the ship and restore production.”
PDVSA has halted operations at units that convert extra-heavy oil into exportable crude. Early this month it asked customers to transfer oil at sea to clear a backlog of tankers waiting to load at its ports.
The Venezuelan firm has notified PetroChina of the new ship-to-ship requirement and agreed also to bear the additional cost, according to another industry executive with knowledge of the matter.
One trader with an independent Chinese refiner said he was still receiving offers of Venezuelan oil for August delivery at stable prices compared with a month ago, but added that the supply outlook is murky. “There isn’t a lot of cheap heavy crude (available) so some Chinese refineries might have to change diet a bit,” he said.
Sengyick Tee, a Beijing-based consultant at SIA Energy, said Chinese independents have increased imports of other heavy crude grades such as Castilla from Colombia and fuel oil as replacement.
Venezuela was the eighth-largest crude supplier to China last year, with 435,400 barrels per day (bpd), behind Brazil, according to China customs data.
But it already dropped to the ninth position in the first quarter of this year with an average volume of 381,300 bpd as China ramped up imports from Iraq, Kuwait and Brazil.
Venezuelan crude exports to India have also dropped 20 percent in the first five months to 323,600 bpd, according to data from shipping and industry sources.
Reliance Industries Ltd and Nayara Energy, key Venezuelan crude buyers, have stepped up imports of similar-quality oil from Brazil, Mexico, Kuwait, Iran, Iraq, the United Arab Emirates and Chad for replacement, data showed.
(OilPrice.com, Tsvetana Paraskova, 15.Jun.2018) – Venezuela’s plummeting oil production is nearing the psychological threshold of just 1 million bpd as early as this year, analysts and industry experts tell Platts.
Venezuela’s production plummeted again in May, by 42,500 bpd from April to below 1.4 million bpd—1.392 million bpd, according to OPEC’s secondary sources in its latest Monthly Oil Market Report published earlier this week.
According to the United States EIA, Venezuelan production was 1.43 million bpd last month, down from 1.46 million bpd in April and from 1.98 million bpd in May of last year.
Lejla Villar, who works on projections for EIA’s monthly Short-Term Energy Outlook (STEO), currently expects Venezuela’s production to fall to 1 million bpd in the second quarter of 2019, but she is waiting to see June export numbers from Venezuela—if they are low, Venezuelan production could sink to 1 million bpd sooner than that.
“If the worst-case scenario for June production comes true, then we could see Venezuela’s production fall to 1 million b/d sooner,” Villar told Platts.
“Depending what June does, this may or may not lead me to take a more pessimistic view on Venezuela’s production outlook through the end of 2019,” she said.
The International Energy Agency (IEA) forecasts that Venezuela’s oil production could drop to just 800,000 bpd or even lower next year.
“For Venezuela, we assume no respite in the production collapse that has taken 1 mb/d off the market in the past two years,” the IEA said in its Oil Market Report this week.
According to Francisco Monaldi, a Latin American energy policy expert at Rice University, Venezuela’s production will see a “major drop” this month and next and production will plunge to the 1-million-bpd threshold by November or December this year.
Ed Morse, Global Head of Commodity Research at Citi Group, believes that the plunge to 1 million bpd is imminent, as current production is likely around 1.1 million bpd-1.2 million bpd.
Venezuela’s rig count number is in the 20s, while it needs it into above-40 territory to sustain production flat, according to Morse.
(Energy Analytics Institute, Piero Stewart, 15.Jun.2018) – A brief look at Lake Maracaibo’s descent into chaos. The Maracaibo basin has produced over 43 billion barrels of petroleum, and close to 19 billion barrels of proven reserves still remain.
(Energy Analytics Institute, Jared Yamin, 15.Jun.2018) – Ecuador’s production of crude oil reached 519 thousand barrels per day (Mb/d) in May 2018, up compared to 518 Mb/d in April 2018, the Organization of Petroleum Exporting Countries (OPEC) reported in its monthly oil report.
Ecuador, one of only two OPEC member nations in Latin America, produced 545 Mb/d in 2016 and 530 Mb/d in 2017, according to OPEC.
(Energy Analytics Institute, Piero Stewart, 14.Jun.2018) – Venezuela’s oil production continues its downward slope.
Venezuela’s crude oil production fell to 1.392 million barrels per day (MMb/d) in May 2018, according to a recent report by the Organization of Petroleum Exporting Countries (OPEC), citing data from secondary sources. This compares to production of 1.434 MMb/d in April 2018, 1.474 MMb/d in March 2018, and 2.154 MMb/d in 2016.
(Energy Analytics Institute, Ian Silverman, 14.Jun.2018) – PDVSA announced its subsidiary PDV Mantenimiento oversaw the successful start up of the High Vacuum 3 (AV3) Plant at the Cardón Refinery located in the Paraguaná Peninsula in Western Venezuela.
Savings to PDVSA from the activation of the AV3 will amount to an estimated $55.5 million per month. Coupled with the start-up of the Number 3 Distillery Plant located in Amuay, the savings amount to an estimated $127.1 million per month related to the acquisition of vacuum distillate (VGO), a basic component to produce fuel, reported PDVSA in an official statement, citing PDV Mantenimiento Routine Maintenance Manager Rafael Camacho.
The AV3 start-up leverages processing of 23,000 barrels per day (b/d) of VGO, which is a load component to the Fluidized Catalytic Cracking (FCC) unit, reported PDVSA. The FCC is a vital process to produce fuel.
In Venezuela’s western Falcon state, Venezuela’s state oil entity PDVSA operates two refineries: Amuay, with a 645,000 barrel-a-day processing capacity and Cardón, with a 310,000 barrel-a-day capacity. In neighboring Zulia state, PDVSA operates the smaller Bajo Grande refinery, with a 16,000 barrel-a-day capacity.
(Energy Analytics Institute, Piero Stewart, 12.Jun.2018) – Venezuela will continue to forgo substantial oil revenues this year due to its collapsing production.
In the last four years of the administration of Venezuelan President Nicolas Maduro, the country’s oil production has fallen between 1.361 million barrels per day (MMb/d) according to secondary sources and 1.533 MMb/d according to the state oil entity PDVSA, wrote Ecoanalitica Director Alejandro Grisanti in a Twitter post. As a result, Venezuela will forgo oil income in 2018 estimated between $29.8 billion and $33.6 billion respectively, wrote Grisanti, a former analyst at Barclays in New York City.
(Reuters, Deisy Buitrago, Marianna Parraga, 12.Jun.2018) – Venezuela’s state-run PDVSA [PDVSA.UL] and partners have halted operations at two upgraders that convert extra-heavy oil into exportable crude and plan to stop work at two others, according to six sources close to the projects, a move aimed at easing the strains from a tanker backlog that is delaying shipments.
Venezuela’s largest upgrader, Petrocedeno – operated by PDVSA, Total and Equinor – was halted this week for repairs and a lack of raw materials. The companies turned the stoppage into an expanded maintenance project.
Petropiar, a venture between PDVSA and Chevron Corp, also halted work this month due to lack of spare parts.
PDVSA and its partners typically produce diluted crude oil (DCO), made with extra-heavy crude and imported naphtha, during maintenance, but production and export levels usually decline compared with regular output.
Most of Venezuela’s upgraded oil is sold on the open market, not through long-term supply contracts.
PDVSA’s U.S. unit Citgo Petroleum has been importing DCO in recent weeks to cover a portion of the upgraded crude it has not been receiving from joint ventures.
The subsidiary is buying more imported crude, including Ecuadorean and Colombian grades, on the open market to supply its Gulf Coast refineries.
Two of PDVSA’s largest customers, India’s Reliance and Nayara Energy, received 14 percent less heavy Venezuelan crude last month, falling to an average of 342,000 bpd.
Reporting by Deisy Buitrago in Caracas and Marianna Parraga in Houston; Editing by Leslie Adler and Tom Brown
(OilPrice.com, Robert Rapier, 12.Jun.2018) – On May 21st President Donald Trump signed a new executive order prohibiting certain oil-related transactions with Venezuela. GlobalData, a leading data and analytics company, argues that the new sanctions are symbolic in comparison to the more targeted sanctions previously considered that would limit exports of Venezuelan crude oil to the U.S.
Adrian Lara, Oil & Gas Analyst at GlobalData stated:
“Crude oil production in Venezuela is practically falling at an average of 10% every quarter and has been since mid-2017. A scenario with oil production in the country losing at least another 500,000 barrels per day by the end of the year is not unrealistic. Having full additional sanctions imposed would certainly send a strong geopolitical message from the U.S. at the risk of generating more instability in the world supply markets.”
GlobalData also forecast that Venezuelan crude oil production would fall to around one million barrels per day by the end of 2018. This is a steep decline from the three million barrels per day that Venezuela produced in 2011.
Venezuelan Crude Oil Production
Platts reported this week that Venezuela has already warned eight international customers that it wouldn’t be able to meet its crude oil commitments to them in June. Venezuela’s state oil company PDVSA is contractually obligated to supply 1.495 million barrels per day to those customers in June, but only has 694,000 barrels per day available for export.
Impacted U.S. oil companies reportedly include Chevron, “Conoco” and Valero. I suspect “Conoco” is really Phillips 66, the refining arm spun out of ConocoPhillips in 2012.
Venezuela also reportedly has a severe backlog of crude deliveries at its main terminals, and this could temporarily halt PDVSA’s supply contracts if they are not cleared soon. The company has told some customers it may declare force majeure if they do not accept new delivery terms, including higher-cost and riskier seaborne transfers. Brent crude prices moved higher on the news.
But if the GlobalData forecast is correct, then the temporary interruption of Venezuela’s exports may be permanent, as they will be plunging toward zero by the end of the year.
(ExxonMobil, 12.Jun.2018) – The Liza Phase 1 development continues to rapidly progress, with the commencement of development drilling offshore Guyana, ExxonMobil said.
Development drilling began in May for the first of 17 wells planned for Phase 1, laying the foundation for production startup in 2020. The company and its co-venturers have so far discovered estimated recoverable resources of more than 3.2 billion oil-equivalent barrels on the Stabroek Block.
“The work our teams have done in Guyana is remarkable,” said Liam Mallon, president of ExxonMobil Development Company. “We are well on our way to producing oil less than five years after our first discovery, which is well ahead of the industry average for similar projects. The Liza development and future projects will provide significant economic benefits to Guyana.”
Liza Phase 1 is expected to generate over $7 billion in royalty and profit oil revenues for Guyana over the life of the project. Additional benefits will accrue from other development projects now being planned. Liza Phase 1 involves the conversion of an oil tanker into a floating, production, storage and offloading (FPSO) vessel named Liza Destiny, along with four undersea drill centers with 17 production wells. Construction of the FPSO and subsea equipment is under way in more than a dozen countries.
Liza Destiny will have a production capacity of 120,000 barrels of oil per day. A second FPSO with a capacity of 220,000 barrels per day is being planned as part of the Liza Phase 2 development, and a third is under consideration for the Payara development. Together, these three developments will produce more than 500,000 barrels of oil per day.
“Guyanese businesses, contractors and employees have been an essential element of our exploration, drilling and development progress,” Mallon said. “Our focus is on enabling local workforce and supplier development, and collaborating with the government to support the growth and success of Guyana’s new energy industry.”
About 50 percent of ExxonMobil’s employees, contractors and subcontractors are Guyanese, a number that will continue to grow as operations progress. ExxonMobil spent about $24 million with more than 300 local suppliers in 2017, and opened the Centre for Local Business Development in Georgetown, Guyana, to promote the establishment and growth of small- and medium-sized local businesses. The centre has enabled access to training and capacity-building support for more than 275 local businesses.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
(Kallanish Energy, 11.Jun.2018) -- Venezuela’s PDVSA has reportedly completed its first ship-to-ship (STS) transfer last week, in a move to tackle the severe bottleneck of tankers around its main crude ports.
Reuters reported the inaugural operation was with the Suezmax tanker Sonagol Kalandula for a Thai company’s refinery in Kemaman, Malaysia. The cargo, owned by Tipco Asphalt, is believed to be Venezuelan Boscan heavy crude. The oil tanker had been waiting to load since February.
Shipping data tracked by Kallanish Energy on Friday afternoon showed 13 oil tankers were anchored at one of Venezuela’s main ports, Jose. Reuters estimated 40 tankers were waiting in Venezuelan waters to load crude and refined products for exports.
The delays at the ports have mounted since May, when ConocoPhillips attempted to seize PDVSA’s assets in the Caribbean Ocean. To prevent this, PDVSA stopped using its facilities in the Caribbean islands for storing and loading export cargoes.
To alleviate the congestion, PDVSA is reportedly telling buyers they either accept partial supplies under the STS's new terms or the company will declare force majeure in June. It’s said to have told customers it doesn’t have crude available to fulfill its contractual obligations.
Customers waiting for cargoes include the U.S.’s Chevron and Valero Energy, India’s Nayara Energy and China’s CNPC and PetroChina. The backlog at the ports is estimated at 24 million barrels.
The sea-transfer is expected to increase the purchase cost by $1 per barrel and it’s not clear who will foot the bill – PDVSA or the buyers.
(Financial Times, Nick Butler, 10.Jun.2018) Among this year’s many elections — from Iraq to Malaysia to Russia — none is more important for the international energy business than the presidential race in Mexico, which will be held on July 1.
Unless the polls are all badly awry, the candidate of the National Regeneration Movement (Morena) will win easily. Andrés Manuel López Obrador — popularly known as Amlo — was ahead of his nearest opponent by at least 10 points in a recent survey by Consulta Mitofsky. However, his energy policies remain obscure.
Mexico has begun to change the sector in radical ways over the past five years under the banner of the Reforma Energetica. The monopoly position of Pemex, the state oil company, has been eroded. Exploration blocks have been auctioned in an open process that has allowed foreign companies to win access for the first time in 75 years. That has attracted more than $35bn of investment into more than 40 upstream ventures.
The initial results have been positive. A consortium led by the US-based company Talos has made a major discovery in shallow water off the coast of the Mexican state of Tabasco — amounting to 1.4bn to 2bn barrels of oil, according to early estimates. Eni, the Italian group, has also added substantially to reserves in the Amoca field after drilling new wells.
These two finds alone would enable Mexico to reverse the decline in production of the past decade and a half. But the reforms have just begun. Many of the allocated blocks are still to be explored and some 500 more are due to be auctioned over the next three years.
Change is not limited to the oil and gas sector. The electricity monopoly held by the Comisión Federal de Electricidad has been broken by creating new companies. International capital has been brought in to develop infrastructure and help build new renewables businesses, including hydro, solar and wind. The power grid is being extended and a programme of refinery construction and upgrading is under way.
There is no rational reason why Mr López Obrador should halt this process if he is elected. The country needs a strong energy sector. Pemex, once a symbol of national hope, has failed to deliver — oil reserves, for instance, have shrunk from 48bn barrels in 1996 to about 9bn. The latest discoveries underline the company’s failure.
International investors are not getting a windfall — the terms on which they have been attracted are hardly over-generous. Taxes and charges ensure that the Mexican government will secure around 80 per cent of the value of every barrel of oil produced.
But Mr López Obrador has been campaigning as a nationalist. He speaks of Mexicans being exploited by international companies and has attacked the North American Free Trade Agreement for making the country a branch plant for US businesses. His supporters, including some potential ministers, have talked of ending looting and stopping foreigners taking control of Mexico’s natural resources.
No one knows how he will translate words into action if he wins the presidency. Even if he seems unlikely to follow Venezuela’s Hugo Chávez or Nicolás Maduro in driving international capital out of the country, he could still discourage many potential investors by reasserting the role of Pemex and abandoning Nafta.
It would be much better to see Mr López Obrador focus (as he has at times while campaigning) on the endemic problem of corruption. With that on his agenda, Pemex should be broken up and new independent companies created. Pemex holds a huge portfolio of under-developed assets that could be brought into production by new management.
If the reforms endure and exploration success continues, Mexico could be a significant contributor to the goal of North American energy independence. It could be an exporter able to increase trade even more if renewables are developed systematically, replacing existing gas imports and selling more oil on the world market. Its hand in dealing with the US would also be bolstered.Mr López Obrador, a former mayor of Mexico City, has long been a leading figure in national politics, but never before has he come close to real power.
If he wins and combines a degree of populism with a determination to root out corruption, shake up bureaucracy and engage with the global economy from a position of strength, he could offer a new model for countries across Latin America disillusioned with the legacy of the left — especially in Venezuela — and with rightwing military regimes.
His challenge is to demonstrate that populism and pragmatism are not incompatible.
(Reuters, 9.Jun.2018) — US oil producer Chevron Corp permanently assigned its Brazil country chief to run its Venezuelan operations, three sources said this week, after the months-long detention of two executives escalated tensions between the Opec-member nation and foreign oil firms.
Javier La Rosa, who had been president of Chevron Brazil since 2016 according to his LinkedIn page, this month was named to replace the company’s Venezuela general manager, Christopher Whatley, said the sources, who spoke on Thursday and Friday.
Chevron did not immediately respond to a request for comment.
Mr La Rosa had headed Venezuela operations for the company from 2005 to 2008, his LinkedIn page said. He flew to Caracas shortly after Chevron employees were detained to temporarily lead the Venezuela unit, according to two other people familiar with the matter.
None of the sources could speak for attribution because they were not authorized to speak on the matter.
Mr La Rosa’s appointment comes after a tense showdown between foreign oil companies and the government in recent months as Venezuela’s political and economic meltdown deepened.
Venezuelan authorities this week released the two executives jailed since April as part of an ongoing graft probe into the oil sector, which has spooked other foreign companies operating in partnership with state oil company PDVSA.
The arrests, related to the executives’ refusal to sign a supply contract for furnace parts for a PDVSA joint venture, were made public after some oil-service companies pulled back from Venezuela, writing off billions of dollars in assets.
La Rosa is leaving Brazil just as Chevron begins to flex its muscle in Latin America’s largest crude producer. In a consortium with Petrobras and Royal Dutch Shell Plc , Chevron clinched its first block in Brazil’s coveted offshore pre-salt oil play on Thursday.
It was not immediately clear who will run Chevron’s Brazil operations.
Reuters reported in December that Chevron was in talks with oil services firm Schlumberger NV to resume drilling in an offshore field after a 2011 oil spill there cut production.
Chevron, the world’s seventh-largest publicly traded oil producer, with 2017 revenue of US$135 billion, operates in Venezuela mostly through minority stakes in five projects. Its earnings from Venezuela dropped 18 per cent last year to US$329 million, according to regulatory filings.
(Energy Analytics Institute, Aaron Simonsky, 7.Jun.2018) – Kevin Ramnarine discusses the regional deep-water industry in the southern Caribbean during a technical speech in Trinidad on the emerging regional deep-water province of Suriname, Trinidad and Tobago and Guyana, which was hosted by the Geological Society of Trinidad and Tobago and streamed live.
(Energy Analytics Institute, Piero Stewart, 7.Jun.2018) – Cuba’s foreign currency will be under pressure this year.
“Difficulties with fuel supply and a drop in exports have continued to put pressure on the availability of foreign currency,” wrote Caribbean Economist Marla Dukharan in a recent Caribbean Economic Report, which is available monthly on her website.
Additionally, Venezuela’s state oil company PDVSA reportedly acquired $440 million in foreign crude this year to send to Cuba on favourable credit terms, however, recent U.S. sanctions against Caracas-based PDVSA could impact such deals in the future, she said.
As a result, low growth in Cuba of less than 2% is likely to persist as a result of Venezuela’s crisis and shifts in U.S. policy, while availability of currency will remain a challenge, said Dukharan, also Chief Economist at Barbados-based fintech company, Bitt Inc.
“The transition of power underway [in Cuba] is not expected to drive large sways in policy with the new President Miguel Diez-Canel Bermúdez committing to the same economic model and reforms being implemented by the Castros,” Dukharan concluded.
(Energy Analytics Institute, Aaron Simonsky, 7.Jun.2018) –That’s according to comments by former Trinidad and Tobago Energy Minister Kevin Ramnarine.
“On average, deep-water projects need an oil price of US$42 per barrel to break even at an NPV10. Assuming a 15% internal rate of return hurdle (NPV15), 5 billion barrels of pre-sanction deep-water reserves now breakeven at US$50/boe or lower. This triples to 15 billion boe at US$60/boe,” said Ramnarine, speaking in Trinidad during a technical talk on the emerging regional deep-water province of Suriname, Trinidad and Tobago and Guyana, which was hosted by the Geological Society of Trinidad and Tobago and streamed live.
Ramnarine — a strategy energy advisor — also highlighted that during the period of 2012-2014, there were 510 deep-water exploration wells drilled in 55 countries, while during 2015-2017, there were 231 deep-water exploration wells drilled in 37 countries.
“We have four drill ships simultaneously working in this part of the world [Guyana and Suriname]. Five years ago that was probably something we couldn’t conceive of,” he said.
(Tsvetana Paraskova, OilPrice.com, 6.Jun.2018) — Venezuela’s President Nicolas Maduro has accused the United States of infiltrating senior positions at the Venezuelan oil industry.
“There was a process of penetration and infiltration in key positions of the petroleum industry, to control strategic information,” Maduro was quoted as saying at a meeting with workers at the struggling state oil firm PDVSA on Tuesday.
The embattled president, who has just won a presidential election deemed illegitimate by other nations, also called for an “economic counteroffensive” against what he described as a U.S. economic war on Venezuela.
“Now we will continue with an economic counteroffensive, the most difficult thing… we are going to win this battle for economic peace, for stability, for prosperity, and we are going to go the length in the fight against the criminal economy,” Maduro was quoted as saying.
Maduro’s claims against the U.S. come just as the Organization of American States (OAS) said in a resolution on Tuesday that it decided to “declare that the electoral process as implemented in Venezuela, which concluded on May 20, 2018, lacks legitimacy, for not complying with international standards, for not having met the participation of all Venezuelan political actors, and for being carried out without the necessary guarantees for a free, fair, transparent and democratic process.”
Earlier this week, U.S. Secretary of State Mike Pompeo asked the OAS to suspend Venezuela from the organization.
While attacking the U.S. for infiltrating the oil industry, Maduro told PDVSA workers to start a production “revolution” at the state oil company.
PDVSA’s oil production has been plummeting and it is currently around 1.4 million bpd, according to estimates.
PDVSA has recently told eight foreign clients that it would be unable to supply the contracted volumes of crude oil, a company employee told S&P Platts earlier this week. The affected clients due to the low availability of crude oil to export include Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil, which will partially receive the volumes established by the contracts, according to the PDVSA official.
(Nick Cunningham, OilPrice.com, 6.Jun.2018) -- Venezuela might have to declare force majeure on its oil exports as production plunges and its ports are unable to ship enough crude. The ongoing meltdown in Venezuela’s oil sector could tighten the oil market more than expected.
Reuters reported Tuesday that Venezuela is considering declaring force majeure, a legal declaration made in extraordinary circumstances to basically get out of contractual obligations. In other words, Venezuela’s PDVSA is essentially prepared to say that it can’t supply the oil that it promised.
The utter collapse of the country’s oil production is obviously a big factor in PDVSA’s inability to ship enough oil. Output is down below 1.5 million barrels per day and falling fast.
But the tanker traffic at a handful of its ports has created unexpected bottlenecks, which have slowed loadings. Clogged ports are the direct result of the seizure of operations on several Caribbean islands by ConocoPhillips last month. The American oil major sought to enforce an arbitration award, laying claim to a series of storage facilities on the islands of Bonaire, Curacao and Aruba.
Those assets were crucial to PDVSA’s operations – in fact, they had become even more important as PDVSA’s facilities in Venezuela deteriorated. They had the ability to service very large crude carriers (VLCCs), and were important for storing and blending PDVSA’s oil, and preparing it for export.
Since ConocoPhillips tried to take over those facilities, PDVSA has tried to shift operations back to its ports in Venezuela. But those terminals are in very bad shape, and cannot make up for the loss of the Caribbean facilities. Reuters reported that there are more than 70 tankers sitting off the Venezuelan coast.
Reuters also says that PDVSA told customers that they need to send ships that are able to handle ship-to-ship loadings, since they can’t service enough ships at the ports. If customers fail to do that, or fail to accept those terms, PDVSA could declare force majeure. Reuters says most customers are balking at the demand since there is no third party supervision, plus the added cost of ship-to-ship transfers is also something customers are not willing to take on.
It is no surprise that Venezuela has fallen short on the shipments it has promised, but the figures are staggering. In April, Venezuela only shipped 1.49 million barrels per day of oil and fuels, or 665,000 bpd below what it had contracted, according to Reuters. That means that some customers are missing out on cargo. For instance, in April, PDVSA shorted its subsidiary Citgo nearly all of what it had promised – 273,000 bpd.
The problems for Venezuela continue to mount, and the news that it is considering force majeure points to a more catastrophic decline in production and exports. PDVSA "in the best case only has about 695,000 b/d of crude supply available for export in June," a marketing division executive within the company told Argus Media.
It seems unlikely that the sudden decline in exports will be resolved in any reasonable timeframe. It isn’t just a matter of easing bottlenecks at the ports. For one, it isn’t clear that PDVSA can handle the necessary volumes from its existing export terminals.
More importantly, upstream oil production continues to plummet, and refining and processing are also in freefall. Venezuela’s heavy oil needs to be upgraded before it can be exported, but at least three PDVSA upgraders are in terrible shape, and the Petropiar upgrader, which PDVSA runs jointly with Chevron, is offline for maintenance. That is also the site overseen by Chevron employees that were detained by Venezuelan security services a few months ago, putting a chill on operations.
“[PDVSA] has a critical structural problem that cannot be fixed in a few weeks or even a few months, because the core problem is that Venezuela's crude production has dropped far beneath the volumes we are contracted to deliver,” a company executive told Argus. “We simply aren't producing enough crude, and we don't have the cash flow to compensate by purchasing crude from third parties to meet our supply commitments. Our greatest operational concern right now is that production continues to fall and our export supply volumes also will continue to decline as a result.”
As a result, the force majeure on shipments seems unavoidable, unless that is, customers simply take a haircut and accept lower volumes. A PDVSA source told Argus Media that companies that don’t accept lower volumes could see all of their shipments suspended. That sounds like a threat, but it is PDVSA that is in the state of crisis, not buyers from China, India or the U.S.
Customers are already reporting problems with shipments. A Japanese trading house told S&P Global Platts this week that it has been unable to load up on Venezuelan oil under a loan-for-oil deal. "There is no cargo made available to lift," said the source.
Several diplomats from China and India told Argus that refiners from their countries are looking elsewhere for oil shipments in the months ahead, on the expectation that cargoes from Venezuela continue to decline. Independent refiners from China are looking at heavy crude sources such as Mexico’s Maya, Colombia’s Castilla, and Canada’s Cold Lake Blend, according to S&P Global Platts.
PDVSA could cite U.S. sanctions as a justification for force majeure, and while that could potentially provide some legal basis for nixing shipments, from the oil market perspective, it makes no difference one way or another why exports are declining, or who is at fault. All that matters is that supply is falling fast, and to the extent that PDVSA can’t keep up with its obligations, it is a worrying sign that even the most pessimistic scenarios for Venezuelan output could turn out to be too hopeful.
(Energy Analytics Institute, Piero Stewart, 5.Jun.2018) – Decree No. 3368, dated April 12, 2018, and published in Gazette No. 41376, establishes a special transitional regime aimed at boosting Venezuela’s oil production capacity.
Additionally, resolutions No. 051 and 052, published in Gazette No. 41394, dated May 10, 2018, establish measures aimed at simplifying administration procedures at the state oil entity, Petróleos de Venezuela, S.A., its subsidiaries and joint ventures, announced PDVSA in an official statement.
Important sections of the decree are summarized below:
… Resolution No. 051 establishes actions and measures to effectively contribute to simplify procedures related to acquisition of property, service delivery and execution of works necessary to increase the productive capacity of Corporación Venezolana de Petróleo, S.A. (CVP) and the joint ventures.
… Under Resolution No. 051, PDVSA’s Finance Vice-Presidency is instructed to warranty the financial and budgetary availability for acquisition of property, execution of works, and service delivery, as well as submit an obligatory quarterly report before the governing body, which in turn, shall notify the General Comptroller’s Office.
… Under Resolution No. 052, PDVSA and its subsidiaries are instructed to establish measures and actions that contribute to the administrative simplification for acquisition of property, service delivery and execution of works necessary to increase the productive capacity.
… Finally, the resolution calls for temporary creation of the Special Regime Unity of Public Contracts, with aim to coordinate requirements of areas and businesses belonging to the national oil industry, prioritize contracting processes to contribute to the sustainable increase of the oil production, as well as forward those processes to the various commissions referred in the resolution.
(Energy Analytics Institute, Piero Stewart, 5.Jun.2018) – Venezuela’s Oil Minister Manuel Quevedo says the state oil company has identified 23,319 wells which have potential to recover Venezuela’s oil production by 1.426 million barrels per day (MMb/d).
Quevedo, who also serves as the president of PDVSA, made the announcement in La Campiña in Caracas during a meeting with Venezuela’s President Nicolás Maduro, announced PDVSA in an official statement.
In the western region of Zulia state alone some 13,435 category two and three oil wells have been identified with potential to recover production of 655 thousand barrels per day (Mb/d). In the eastern region of Venezuela another 9,500 wells have been identified with potential to recover production 700 Mb/d. In total, Quevedo said 23,139 wells have been identified with potential to recover 1.426 MMb/d.
The official didn’t explain where the additional 389 wells were located, which have potential to recover another 71 Mb/d.
(Reuters, 5.Jun.2018) — Venezuela’s state-owned PDVSA is considering a declaration of force majeure on some of its oil supply contracts in June unless its clients agree to accept volume reductions of up to 50 percent, Argus reported on Tuesday, citing PDVSA officials.
PDVSA “in the best case only has about 695,000 (barrels per day (bpd) of crude supply available for export in June,” a PDVSA marketing division executive told Argus. (bit.ly/2Jtt55M)
PDVSA’s tumbling crude production, chronic breakdowns of its heavy crude upgraders and difficulty importing critical light crude and naphtha are progressively reducing the amount of oil available for export, Argus said.
PDVSA is asking its principal clients that are collectively owed 1.5 million bpd of crude in June to accept smaller volumes and restructure existing supply contracts for up to one year, Argus said.
Maintenance will last through the end of June and PDVSA clients that reject new deals with supply haircuts could see all of their Venezuelan supplies suspended until the circumstances obliging PDVSA to declare force majeure are resolved, one of the PDVSA officials told Argus.
PDVSA could not immediately be reached for a comment outside business hours. (Reporting by Rishika Chatterjee in Bengaluru; Editing by Peter Cooney)
(Energy Analytics Institute, Ian Silverman, 31.May.2018) – Former Trinidad and Tobago Energy Minister Kevin Ramnarine will speak in Port of Spain about the regional deepwater industry in the Southern Caribbean.
An abstract from his technical talk about the regional deepwater industry in the Southern Caribbean, and the case of Guyana, Suriname & Trinidad and Tobago, follows:
“The 2015 discovery by ExxonMobil of oil in Guyana’s Stabroek Block, the discovery of natural gas by BHP Billiton in Trinidad and Tobago’s Block TTDAA 5 in 2017 and ongoing exploration in both countries and in Suriname have set the stage for a major deepwater oil industry in the Southern Caribbean which could potentially extend to Barbados. Such an industry will have a transformative effect on the practice of geoscience and all aspects of petroleum engineering. In addition, deepwater oil and natural gas commercialization require different skills and technologies different to what obtains on the shallow and average depth waters of continental shelf.”
For more details contact The Geological Society of Trinidad & Tobago at email@example.com
(Anthony Venezia, Energy Intelligence, 30.May.2018) — The political and economic crisis afflicting Venezuela typically makes international headlines in connection with the possibility of sanctions being imposed on Caracas by the US, or the impact on world oil markets of the country’s dwindling crude production. But recent reporting by Energy Intelligence Latin America reporter Anthony Venezia has highlighted the grim on-the-ground realities facing the country’s state oil company, Petroleos de Venezuela (PDV), and its desperate workforce.
With much of the rest of the economy at a virtual standstill, PDV is essentially the country’s only source of cash generation, and is now allegedly being preyed upon by racketeers charging it exorbitant prices for goods, Venezuelan industry sources tell Energy Intelligence. Interviews with workers and contractors paint a picture of an anarchistic environment, in which corruption and fraud are commonplace. “There’s no [equipment] supply, but there’s a lot of demand,” one oil industry source says. “So, everybody has to know somebody to get anything.”
Such graft has only exacerbated PDV’s financial problems, which include crushing debt and default on its bonds. Oil output, meanwhile, has slipped to 1.4 million barrels per day from 2.17 million b/d in 2017, according to Energy Intelligence estimates, and the country’s refining complex is in disrepair. And with President Nicolas Maduro winning re-election over the weekend in a vote widely seen as undemocratic, little relief is in sight.
A common racket that sources working in the Venezuelan oil industry describe involves shadowy intermediaries, operating out of residential or even false addresses, that step into transactions between PDV and what few suppliers remain in Venezuela, marking up prices and pocketing the difference. These shadowy intermediaries are referred to as “briefcase companies,” an allusion to how money obtained via graft is commonly perceived to be exchanged. Such illegitimate companies are not unique to the energy sector and appear to hold sway over virtually every part of Venezuela’s weakened economy.
“These organized mafias steal millions of dollars of equipment and then sell it on the black market,” a source at PDV tells Energy Intelligence. “I’m talking thousands of kilometers of cables, pumps, seals, parts.” Multiple sources claim such firms are frequently set up by ex-employees of PDV’s procurement department, who leverage their network to tap into its supply chain.
The firms, likely innumerable across the economy, usually comply with minimum legal requirements such as obtaining a government tax ID. Several sources say company names that convey an air of legitimacy yet remain very generic are common, although the firms often have no fixed addresses, phone numbers or internet presence. Individuals operating such schemes are called “enchufados,” which in Spanish means “plugged in,” as they are connected to industry or political insiders who facilitate purchases.
“You get one of these enchufado guys who finds a supplier and says, ‘you want to sell your pumps, they sell for $60, but I can get PDV to buy 20 of them for $45,'” a source at a major service company says, explaining how a scheme might work in practice. “So, the supplier says, ‘my margin is less, I make them at $40, but OK.’ And the enchufado doesn’t worry because his cousin at PDV is the one approving it,” adds the source, who no longer lives in Venezuela, but still does business there.
The enchufado would then sell the pumps at $60 or more but pay the supplier $45 apiece, splitting the difference with his or her PDV accomplice. Meanwhile, PDV accountants would simply register a finalized purchase at $60 per pump.
With “briefcase companies” monopolizing many transactions, and virtually no one else selling goods on the open market, PDV and other oil companies have little choice but to pay up. “At the end of the day, there’s a well that needs to be worked on … so, they end up paying,” the major service firm source adds.
Markups of 100%-150% on the list price are common, sources say, but might be as high as 1,000% in some cases. One oil industry source in Venezuela recalls a large piece of equipment normally costing around $200,000 being marked up to more than $1 million.
Because the firms have no physical infrastructure to stock items, transactions are generally one-shot affairs carried out in US dollars, as Venezuela’s bolivar has become worthless. Once a sale is complete, the firms are abandoned to cut off paper trails and new ones are set up to continue the racket.
The major service firm employee says the schemes do not even need to be set up inside Venezuela, alleging that a host of ex-PDV logistics staff are operating remotely in and around the Miami, Florida area, with in-country acquaintances doing the dirty work.
Venezuela’s government seems powerless to stop the rackets, despite extensive coverage in the local press. It is likely a PDV audit last December was at least partially undertaken to root out such schemes. Before the late President Hugo Chavez took power in 1999, PDV had essentially zero tolerance for corruption, a source formerly with the firm tells Energy Intelligence. But corruption flourished during Chavez’s decade-plus in power, continued after he died in 2013, and now eats into Venezuela’s shrinking oil revenue stream.
Unable to eliminate the schemes, Venezuela has at times played down the menace they pose. In 2016, for instance, after citizens questioned whether the illicit firms played a role in hyperinflation by artificially driving up prices for everything from food to medicine, officials maintained they were marginal and not a true threat to commerce.
However, in September 2017, Venezuela identified two such “briefcase companies” in the mining and chemical sectors, according to a state news site, supposedly raiding the residences they were registered under.
In that same instance, the government also acknowledged that a similar “multimillion-dollar embezzlement” had occurred in Venezuela’s Orinoco Belt heavy-oil region, perpetrated by what it said were individuals residing in the US.
While PDV struggles with the corrosive effects of such widespread graft and corruption, workers in the country’s oil fields are facing even graver challenges, laboring under brutal conditions, from food shortages to a lack of spare parts and even roaming gangs terrorizing employees, stealing what little they have left.
“What you hear from outside is a lot better than what we’re actually living through in the fields,” one source inside Venezuela says. “The morale of the people in the industry has hit rock bottom.”
Multiple sources on the ground in Venezuela, as well as several who have fled the country, paint a bleak picture of working conditions, with PDV apparently unable to provide even the basics. Cafeterias operated by the state oil giant often have no food — mirroring shortages experienced by the wider Venezuelan population — depriving employees of the calorie intake needed to undertake hours of manual labor. Weakened employees frequently request part-time shifts or medical leave, says one source, which PDV begrudgingly grants.
Blackouts are also an everyday occurrence, leaving equipment without power and forcing crews to work intermittently. Even when there is electricity, facilities used to monitor operations often have no air conditioning, leaving personnel at the mercy of Venezuela’s tropical climate — one source describes a control facility where the temperature inside routinely hits 40°C (104°F), making anything resembling normal productivity all but impossible.
In scenes reminiscent of the “Mad Max” film series set in a dystopian future in which armed factions feud over oil, employees also risk violence merely by showing up for work. Several sources spoke of a lack of trucks for transport, forcing workers to bring their own vehicles to the job site and leaving them vulnerable to carjackings.
“The lack of security in the areas around the wells is out of control,” says one source, noting armed gangs roam the fields, stripping anything of value from equipment and personnel. Indeed, wiring and electronics are often stolen off rigs, their copper to be scrapped for cash, while PDV personnel are routinely robbed of their belongings.
Workers say they frequently complain to PDV about security, with strikes over those issues as well as general working conditions commonplace, but the company does nothing “concrete” to address it. PDV has not responded to Energy Intelligence attempts to contact it for comment either on the day-to-day conditions facing its workers, or the allegations of graft and corruption.
While there is usually a Venezuelan National Guard unit stationed at oil installations, their presence seemingly does not improve the situation. Some workers suggest it may even be part of the problem.
When thefts and assaults occur, provided employees have not been robbed of their cell phones, workers say calling the authorities for help from out in the fields’ vast, wide-open spaces is a lost cause.
“Even if you did call the police,” one source says, “when they show up, they might rob you, too.
Anthony Venezia is a reporter with Energy Intelligence based in New York. This article is based on news stories that have previously appeared in Energy Intelligence’s publication Oil Daily.
(Energy Analytics Institute, Piero Stewart, 30.May.2018) – Fuel smuggling from countries neighbouring Guyana is a major issue. The small South American country has developed the Fuel Marking Programme to address the issue.
What follows here within are questions from Guyana’s Stabroek News directed at the Guyana Energy Agency (GEA) and the answers from the latter.
1. Stabroek News (SN): SN has received numerous reports that fuel is being smuggled into Guyana from Venezuela. Is the GEA aware of this?
Guyana Energy Agency (GEA): Arising from complaints about 2004 that there was significant smuggling of fuel into Guyana, with about one third of the fuel used in Guyana believed to have been smuggled, the Fuel Marking Programme was established.
From 2006 to 2013, the percentage of sites found with significant dilution in at least one tank has progressively decreased from 34% in 2006 to 3% in 2013.
GEA has achieved 29 convictions since the commencement of Prosecutions for illegal fuel.
While we are unsure of the source of this illegal fuel, one may presume that it originates from neighbouring countries such as Suriname, Trinidad and Tobago and/or Venezuela.
The success of the Fuel Marking programme, and the fact that since its implementation there has been a significant drop in fuel smuggling, is testament to the fact that GEA has always strategized about where their presence is needed.
The Agency continuously monitors and reassesses their strategy to ascertain whether an impact is being made, or whether there is need for change with the aim of ensuring that Fuel Smuggling is curtailed.
2. Stabroek News: Has there been any dialogue between officials of the GEA and the police or the mining association or the Ministry of Natural Resources on the presence of illegal fuel in areas such as the North West and the Essequibo Coast. If so when last where any dialogues held and what were some of the recommendations made?
Guyana Energy Agency: In 2007, a Task Force on Fuel Smuggling and Contraband was convened under the auspices of the Ministry of Home Affairs to coordinate the efforts of the different law enforcement agencies in the fight against fuel smuggling and contraband. The resulting cooperation between the Guyana Police Force, Guyana Revenue Authority, Guyana Energy Agency, Guyana Defence Force Coast Guard and Customs Anti-Narcotics Unit (CANU) aided in several interdictions of illegal fuel and assistance in capturing, escorting and securing various transport vessels (both land and water). Cooperation from the Guyana Police Force in the detention of suspects and the GDF Coast Guard and Guyana Revenue Authority (GRA) in joint operations have proven invaluable in combating the illegal fuel trade.
The GEA is also part of the Hinterland Intelligence Committee (HIC), which was organized by the Guyana Police Force (GPF) and is chaired by the Commissioner of Police. Members of this committee include the Guyana Defence force (GDF), Civil Aviation Authority, Guyana Geology and Mines Commission (GGMC), Guyana Gold and Diamond Miners Association, Guyana Revenue Authority (GRA), Guyana Police Force, Association of Aircraft Owners, Ministry of Health, Ministry of Local Government, Guyana Forestry Commission and the Guyana Women Miners Organization, among others.
Many issues are discussed at monthly meetings of both the Task Force and HIC, including the issue of fuel smuggling.
Additionally, the GPF is usually consulted when there is an emergency or if a tip is received. GEA usually solicits the support of other enforcement Agencies as required.
3. Stabroek News: Are there any GEA officers present in Port Kaituma, any other part of the North West and the Essequibo Coast to check for illegal fuel? If so can you give a total figure or an average of the number of officers present in the Northwest and Essequibo and the locations where they are based. For example two are based at Port Kaituma and one close to the Venezuela border.
Guyana Energy Agency: GEA has permanent bases at Georgetown, Linden and Essequibo.
The GEA has more than 20 Field Officers tasked with testing fuel across the country.
To ensure operational integrity and security, the Agency cannot disclose the number of staff present at these locations.
4. Stabroek News: Is there a process in place by the GEA to (a) check fuel boats in the North West to ensure that they are meeting the required standards and if so how often is this done (b) to ascertain where the GEA’s presence is mostly needed for example in the case of the North West whether it would be more beneficial to have officers based near the Guyana/Venezuela border at points where it is known that illegal fuel passes through?
Guyana Energy Agency: Government, recognizing the challenges in supplying border areas has allowed “border trade” along border areas to the west as long as the materials being brought into Guyana are being utilized within the border area. For fuel, for the time being, this applies to all of Region 1; down the Cuyuni to below Aranka in Region 7, and sub-Region 1 of Region 8. At this time, fuel supplied from our coast to Region 9 is generally less costly from fuel coming across the Brazilian border. Government does not consider fuel traded across the border as illegal in the areas mentioned.
5. Stabroek News: In relation to the recent explosion at Port Kaituma, is the GEA conducting any investigations to ascertain whether the boat that exploded and the others which were burnt were carry illegal fuel?
Guyana Energy Agency: Fires and explosions fall under the purview/responsibility of the Guyana Fire Service and the Guyana Police Force.
In fact, the Guyana Fire Service is preparing a report which will be the basis for discussions amongst relevant Government Agencies and other stakeholders.
6. Stabroek News: Has GEA officials gone around the community to persons who are selling fuel to ascertain whether it is legal or illegal?
Guyana Energy Agency: Officers of the GEA visit the area at least twice per year to learn about what is happening in the area.
The Task Force on Fuel Smuggling and Contraband has, in the past, visited the communities.
7. Stabroek News: Have complaints ever been made to the GEA about the presence of illegal fuel at Port Kaituma and if so what has been done about it?
Guyana Energy Agency: See response at 4. above.
8. Stabroek News: On a general note how big an issue is illegal fuel in Guyana and where does the bulk if it comes from?
Guyana Energy Agency: Illegal fuel causes loss of revenue from related tax losses and also has a negative effect on legitimate businesses. Prior to 2003 Guyana was facing a large number of fuel smuggling and associated tax losses. Non-taxed fuel was being smuggled into the country and sold illegally to retail sites while taxed road fuels were being adulterated with untaxed kerosene. With no means of identifying which fuels were legally imported and which were smuggled, and recognizing the ruinous effect of fuel smuggling on legitimate businesses, the Government of Guyana implemented the Fuel Marking Programme (FMP) in 2003.
With the technology being new to Guyana and the region at the time of its introduction, there was need for specialised legislation. The Guyana Energy Agency Act 1997 was therefore amended in 2004 to provide specifically for licensing of the different classes of fuel dealers and for the marking of all legitimately imported fuel. Subsidiary legislation in the form of the Petroleum and Petroleum Products Regulations 2004 was also created to regularize fuel operations.
The Fuel Marking Programme was charged with the responsibility of ensuring that all gasoline, diesel and kerosene were properly ‘marked’ at a known concentration at all legitimate import points and also collecting and testing samples of fuel from various parts of the country including wholesalers, retailers, distributors, transporters, commercial consumers and any person in possession of fuel for the relevant marker(s).
The constant monitoring and maintenance of the Fuel Marking System’s integrity is absolutely necessary for its continued success.
While we are unsure of the source of this illegal fuel, one may presume that it originates from neighbouring countries such as Suriname, Trinidad and Tobago and/or Venezuela.
9. Stabroek News: Why do you think persons insist on transporting and using illegal fuel as oppose to legal fuel?
Guyana Energy Agency: GEA too would like to know.
10. Stabroek News: What are some of the dangers attached to having illegal fuel in one’s possession?
Guyana Energy Agency: Persons found with illegal fuel can be prosecuted.
Illegal fuel can also affect consumers owing to the fact that usually, the illegal fuel that comes into the country is of a lower quality than the legal one. We have found that often the illegal fuel is smuggled in dirty containers and it is exposed to salt water (sea water) which causes it to become contaminated. The use of contaminated fuel damages equipment. Contaminated fuel can cause damage to fuel pumps, cause injectors to become blocked, damage fuel filters and spark plugs.
There are also safety concerns attached to having illegal fuel in one’s possession. In trying to hide an illegal operation a person may compromise safety to conceal the said operation.
11. Stabroek News: In addition to marking fuel, does the GEA’s work also entail ensuring that the boats meet the required standards for transporting and storing fuel?
Guyana Energy Agency: A Bulk transportation Licence from the GEA if a person is transporting an aggregate quantity of 2000 litres of petroleum and petroleum products in a vehicle, vessel or boat.
As part of its licensing process for the Bulk Transportation of fuel in boats/vessels, GEA’s Officers conduct an Inspection of the facilities and operators are required to submit: a) Petroleum License from the Guyana Fire Service (GFS) b) Maritime Administration Department (MARAD) Inspection Certificate c) Captain’s License d) Vessel License (MARAD).
GEA continuously monitors and evaluates its strategies and procedures. In 2013 GEA conducted research on Fuel handling Standards used in India, USA, Canada and Europe for Vessels, Trucks and Tankers transporting Fuel and petroleum products.
GEA subsequently collaborated with the Guyana National Bureau of Standards (GNBS) and Guyana Fire Service (GFS) to research and formulate draft guidelines for the transportation of fuel using approved containers and drums. During this process Regulations and Guidelines from Trinidad and Tobago, USA and Canada, for transporting fuel by Tanker Wagons and other vessels were examined. Precedents were also obtained, and best practices extracted and reviewed, to ensure practicality and applicability to Guyana.
Two standards were then drafted, and submitted to GNBS and GFS, by the Guyana Energy Agency. A Technical Committee has been convened by GNBS with representation from relevant stakeholders. This committee is currently reviewing the standards with the aim of having it approved and published.
12. Stabroek News: Does the GEA have a list of persons in the Northwest who transport fuel and if one wants to enter into such a business what is the process in place for doing so?
Guyana Energy Agency: Answer: See response in 4 above.
A link to the original PDF on the Guyana Energy Agency (GEA) website follows:
(Reuters, 28.May.2018) — India said on Monday it had no plans to use Venezuela’s local cryptocurrency ‘petro’ in oil trade with the Latin American nation, which is facing sanctions from the United States.
Responding to a question at a news conference, Foreign Minister Sushma Swaraj cited an order by the country’s central bank saying it did not allow trade using cryptocurrency.
Venezuela, whose oil output is falling under pressure from the U.S. sanctions, is offering discount on oil sales done in ‘petro’.
(Energy Analytics Institute, Special from Pietro D. Pitts, 28.May.2018) — Venezuela’s upstream, downstream and midstream sectors remain attractive, yet unattractive to investors.
Why the contradiction?
The three sectors remain highly attractive due to the fact that Venezuela — the country with the world’s largest crude oil reserve base and the eighth largest natural gas reserve base — is arguably one of the most attractive geological locations in the world. Petroleum reservoirs here contain light and medium oil deposits, while the Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja, contains the largest accumulation of heavy and extra-heavy crude oil (EHCO) in the world. From the prolific Lake Maracaibo in the west to the massive Faja in the east, the opportunity set is second to none. And that’s excluding other natural resources from iron ore to gold that makes this place that much more attractive.
However, above surface issues continue to ruin the energy party due to continued political, economic and financial turmoil as well as an ongoing humanitarian crisis. A look at just some of the micro issues of these crises, in no specific order, including corruption, price and currency controls, five-digit inflation, homicide rates among the highest in the world, kidnappings of foreigners and embassy employees, worthless currency, the Petro, a brain-drain of talent, a FDI drought, Nicolas Maduro, ongoing nationalization threats, gas deficits, black and brown outages, refinery output trending towards nothing, oil production in steady decline, service providers payment backlog, political appointees at PDVSA, drug trafficking, and mismanagement of resources, continue to prove Venezuela is not for the light of heart investors.
Taking these issues, among others, coupled with recent detentions of executives from companies from Houston-based Citgo Petroleum to PDVSA to California-based Chevron Corporation only serve as evidence to the still complicated operating environment that exists in this OPEC nation of around 30 million citizens.
Nowadays, political issues above ground continue to dictate what goes on below ground, even if indirectly. When has that ever been otherwise in Venezuela? There’s no doubt Venezuela — or if you prefer, Cuba with petroleum and the Russians (in contrast or comparison to Cuba and the Soviets in the past) — will remain a country to watch for petroleum investors for many years to come.
(AP, 27.May.2018) – Venezuela’s former oil czar said crude production in the OPEC nation will continue to plummet in the aftermath of President Nicolas Maduro’s re-election, as the embattled socialist leader takes the country down an increasingly authoritarian path that scares off private investment and leads to more international sanctions against his Government.
In a rare interview, Rafael Ramirez on Friday blasted Maduro, saying that in the wake of his recent victory he has showed no signs of reversing policies blamed for hyperinflation and widespread shortages.
“The demons have been unleashed,” Ramirez, who went into exile after a bitter split last year with Maduro, said in a phone interview from an undisclosed location. “Maduro keeps insisting on the same rhetoric, taking no responsibility for his own actions.”
Maduro coasted to another six-year term in an election last Sunday that was boycotted by the biggest opposition parties and condemned as rigged in his favour by several foreign governments. The Trump Administration responded by tightening sanctions on the Government, making it tougher for State-run oil giant PDVSA to raise badly-needed cash to pay off creditors and jumpstart production.
Ramirez, who headed the oil industry for a decade until 2014, said a purge that started last year and has led to the arrest of more than 80 PDVSA managers, including its president, as well as the arrest last month of two managers at Chevron, has paralysed oil production.
Since Ramirez was removed from his dual post as energy minister and PDVSA boss in 2014, production has tumbled almost 40 per cent, to 1.4 million barrels of oil per day, the lowest level in seven decades. He predicts that unless Maduro changes course, it could fall soon to 900,000 barrels per day, the bulk of which is already sold at a huge loss domestically or used to pay off debts to China and Russia.
He also pointed to a recent decree signed by Maduro giving PDVSA’s newly installed president, Major General Manuel Quevedo, special powers to rewrite the terms of PDVSA’s joint ventures with foreign oil companies, circumventing the constitutionally-mandated oversight of the Opposition-controlled National Assembly.
“There’s a climate of terror inside the oil industry and everyone is afraid to make decisions,” he said.
PDVSA and Venezuela’s Information Ministry didn’t respond to requests seeking comment.
Ramirez, who was close to the late Hugo Chavez, quit as the country’s ambassador to the United Nations in December amid a public feud with Maduro over the direction of economic policy. Ramirez had been arguing for a more pragmatic course that included unifying Venezuela’s multi-tiered exchange rates while Maduro doubled down on policies to attack criminal “mafias” and going after opposition groups he blamed for waging an “economic war” with the backing of the US.
In January, chief prosecutor Tarek William Saab announced he would seek Ramirez’s arrest for allegedly profiting from illegal oil sales. Several close associates including his nephew have already been arrested in Venezuela and two former deputies were picked up in Spain last year on a US warrant as part of a separate probe led by prosecutors in Houston into corruption at PDVSA under Ramirez’s watch.
Ramirez rejects the accusations and said that his conscience is clear. Since leaving the US last year, he said he’s moved among cities around the world and avoided returning to Venezuela for fear of arrest.
“It hurts me because in the name of pursuing corruption Maduro has destroyed the industry so he can take control of PDVSA,” he said.
He said that none of the people running PDVSA today have experience in the oil industry, and coupled with the departure of thousands of oil engineers, the company that is the source of almost all of Venezuela’s export earnings is on the verge of collapse. A recent display of what he considers the current management’s incompetence was its failure to outmanoeuvre Houston-based ConocoPhillips’ attempts to collect on a US$2 billion arbitration award, which forced PDVSA to scramble and divert oil tankers from its facilities in the Dutch Caribbean for fear of seizure.
Ramirez said that he headed off a similar legal action years ago by Exxon Mobil in the United Kingdom.
“What’s surprising, and concerning, is that PDVSA didn’t anticipate this,” he said. “If the actions of a single company have jeopardised the entire country, imagine what will happen if the US imposes sanctions.”
(Energy Analytics Institute, Piero Stewart, 25.May.2018) ‐- Venezuela’s state oil company Petróleos de Venezuela owes an estimated $1 billion to its partners in the Cardón IV natural gas project offshore.
Gas Energy Latin America Partner Antero Alvarado told Petroguía in interview that Caracas-based PDVSA is accumulating estimated monthly expenses of $60 million for the purchase of gas from Repsol and Eni.
Financial problems at the project relate to indefiniteness of exports, tariff lags, and accumulated debts PDVSA has with the foreign partners that have the licenses, according to Alvarado.
Spain’s Repsol and Italy’s Eni, joint operators, discovered the Perla field in 2009. Initial production at the field, located in shallow waters in the Gulf of Venezuela, commenced in 2015 at 150 million cubic feet per day (MMcf/d). Two additional phases of the project’s development were planned to boost production to 800 MMcf/d in 2017 and then a peak of 1,200 MMcf/d in 2020, according to Eni data. The Perla field is also expected to be producing 15,000 barrels per day (b/d) of condensate, which will rise to 38,000 b/d by 2020.
(Energy Analytics Institute, Aaron Simonsky, 24.May.2018) – Energy Analytics Institute, formerly LatinPetroleum Inc., continues to promote its “Energy Education Initiative” in the Americas, also known as “NRG ED.”
NRG ED is structured to work with K-12 schools, community colleges, four-year colleges and universities, workforce training programs, communities and businesses, and aims to promote reduction of non-renewable energy usage in favor of renewable energies. However, the core of the initiative is education, without which the NRG ED initiative would not be.
“At its core the initiative is really focused on education,” said Chad Archey, Editor-in-Chief at Energy Analytics Institute from Atlanta, Georgia.
EAI views basic education as most important in the overall learning process and also promotes educational initiatives and research from grade school to the professional level related to the energy sector. EAI aims to foment constructive dialogue regarding energy usage as well as ways to reduce the carbon footprint left by non-renewable energy resources through the following: 1) educational consultancy, 2) development and distribution of educational and training materials, and 3) promotion of debate and discussion regarding renewable energy alternatives.
Energy Analytics Institute (EAI), formerly LatinPetroleum Inc. (dba LatinPetroleum.com), is a Houston-based independent company focused on producing non-biased news, updates and special reports for investors interested in the Latin America and Caribbean petroleum sectors.
(Energy Analytics Institute, Pietro D. Pitts, 24.May.2018) – Venezuela’s reserves-to-production or R/P ratio was a remarkable 342 times in 2016 based on reserves of 300.9 billion barrels and production of 2.41 million barrels per day (MMb/d), according to BP’s Statistical Review of World Energy.
Today, in a best-case scenario, Venezuela’s R/P ratio could reach 550 times assuming no decline in reserves but a 38% drop in production to 1.5 MMb/d. Stated another way, Venezuela has enough reserves to last for 550 years, up 61% from 2016. In a presumed worst case scenario, if reserves were to declined for numerous reasons by 10% to 271 billion barrels with the same production of 1.5 MMb/d, Venezuela would still have enough reserves to last for 495 years, up 45% from 2016.
When compared to a Reuters’ peer group (comprised of Exxon, BP, Chevron, Total, Eni, Shell, and Equinor, the former Statoil – see chart above) with a combined R/P ratio of 80, Venezuela’s R/P ratio is still a whopping 7x higher than the seven-company peer group.
For what it’s worth, we know reserves are worth nothing in the ground unless they are produced. Maybe it’s correct and better to focus on reserve quality versus quantity but that still doesn’t drive me from my most important point in the case of Venezuela, a country with a lot of potential, but many more wasted opportunities.
Just think what will happen to Venezuela’s R/P ratio as the denominator approaches zero.
(Platts, 18.May.2018) — Ahead of Sunday’s presidential election in Venezuela, Risa Grais-Targow, director-Latin America, at the Eurasia Group, spoke to S&P Global Platts about the expected US response, the impact of rising oil prices on sanctions and the ongoing collapse of the country’s oil sector.
The interview has been edited for brevity and clarity.
PLATTS: What do you expect the US response will be to Sunday’s election?
GRAIS-TARGOW: I think the US has already been pretty clear that they view these elections as fraudulent. So I think, at a minimum, they will reject the results and refuse to recognize them. There could be some additional sanctions in response as well.
PLATTS: What will those sanctions look like?
GRAIS-TARGOW: The signaling from the [Trump] administration in more recent weeks has been less in the direction of aggressive sanctions right off the bat. I think especially with [exit from] the Iran deal they seem to be a bit more concerned about international oil prices and higher domestic gasoline prices. Obviously, their Iran policy contributes to that and it seems like, even though we have a more hawkish foreign policy team, there may be a bit more reluctance to add Venezuela to those pressures as well. I think that it would be, maybe, milder sanctions to begin with, something more like a ban on the sale of diluents and lighter crudes to Venezuela or potentially an insurance-related ban that would affect their oil cargoes. But it seems like the import ban that was being discussed a few months ago more actively is now looking like something that would only happen over a longer time frame.
PLATTS: What would need to occur for an import ban to go forward?
GRAIS-TARGOW: In general, the preference here has been to escalate sanctions. The fact that we haven’t had those initial, targeted sanctions for the oil sector happening before the vote means that you start with them after the vote. To the extent that it doesn’t change the Maduro administration’s behavior then we could still escalate towards an import ban. But it seems like we would probably start with milder actions and escalate towards that, using the threat of more aggressive actions as a potential deterrent.
PLATTS: Is there an outcome Sunday in Venezuela that wouldn’t draw a US response?
GRAIS-TARGOW: I think the only scenario in which we don’t is if [Venezuelan presidential candidate Henri]Falcon somehow manages to win, which, in my view, is pretty unlikely at this point.
PLATTS: What impact have existing sanctions had on Venezuela’s oil sector?
GRAIS-TARGOW: Some of the sanctioned individuals had been executives at PDVSA, so what we saw last year was some reluctance to enter into deals with PDVSA. The existing sanctions, the financial sanctions that were imposed in August, those have had a much more severe impact on the oil sector. They don’t allow the government to issue promissory notes to service providers and so that’s really hurt their ability to maintain these relationships with service providers and it’s one of the reasons that we’ve seen such aggressive production declines over the past six months or so.
PLATTS: How much are oil prices at the moment impacting what the US response to Venezuela could be?
GRAIS-TARGOW: It’s certainly a factor. We had Trump tweeting out a few weeks ago this attack on OPEC over oil prices. It does seem to be something that he’s concerned about. If you look at historic trends, higher domestic gasoline prices tend to really change domestic economic sentiment and generally tend to hurt the administration. That’s something the government obviously wants to avoid with November mid-terms. Especially since we’re entering into peak summer driving season, that’s become more of a consideration as they think about the policy response to Venezuela.
PLATTS: Where is rock bottom for Venezuela’s oil sector? Are we already there?
GRAIS-TARGOW: I think we’ve all been shocked at the acceleration of production declines. I’ve generally seen a floor owing to the joint ventures, which are much more functional than PDVSA’s solely operated production. That range is 900,000 b/d to 1.1 million b/d that are being operated as joint ventures. That, to me, has always been the floor. The challenge now is that the government has been more aggressive with its joint venture partners and so now we’re in a new era where we could see the joint venture partners starting to reduce their presence or suspend operations. If we see some of the western companies starting to pull out owing to safety concerns or some of these issues and concerns about their human capital then I think that floor starts to sink further.
(Energy Analytics Institute, Aaron Simonsky, 18.May.2018) – Venezuela’s oil production continues to fall, and further declines are anticipated due to a number of problems at state oil company PDVSA, according to a report by Caracas Capital Markets.
“Venezuela’s oil production has now fallen from 3.5 million barrels per day when Hugo Chavez was elected in 1998 to 1.436 bpd last month. Instead of going up to 6-8mm bpd where Venezuela’s oil production should have been by 2008, Venezuela’s oil production has returned to the level it first achieved in 1949,” wrote Russ Dallen, Managing Director at Caracas Capital Markets, in a report last week to clients.
Dallen, a bond trader, further said: “We haven’t yet fallen back to 1948 levels, but we anticipate that we will return to 1948 this month, when Venezuela was producing 1.339 million bpd. By 1950, Caracas was producing 1.497 million bpd — even more than it is currently producing.”
The U.S. is now exporting over 1.6 million barrels of crude oil per day – more than all of Venezuela’s total production, according to Dallen who wanted to “put Venezuela’s disastrous fall in oil production to 1.436 million bpd in perspective.”
Further declines in Venezuela’s oil production are expected due to a number of problems that continue to stymie PDVSA, wrote Dallen.
(Energy Analytics Institute, Aaron Simonsky, 17.May.2018) — PDVSA officials Executive Vice President Ysmel Serrano and External Directors Ricardo León and Yurbis Gómez visited with workers from the Petrozamora mixed company, while touring the Libertador II dock located in Bachaquero along the Eastern Coast of Lake Maracaibo, to discuss plans to recuperate lake vessels.
While no financial details were reported by PDVSA, one external director commented about the visit and planned work by the state entity.
“We don’t need dollars to construct our machinery, everything we need we have it here in the talent from Zulia and the revolutionary conscience,” said Gómez.
(Energy Analytics Institute, Jared Yamin, 14.May.2018) – Venezuela’s Ayacucho Block is one of four that comprise the Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja. Collectively, the four blocks, comprised of Boyacá, Junín, Ayacucho and Carabobo, contain the largest accumulation of heavy and extra-heavy crude oil (ECHO) in the world, according to PDVSA.
Ayacucho Block 1 contains estimated certified reserves of more than 5 billion barrels of extra-heavy oil, which serve as a guarantee to the Petro, the first Venezuelan cryptocurrency.
Ayacucho Block 1 spans an area of 380 square kilometers, and is located in the extreme northeast of the Ayacucho Division. Currently, 11 oil wells are functioning in the area where oil has an average API of 9.5 to 9.9 degrees, according to PDVSA, as the state oil company is known.
(Energy Analytics Institute, Jared Yamin, 14.May.2018) – Venezuela’s state oil company Petróleos de Venezuela, S.A. (PDVSA) is bankrupt, at least that what its former president Luis Giusti thinks.
“If you look at the signs … they all point to a company that is bankrupt,” said Giusti during a televised interview on the Bayly show on 27 April 2018 with host Jamie Bayly.
Giusti initiated his career at Shell Corporation in Venezuela. He later worked at Maraven, S.A., a PDVSA operating affiliate. In 1994, Giusti was named chairman and CEO of PDVSA, positions he maintained until March of 1999, according to data posted to the website of the Center for Strategy & International Studies (CSIS), an organization where Giusti served as a senior advisor directly after departing PDVSA in 1999.
At the helm of PDVSA, Giusti oversaw major reforms to the Venezuelan petroleum sector including opening the sector to private participation, which attracted foreign direct investments (FDI) between 1995-2004 estimated at around $30 billion.
An engineer by profession, Giusti graduated from the University of Zulia in 1966, and received a M.S. in petroleum engineering from the University of Tulsa in 1971.
What follows are short extracts from the interview:
BAYLY: Why has Venezuela sent so much oil to the U.S. over the years?
GIUSTI: A lot of Venezuela barrels always went to the U.S. for a reason that is clear and precise, and that is due to the decisions made by many refineries along the Gulf Coast to invest in deep conversion capacity and to buy cheaper raw material.
Of the seven refineries in Venezuela only one is operating and the reason is simple and much more than efficiency losses and installation deteriorations. They’re simply not operating because there is no petroleum in Venezuela to process. (See Note 1)
BAYLY: If the US asked you what it could do to assist Venezuela such as to cease imports of Venezuelan crude oil or cease exports of U.S. gasoline to Venezuela, what would you recommend?
GIUSTI: It’s a bit difficult because you need to surmise the crises the citizens are living right now and take into consideration whether such a measure could turn everything around to achieve a change in a reasonable time in Venezuela. I would say that is the main concern.
BAYLY: How much money has been stolen from PDVSA?
GIUSTI: Venezuela and PDVSA are in the situation they are now due to a mismanagement of funds, without even talking about corruption.
After ten years of discretional uses of resources under the mandate of Chavez, we know that much of the funds went to personal accounts. Over a good 10-year period of Chavismo the amount that has been stolen could easily surpass $100 billion.
BAYLY: Is PDVSA bankrupt?
GIUSTI: Since PDVSA is a company of the state, it will never declare in bankruptcy. But, if you look at signs such as: not being able to pay bond returns, the Chinese’s unwillingness to lend more money, declining production levels, and salaries around $5 per month, among others signs, they all point to a company that is bankrupt.
BAYLY: What about the fact that is now run by military personnel?
GIUSTI: Military personnel who could be good or bad in their profession run PDVSA, but they are military personnel that don’t know anything about the petroleum sector.
BAYLY: How does Venezuela exit this disaster?
GIUSTI: It’s a hard question to answer but we are in the presence of a binary decision. There will not be talks about our understandings, or that we will team up. The scenario comes down to the persons in power leaving or there’s no way to resolve this.
Editor’s Note 1: The PDVSA refineries located in Venezuela include: Amuay (645 Mb/d), Cardon (310 Mb/d), Puerto La Cruz (187 Mb/d), El Palito (140 Mb/d), Bajo Grande (16 Mb/d) and San Roque (5 Mb/d), according to PDVSA data.
(Energy Analytics Institute, Jared Yamin, 14.May.2018) – PDVSA inaugurated the 175 megawatt TG1 turbo-generating unit of the Juan Manuel Valdez Thermoelectric Plant located within the CIGMA industrial complex in Güiria, Venezuela.
The thermoelectric plant will have a total capacity to generate 350 megawatts of energy. Located in Sucre state, the plant will supply energy to CIGMA, the Eastern Caribbean Delta Axis and other PDVSA developments offshore, reported the state oil company in an official statement.
(Reuters, 13.May.2018) – A Curacao court has authorized ConocoPhillips to seize about $636 million in assets belonging to Venezuela’s state oil company PDVSA due to the 2007 nationalization of the U.S. oil major’s projects in Venezuela.
The legal action was the latest in the Caribbean to enforce a $2 billion arbitration award by the International Chamber of Commerce (ICC) over the nationalization.
The court decision, first reported by Caribbean media outlet Antilliaans Dagblad on Saturday, says Curacao can attach “oil or oil products on ships and on bank deposits.”
Conoco and PDVSA did not immediately respond to requests for comment on the decision, which was seen by Reuters and dated May 4.
Conoco earlier this month moved to temporarily seize PDVSA’s assets on Aruba, Bonaire, Curacao and St. Eustatius. That threw Venezuela’s oil export chain into a tailspin just as Venezuela’s crude production has crumbled to a more than 30-year low due to underinvestment, theft, a brain drain and mismanagement.
Reuters reported on Friday that PDVSA was preparing to shut down the 335,000 barrel-per-day Isla refinery it operates in Curacao amid threats by Conoco to seize cargoes sent to resupply the facility.
PDVSA is also seeking ways to sidestep legal orders to hand over assets. The Venezuelan firm has transferred custody over the fuel produced at the Isla refinery to the Curacao government, the owner of the facility, according to two sources with knowledge of the matter.
PDVSA transferred ownership of crude to be refined at Isla to its U.S. unit, Citgo Petroleum, one of the sources said.
For the time being, PDVSA has suspended all oil storage and shipping from its Caribbean facilities and concentrated most shipping in its main crude terminal of Jose, which is suffering from a backlog.
(Energy Analytics Institute, Aaron Simonsky, 8.May.2018) – Venezuela’s Oil Minister and PDVSA President Manuel Quevedo traveled to Maturín to meet with representatives from companies that provide services to PDVSA’s Eastern Production division.
Everything that we are proposing at this stage of the industry would not be possible without the workers, reported PDVSA in an official statement, citing Quevedo. “It deals with expanding projects and new alliances based on ethics and values,” he said.
In the meetings, Quevedo stressed the importance of Emergency Economic Decree No. 3,368 published in the Official Gazette No. 41,376. The decree authorized creation of a Special and Transitory Regime for the state oil company aimed to expedite paperwork related to contracting.
“The decree will establish a new order that permits for a speedy process and end bureaucratic procedures,” said Quevedo.
(Energy Analytics Institute, Piero Stewart, 7.May.2018) – Venezuela’s opposition presidential candidate Henri Falcon said changes need to be made at state oil company Petróleos de Venezuela, S.A.. He also said an petroleum sector opening was needed to attract investments and boost declining oil production in the OPEC nation.
The transformation of PDVSA would have to begin with an audit, said presidential aspirant Falcon during a televised interview on “The Bocaranda Show” with host and journalist Nelson Bocaranda. Why? “Because PDVSA, which was always the motor of production of resources to support our imports, today has been converted into the cradle of corruption in the country,” said Falcon.
Later, referring to professional workers at PDVSA, as the Caracas-based company is known, Falcon added that a process of professionalism needed to be initialized. He also said that a petroleum opening ‘apertura’ with investments from the Venezuelan state, and also internationally from the private sector was needed so that “the international private sector could be used to give a push to PDVSA to rescue production, which has been declining.”
(Energy Analytics Institute, Aaron Simonsky, 6.May.2018) – Venezuela published its Official Gazette No. 41,389 on 3 May 3 2018 which detailed Decree No. 3398 and the naming of the Board of Directors of state oil company Petróleos de Venezuela, S.A. (PDVSA). Most importantly, the decree ratified Manuel Quevedo as president of PDVSA.
The decree, signed by Venezuela’s President Nicolás Maduro, also confirms the following appointments:
— Ysmel Serrano as Executive Vice President,
— Guillermo Blanco as Vice President of Refining,
— Nelson Ferrer as Vice President of Exploration and Production,
— Fernando de Quintal, Vice President of Trade and Supply,
— Iliana Ruzza, Vice President of Finance,
— Nemrod Contreras, Vice President of Gas,
— Marcos Rojas Marchena, Vice President of International Affairs, and
— Miguel José Quintana, Vice President of Planning and Engineering.
Members retaining their functions as External Directors include the following:
— Wills Rangel,
— Yurbis Gómez,
— Ricardo Leon, and
— Simón Zerpa Delgado.
(PDVSA, 5.May.2018) – People’s Minister of Petroleum and President of Petroleos de Venezuela SA (PDVSA), Manuel Quevedo, held a strategic meeting with oil business leaders in the Ayacucho Division of the Hugo Chávez Orinoco Oil Belt, as part of the Oil Production Recovery Plan
Vice President of Exploration and Production, Nelson Ferrer; Vice President of Corporación Venezolana de Petróleo (CVP), Rafael Urdaneta; Orinoco Oil Belt Executive Director, Freddy Viloria; and Rear Admiral Gustavo Romero Matamoros, Commander of the Belt Security and Protection Special Unit participated in the meeting.
According to Minister Quevedo, the purpose of the meeting was to increase awareness on the scope of Economic Emergency Decree No. 3368, published in Official Gazette No. 41376 dated April 12, which creates a Special and Transitory Regime for the oil industry to accelerate the administrative procedures of the oil contracts.
They signed 11 strategic partnerships and 3 letters for the start of oil service projects in the eastern region, involving Venezuelan businesses.
Minister Quevedo also made a call to maintain a close relationship with PDVSA partners and suppliers, to build a new business model which addresses, more expeditiously, the processes for the acquisition of oil services as well as the payment of debts and production commitments.
“If we want to build a country and eliminate vices, we need extraordinary measures, the cooperation of all, build a new order that allows a direct relationship with our partners”, he said.
Representatives of Multiservicios Sánchez & Valera, Petrolera Álvarez, Orinoco Drilling, Consoldi, Equiservis and Cooperativa 2021, among others, said this is an opportunity to shore up a new business model with PDVSA, a way to provide services that guarantee the maintenance of equipment, the provision of inputs and other oil logistics.
With these actions, Socialist PDVSA continues to consolidate ties with the Venezuelan productive sector through a new business scheme and a win-win relationship, thus increasing operational reliability from the energy heart of the socialist homeland.
(Energy Analytics Institute, Aaron Simonsky, 1.May.2018) – The United Nations Economic Commission for Latin America and the Caribbean, also known as ECLAC or CEPAL by its Spanish acronym, projects economic activity in troubled Venezuela will contract 8.5% in 2018.
Gross domestic product or (GDP) estimates for other important countries and regions follows:
(Energy Analytics Institute, Ian Silverman, 30.Apr.2018) – Venezuelan lawmaker José Brito wrote in a Twitter post that the OPEC country never closed its doors to the hundreds of Trinidadian nationals that left their twin-island nation to seek opportunities in Venezuela.
When Trinidad’s Prime Minister Keith Rowley says in regards to Venezuela immigration that Trinidad “will not convert itself into a refugee camp,” he needs to remember Venezuela never closed its door on Trinidadian immigrants, wrote Brito.
(Energy Analytics Institute, Piero Stewart, 22.Apr.2018) – Patrick Pouyanne, the Chief Executive Officer of French major Total, announced production at one of its oil fields in Venezuela was down to 80,000 barrels per day (b/d) from 120,000 b/d.
Pouyanne made the comments during an oil summit in Paris, reported Oil Price. He added that production in Venezuela was down due to a lack of capital and staff contributions from its partner PDVSA.
(Energy Analytics Institute, 28.Mar.2018) – PDVSA Refining Vice President Guillermo Blanco visited the operational areas of Puerto La Cruz Refinery (RPLC), located in northern Anzoátegui state, reported PDVSA in an official statement. General Manager Johnnyel Ramos guided Blanco and External Director Yurbis Gómez around RPLC.
The RPLC is one of four facilities that comprise the refining circuit, along with El Chaure Refinery, San Roque Refinery and Guaraguao Crude Storage and Shipping Terminal (TAEG).
(Kallanish Energy, 28.Mar.2018) – Chinese and Russian state oil companies PetroChina and Rosneft will not pay the costs of repairing and modernizing Venezuela’s Cardón and Amuay refineries for PDVSA, according to union sources.
Ivan Freites, senior official of the Venezuelan Unions Federation of Oil Workers, told local newspaper El Nacional the foreign partners decided after lengthy negotiations with PDVSA the projected $10 billion cost was too high.
Under proposed lease agreements, the firms would solely cover the costs of upgrading both refineries and use each for 10 years. After that period, the refineries, still owned by the Venezuela government, would be returned to PDVSA, Kallanish Energy learns.
“That agreement did not prosper because these refineries are in a deplorable state and they realized that the investments they had to make are extremely high,” said Freites.
Rosneft would manage the Amuay refinery — which has the capacity to process roughly 640,000 barrels per day (BPD) of crude — and PetroChina would take over the Cardón refinery – which can process 305,000 BPD.
Located in Falcón state, they are both part of the Paraguaná refining complex, which has a capacity of roughly 940,000 BPD, including the Bajo Grande refinery.
Freites said that without foreign investment, Venezuela is likely to shut three of its major refineries in coming weeks, as a shortage of crude and lack of personnel will add further pressure and prevent the facilities from operating.
The refineries pending “indefinite closure” are Cardon, El Palito (140,000 BPD) and Puerto La Cruz (190,000 BPD), the union leader said. Together, they account for nearly half of PDVSA’s 1.3 MMBPD of domestic refining capacity.
Currently, only four refineries are said to be operating in Venezuela, at roughly 30% of their combined nominal capacity – reportedly at about 390,000 BPD.
None of the companies responded to request for comments.
(Tsvetana Paraskova, OilPrice.com, 28.Mar.2018) – If crisis-hit Venezuela was hoping to pay off its US$3.15-billion debt to Russia with its new cryptocurrency, those hopes have been shattered as the Russian Finance Ministry announces that it won’t be accepting digital coin.
Venezuela will not be paying any part of its debt to Russia with its cryptocurrency, the head of the Russian Finance Ministry’s state debt department, Konstantin Vyshkovsky, has said.
In November last year, Russia threw a life-line to Venezuela after the two countries signed a deal to restructure US$3.15 billion worth of Venezuelan debt owed to Moscow. Under the terms of the deal, Venezuela will be repaying the debt over the next ten years, of which the first six years include “minimal payments”.
The following month, Venezuelan President Nicolas Maduro announced that his country would be issuing an oil-backed cryptocurrency, which it did, in February this year.
Maduro’s propaganda machine is touting the digital coin as a ‘ground-breaking’ first-ever national crypto currency, the El Petro–backed by 5 billion barrels of oil reserves in Venezuela’s Orinoco Belt.
But most observers see this crypto issuance as a desperate attempt to skirt U.S. financial sanctions.
Earlier this month, U.S. President Donald Trump banned U.S. purchases, transactions, and dealings of any digital coin or token issued for or by the government of Venezuela.
Last week, Time magazine reported that Russia secretly helped Venezuela in creating the Petro, with the purpose of undermining the power of U.S. sanctions, the magazine reported, citing sources familiar with the effort.
Russia slammed the Time report as “fake news”, with Deputy Director of the Information and Press Department of the Russian Foreign Ministry, Artyom Kozhin, saying that Russia and Venezuela had never worked together on the development of the Venezuelan cryptocurrency.
Russia and China are the last holdouts that still finance Venezuela, which is digging deeper into the downward spiral of economic crisis, hyperinflation, and crumbling oil production. However, China is reportedly thinking of cutting off Venezuela from new loans. This would leave Russia as the only financial supporter of the Maduro regime, and if all it’s got is a crypto coin that no one really believes in to pay off debt, loans are likely to be plentiful.
(Energy Analytics Institute, Pietro D. Pitts, 27.Mar.2018) – Venezuela’s PDVSA owns six domestic refineries with a combined processing capacity of 1,303 thousand barrels per day (Mb/d), according to data from the state oil entity.
A quick summary of the refineries follows:
Refinery ————- Capacity (Mb/d) —- % of Total
Amuay ————— 645 ——————- 49.5%
Cardon ————– 310 ——————– 23.8%
Puerto La Cruz —- 187 ——————- 14.3%
El Palito ————- 140 ——————- 10.7%
Bajo Grande ——- 16 ——————— 1.3%
San Roque ——— 5 ———————– 0.4%
TOTAL ————— 1,303 —————- 100.0%
Venezuela’s refining sector has been hampered now for some time by lack capital investments, maintenance, feedstock, and a continued exodus of quality domestic and international workers, all of which have combined to boost accidents and downtime while bringing down utilization rates. Today, the combined utilization rate for the 6 refineries is nowhere near the levels seen during better times, and PDVSA is increasingly forced to import some petroleum-derivatives from abroad.
(Energy Analytics Institute, Piero Stewart, 27.Mar.2018) – Delegations from Trinidad and Tobago and Venezuela meet in Caracas to review progress related to gas agreements between both nations, reported PDVSA in an official statement.
The delegations reviewed the progress of agreements to finalize construction, operation and maintenance of a gas pipeline that would span from the Dragon field in Venezuela to the Hibiscus field in Trinidad, and eventually supply the domestic market in Trinidad as well as abroad.
The delegation from Trinidad was comprised of the Minister in the Office of the Prime Minister, Stuart Young, and Ambassador Paul Byam; Permanent Secretary at the Ministry of Energy and Energy Industries, Selwyn Lashley; and Chairman of the National Gas Company, Gerry Brooks. The Venezuelan delegation was lead by Venezuela’s Petroleum Minister and President of PDVSA Manuel Quevedo; PDVSA Vice Minister of Gas, Douglas Sosa; and President of the subsidiary PDVSA Gas, Nemrod Contreras.
(Platts, 22.Mar.2018) – PDVSA is planning to close three of its four large refineries in Venezuela indefinitely due to of lack of crude to process and because the state company does not have enough staff to operate the plants, union sources said Thursday.
Refineries: Venezuela’s Cardon, Puerto La Cruz and El Palito
Overall capacity (b/d):
— Cardon 310,000
— Puerto La Cruz 187,000
— El Palito 145,000
Units affected: All
“The information we have is that PDVSA will close the Cardon, Puerto La Cruz and El Palito refineries in the next few weeks,” said union executive Ivan Freites. Freites said that the Cardon refinery would only be used for the production of lubricants and as part of PDVSA’s logistics for the supply of fuels to the national market. “PDVSA will continue to operate the Amuay refinery where it concentrates specialized personnel in refining and the crude available for processing,” Freites said.
Freites said PDVSA specialists are leaving Venezuela for other countries, where they can obtain higher salaries and a better quality of life. At least 4 million people, or 15% of Venezuela’s population, have left the country because of a serious, ongoing economic crisis. “Our records in the unions indicate that 70% of the plant operators and 75% of the process engineers have renounced PDVSA,” Freites said.
PDVSA’s four large refineries in Venezuela are all operating below capacity and with many maintenance problems. This has forced the country to import refined products.
On March 15, Venezuela’s 955,000 b/d Paraguana Refining Center, or CRP, was operating at 267,000 b/d, or 28% of capacity, PDVSA said in technical report. The CRP includes the 645,000 b/d Amuay refinery and 310,000 b/d Cardon refinery. It also includes the Bajo Grande asphalt plant, which has been shut since November 6 due to damage to a furnace.
The technical report said Amuay was operating at 167,000 b/d, or 25.9% of capacity, and Cardon was operating at 100,000 b/d. But on March 21, PDVSA shut its 185,000 b/d No. 5 distiller at Amuay, bringing the plant’s throughput down to 120,000 b/d, or 18.6% of its capacity. PDVSA has not run Amuay at maximum capacity since August 2012, when an explosion killed 42 people and injured 80.
The Puerto La Cruz refinery was operating at 50,000 b/d, or 26.7% of capacity, on March 21.
“The El Palito refinery has been operating intermittently for short lapses, when there is light crude oil to process. At this moment it is paralyzed,” said a refinery union leader who spoke on condition of anonymity.
“Additionally, El Palito does not have electricity supply autonomy, being highly dependent on the national electricity system that also faces a series of crises,” the union leader said. “PDVSA has announced that it will not send more crude to El Palito, so its definitive closure is imminent,” he added.
(Energy Analytics Institute, Piero Stewart, 22.Mar.2018) – Jamaica’s Foreign Minister Kamina Johnson-Smith and her Venezuelan counterpart Jorge Arreaza held a high-level bilateral meeting in Caracas regarding ways to strengthen energy cooperation through the Petrocaribe Energy Cooperation Agreement, reported PDVSA in an official statement. Both officials also reaffirmed their country’s willingness to continue working together for the benefit of their citizens.
(Energy Analytics Institute, Piero Stewart, 22.Mar.2018) – Workers at PDVSA’s headquarters in Caracas, La Campiña, participated in protest today inside the company’s main building, reported the daily El Nacional, citing a local reporter, Ramon Camacho.
During the protest, the workers demanded that PDVSA make due on all late payments to employees and also shouted out suggestions to the actual president of the state entity, Manuel Quevedo, to step down.
PDVSA didn’t respond to email requests to verify the actions.
(Energy Analytics Institute, Piero Stewart, 20.Mar.2018) – A fire reported Saturday 17 March 2018 at a PDVSA controlled petroleum site located in the Lagunillas sector in Zulia state took an estimated 12 hours to extinguish due to a lack of fire foam, reported the daily El Nacional, citing a tweet from Somos Noticias COL.
It is unclear how the fire started or what was affected during the incident as PDVSA has yet to provide details.
(Energy Analytics Institute, Piero Stewart, 19.Mar.2018) – A new collective contract signed by PDVSA on 14 March 2018 eliminates 8 hour shifts and work lunch rooms, reported the newspaper El Nacional, citing oil union official Iván Freites.
Workers will now be required to work 12-hour shifts, said Freites. He added Venezuelan petroleum sector workers plan actions to reject the new collective contract, without providing details.
“With the elimination of 8 hour shifts, we are returning to the 19th Century,” said Freites.
(Mac Margolis, 16.Feb.2018) – Wedged between Brazil and Venezuela, Guyana could easily go unnoticed. It has fewer than 750,000 people and a per capita income of $4,300, half the regional average, qualifying it as the hemisphere’s third-poorest nation.
At the moment, Guyana also might be its luckiest. Having struck big oil offshore starting in 2015, industry experts reckon total reserves at around 2 billion barrels. That bounty could make Guyana immeasurably rich and Latin America’s biggest producer in less than a decade – or just another Trump-hole.
History abounds with tales of raw-material bonanzas turned into, at best, a mixed blessing for poor countries. Dutch disease, corruption (think Venezuela and Nigeria), life support for dictators: The gift of oil comes with many afflictions. A classic International Monetary Fund study found that living conditions in oil-rich nations in sub-Saharan Africa were no better or worse than countries without oil.
“Equatorial Guinea comes to mind,” Rice University energy scholar Francisco Monaldi told me, in reference to the Central African dictatorship which, after striking oil in the 1990s, went in a matter of years from desperately poor to desperately rich.
“We know historically that if you’re poorly managed when you received the windfall, you’ll likely have difficulty capitalizing your bounty for development,” said Monaldi.
The example is not lost on Guyana, which has a vibrant if flawed — “partially free,” according to Freedom House — democracy, but frail institutions and admittedly scarce human capital to manage the coming wealth. “Guyana has almost zero capacity now for dealing with oil and gas,” Jan Mangal, petroleum adviser to President David Granger, said recently at the University of Guyana.
While officials in Georgetown quickly disavowed Mangal, his comments were hard to ignore. With major oil set to flow as soon as 2020, authorities are bracing both for the shock of wealth and its attendant woes. The bounty will not come all at once: Exxon and other producers will use most of the early oil to pay down startup costs. But that will only delay the impact. “It’s like drinking from a fire hose right now,” Vincent Adams, a Guyanese engineer who recently retired from the U.S. Department of Energy, told me.
One of the biggest challenges is who will manage the gusher. Guyana is a nation of emigrants. Some 463,000 Guyanese, or 60 percent of its population, live abroad, and the outflow continues apace. What’s worse, the leavers have included roughly nine of every 10 graduates with higher education — energy experts and oil engineers among them — according to the World Bank. “The cream of the crop migrated,” said Adams. “In terms of local capacity, we are at a serious disadvantage.”
Guyana could attenuate the brain drain by reaching out to its diaspora. There are more than 100 reported expatriate organizations, and as a group overseas Guyanese consistently send more money back home than foreign investors plow into the economy every year, according to a recent study by Hisakhana Pahoona Corbin and Luis Eduardo Aragon of the Center for Advanced Amazonian Studies. “We have a repository of knowledge outside of Guyana which is amazing,” said Adams.
The government belatedly began to tap this talent pool, launching an official Guyana Diaspora Project in late 2012, but the effort has been criticized as timid. “In spite of this potential, few institutional arrangements have been put in place to better engage the diaspora or to unlock their potentials as an alternative for accelerating development,” Corbin and Aragon wrote last year.
Granted, Guyana will have some help. The Extractive Industries Transparency Initiative is counseling officials on how to avert corruption. Multilateral lenders are training Guyanese to develop an investment plan and mitigate the fiscal risk of the oil boom. “The sudden inflow of wealth could become a tsunami, and if it’s not managed well, could leave a dire situation,” Ramon Espinasa, general coordinator of the Extractive Sector Initiative at the Inter-American Development Bank, said in an interview.
Big Oil also knows the stakes. Despite the familiar criticisms — “Dem know wha Exxon do to govt all over de world,” one marquee local columnist warned in a mock patois — drillers have every reason to make sure their investment is safe.
The hardest part will be down to the host country, of course. “Until recently, small countries like ours were sheltered by benefactors in the east or west. Now the Berlin Wall is gone and the protectors have become our competitors, and we’re left to deal with the world markets,” said Adams.
That’s the challenge the country’s emigrants faced when they remade their careers abroad. Now Guyana must reach out to its diaspora ringers and bring that lesson home.
(Energy Analytics Institute, Ian Silverman, 23.May.2017) – PDVSA President Eulogio Del Pino announced that he fully backs Venezuelan President Nicolás Maduro in the Constituent Assembly process to defeat what he described as violence brought about by the right-wing political groups, reported PDVSA, citing the president of the state oil company.
“They send paramilitaries to attack our distribution units and services stations to later say there is no fuel and generate false opinions about supply,” said Del Pino.
(Energy Analytics Institute, Ian Silverman, 23.May.2017) – Venezuelan petroleum sector workers accompanied Venezuelan President Nicolás Maduro during a march for peace to the headquarters of the National Electoral Council (CNE by its Spanish acronym) in Caracas where he revealed details related to the upcoming Constituent Assembly, a process to rewrite the OPEC country’s Constitution.
“The petroleum workers are here defending the Bolivarian Revolution and giving their all for dialogue,” said PDVSA External Director Ricardo León, referring to the ongoing protests nationwide against the government of Maduro.
(Energy Analytics Institute, Pietro D. Pitts, 22.May.2017) – In recent weeks PDVSA has reported at least three accidents: Petrotrin oil spill in Sucre state and incidents at its Cardon and Curaçao refineries.
The writing on the wall continues to point to a cash-strapped state oil company with an inability to make investments, retain top talent, organically grow oil production, and let alone take on the leadership role in Venezuela’s upstream, downstream, or midstream sectors. The stand-alone events at PDVSA’s Cardon and Curaçao refineries demonstrate conditions at the company’s refineries continue to deteriorate as expected due to a lack of investments, upgrades and maintenance by the state oil entity.
(Energy Analytics Institute, Piero Stewart, 21.May.2017) – PDVSA and Shell continue to conduct discussions related to the exportation of Venezuelan natural gas to the twin-nation island of Trinidad and Tobago, reported PDVSA in an official statement.
“We are evaluating the base of resources for export,” announced PDVSA, citing PDVSA Gas President César Triana. “We have received proposals to finalize the accelerated production project and future development of the field to boost export volumes to the Caribbean nation,” she said. Discussions between the companies were headed by PDVSA President Eulogio Del Pino and PDVSA Gas President Cesar Triana and Shell Venezuela and Trinidad President Luis Prado.
Discussions between the companies teams focused on three aspects: gas volumes, gas prices and the field interconnection point. An earlier agreement signed by the companies entails construction, operation, and maintenance of a gas pipeline to transport the fuel source between both nations and span from the Dragon field located in Sucre state to the Hibiscus field in Trinidad. The project is estimated to have achieved the 91% completion mark, PDVSA reported.
Paria North — where the gas will come from — contains 14.3 trillion cubic feet (Tcf) of gas reserves in four fields: Dragón, Patao, Mejillones and Río Caribe. The Dragón field alone contains 3.1 Tcf, according to PDVSA.
Discussions also focused on the flaring of gas in North Monagas and future recollection of this gas and other general themes related to the Petroregional del Lago mixed company. The initial volumes from the Dragón field will be destined for the Venezuelan domestic market to substitute the use of diesel at thermo-electric plants, and is estimated to free up 32,000 barrels per day of fuel.
(Energy Analytics Institute, Ian Silverman, 21.May.2017) – PDVSA reiterated in a twitter post that once the authorities from Trinidad and Tobago notified the company of the Petrotrin oil spill that it activated a local contingency plan.
(Energy Analytics Institute, Piero Stewart, 20.May.2017) – PDVSA announced that clean-up activities continue along the Venezuelan coast off Sucre state, related to the spill of crude oil at the Pointe-à-Pierre refinery in Trinidad and Tobago, reported the state oil co. in an official statement.
After reviewing clean-up activities along the Paria Peninsula, PDVSA President Eulogio Del Pino announced Venezuela had removed 80% of the spill fuel.
“We flew over Cocal, Pata, and Puerto Hierro beaches as well as Pato Island and observed that the clean-up process is above 80%,” said Del Pino. “The remaining impact is minimum.” We have removed 80% of the fuel from the spill that had reached La Caracola beach in Margarita Island, said Del Pino. Oil also reached Los Roques; however, the impact was minimum, PDVSA reported.
PDVSA is awaiting a visit from Petrotrin to discuss the oil spill. “Petrotrin [officials] will visit all the affected areas,” said Del Pino.
(Piero Stewart, Energy Analytics Institute, 20.May.2017) – Petroleum production below historic average levels, economic distortions on all fronts, the problem with Venezuela, which is clear for the financial markets, is the liquidity crisis, according to an economist in Caracas.
“The Venezuela debt is considered one of the most attractive for those willing to assume the risk, said Peruvian Economist José Gonzáles during an interview broadcast by Globovision. As they say in the financial markets, “the Venezuelan debt is not for the weak of heart.” The Venezuelan bonds are very attractive but also very volatile, he said. The returns on the Venezuelan bonds [are demonstrating to some extent] — because the perception continues to be that the payment conditions are critical in terms of liquidity and if this economic situation continues — that it could led to insolvency, said Gonzáles.
(Piero Stewart, Energy Analytics Institute, 20.May.2017) – “This government doesn’t want to reduce inflation because this government, generating inflation uses it to finance itself,” said opposition lawmaker and Economist José Guerra.
“The inflation is a financing mechanism of the government and that is why they don’t want to stop it,” he said. “When there is high inflation or hyperinflation, the solution is very simple: stop the issuance of inorganic money that is carried out by the Venezuelan Central Bank,” said Guerra during an interview broadcast by Globovision.
(Energy Analytics Institute, Aaron Simonsky, 20.May.2017) – PDVSA continues to guarantee the supply of fuels across the country despite ongoing protests, reported PDVSA in an official statement, citing Commerce and Supply Vice President Ysmel Serrano.
PDVSA guarantees it will deliver more than 50 million liters of fuel including 91 and 95 octane gasoline, diesel, domestic gas, and marine fuel, among others, announced Serrano without providing a specific period.
(Energy Analytics Institute, Jared Yamin, 19.May.2017) – In recent weeks, a reported 66 companies in Venezuela dedicated to the collection of milk have closed their doors and stopped distribution activities due to problems receiving fuel, reported the daily newspaper El Nacional, citing Leonardo Figueroa, president of the Ranchers Association of Táchira state.
“We don’t have gas-oil or gasoline,” said Figueroa during an interview with Union Radio. “Transport operations are paralyzed and if the situation isn’t resolved soon it could cause a crisis worse than what we are living due to the scarcity [of just fuel].” Táchira state is a major producer of milk in Venezuela, he added.
(Energy Analytics Institute, Ian Silverman, 16.May.2017) – PDVSA halted the catalytic cracking unit at the 310,000 barrel-per-day Cardón refinery in Punto Fijo, reported Reuters, citing a worker at the plant and a union official. It is unclear when the unit will be back online.
(Energy Analytics Institute, Aaron Simonsky, 16.May.2017) – PDVSA in alliance with Camimpeg (Compañía Anónima Militar de Industrias Mineras, Petrolíferas y Gas) and Southern Procurement Services (SPS) plan to boost production in Lake Maracaibo by more than 30,000 b/d with an investment of $400 mln, reported PDVSA in an official statement.
“There are more than 500 MMbbls to be developed at Urdaneta Field and we’re going to take it to its maximum production,” said PDVSA President Eulogio Del Pino during a signing ceremony at the Alí Primera Dock, located in La Cañada de Urdaneta municipality in Zulia state.
Del Pino said an unconventional financial model was being applied, for the first time in lake operations, through which “we pay upon services rendered, in this case, upon incremental barrel produced.” The model has been implemented in other areas, and will be replicated in other Lake Maracaibo fields, he said. The companies seek to increase production through the drainage of recoverable hydrocarbon reserves in the reservoirs, according to PDVSA. The alliance between CamimpegSPS and PDVSA calls for development of the Urdaneta Field located in Lake Maracaibo, as well as work at the Alí Primera Dock. Work activities include repairing boat facilities and installations, field optimization, safety reinforcement, drilling wells and recovery activities.
(Energy Analytics Institute, Aaron Simonsky, 15.May.2017) – Petrolera Indovenezolana opened a Saltwater Injection Plant in Zuata North field, Anzoátegui state to boost production and prevent reservoir declination. The field, located in Hugo Chávez Orinoco Oil Belt’s Junín Division, utilized Venezuelan technology during the early phase of the project, reported PDVSA in an official statement.
The project aims to recover production levels and increase it over the short term to 23,000 b/d from 18,500 b/d, PDVSA said. The medium-term goal is to achieve average production of 22,000 b/d which partners PDVSA and Indian company Oil and Natural Gas Corporation Videsh (ONGC) aim to maintain over a 10-yr period. Implementation of this secondary recovery method is expected to boost the current recovery factor to 15% from 9%; thus, recovering an additional 80 MMbbls, according to PDVSA.
(Energy Analytics Institute, Aaron Simonsky, 13.May.2017) – PDVSA has intensified contingency measures to counter the ill effects of an oil spill that occurred last week in neighboring Trinidad and Tobago.
Oil from the spill has reached the Venezuelan eastern coast including the Bay of Morro de Puerto Santo and Cipara beach in the Arismendi municipal in Sucre state as well as other coastal areas such as La Caracola in Valdez beach, Punta Ballena and El Ángel, all located in Nueva Esparta state, announced PDVSA in an official statement.
PDVSA’s Zone 5 Contingency Plan was activated on April 25, 2017 to counter the leakage of fuel oil from Petrotrin’s Pointe-à-Pierre Refinery located in Trinidad. PDVSA personnel continue to conduct maritime and aerial inspections along the areas affected by the spill and primarily of the Paria Peninsula in Sucre state and the southern area of Nueva Esparta state. PDVSA did not provide estimates as to how much oil may have reached Venezuelan coastal regions nor did it provide details of the potential environmental impact of the leakage.
(Energy Analytics Institute, Aaron Simonsky, 13.May.2017) – PDVSA announced construction of a 100-MW electric generation plant located in Barinas state had reached the 98% mark in terms of completion.
Work on the plant is estimate for completion this June 2017, PDVSA announced in an official statement.
New infrastructure at the plant located in the Santa Ines Agroindustral Complex (Cominsi by its Spanish acronym) will allow the company to satisfy the energy needs of the petroleum sector and population in Barinas.
“The energy will supply PDVSA’s operating system with just 15-MW while the remaining 85% will be destined for the Barinas electric network,” reported PDVSA citing the company’s Planning and Engineering Vice President Marianny Gómez.
Construction of the dual fuel plant commenced 34 months ago. Financing to the tune of $300 million was procured through the ChinaVenezuela Fund, announced PDVSA. The pre-commissioned and commissioned testing by PDVSA and its principal contractor, China’s Sinohydro, has advanced without problems, reported PDVSA.
The project, during the construction phase, generated a maximum of 893 direct employees and approximately 2,679 indirect employees. Since construction commenced in February of 2014, the employees have accumulated 2,965,710 labor hours, announced PDVSA.
(Energy Analytics Institute, Aaron Simonsky, 13.May.2017) – Venezuelan President Nicolas Maduro said during a speech televised on national TV that “rain, thunder or lightning, in Venezuela there would be presidential elections in 2018 because the revolution governed.”
(Energy Analytics Institute, Piero Stewart, 26.Mar.2017) – Venezuela’s President Nicolas Maduro announced that this year the South American country would change its oil rentier model for an economic model whereby the private sector would work with his revolutionary government.
(Energy Analytics Institute, 26.Mar.2017) – Houston-based Citgo Petroleum Corporation, the U.S.-based refinery arm of PDVSA, had to skip out on sending heating oil to citizens in the U.S. northeast under a program dubbed “Joe-4-Oil” amid a continued economic crisis in the oil-rich nation, reported the news agency AP.
(Energy Analytics Institute, Piero Stewart, 26.Mar.2017) – An inability to boost foreign and domestic investments in Venezuela’s oil sector in 2017 will result in further declines in the Caribbean nation’s production of crude oil, according to IESA Professor Richard Obuchi.
Producing petroleum requires investments, and if they do not materialize, oil production is expected to fall an additional 100,000 to 150,000 barrels per day, announced Obuchi during the conference titled “Economic Perspectives 2017” held at the Instituto de Estudios Superiores de Administración (IESA) in Caracas. “Economic activity is expected to fall between 4 and 6 percent of GDP,” he added.
“PDVSA’s capacity to maintain production fell in 2016 due to, [but not limited to], a lack of investments and obligations related to financial debts,” said the Full Professor of Political Economy and Governance at the IESA Business and Public Policy School Michael Penfold during the conference. As a result, in 2016, PDVSA experienced a 12 percent decline in production, he said.
“When someone compares PDVSA’s investments levels with other state oil companies such as Pemex and Ecopetrol they will see the companies have been reducing investments. PDVSA has reduced investments much more than Pemex, Ecopetrol and even Rosneft, and we’re talking about investment reductions at PDVSA that not only prevents it from maintaining production but fundamentally explains why production has been declining so much in recent years,” concluded Penfold.
(Energy Analytics Institute, Aaron Simonsky, 15.May.2017) – Venezuela expects to receive between $120,000 and $150,000 per day from the sale of its gasoline along the Colombian border, reported the daily El Nacional citing Economist Aldo Contreras. However, since initiating the process on January 2, 2017 to commercialize its gasoline along the border in Colombian pesos, the Venezuelan government has yet to register a sale in pesos.
The sale of Venezuelan gasoline along the Colombo-Venezuelan border was envisioned by the government of President Nicolas Maduro to cut down on contraband and boost foreign export revenues.
(Energy Analytics Institute, Piero Stewart, 11.Mar.2017) – Venezuela, the country with the world’s largest crude oil reserves, also continues to hold the world’s eighth largest accumulation of natural gas reserves (see table below), according to BP’s Statistical Review of World Energy.
Top Ten Holders of Natural Gas Reserves Worldwide
Rank —- Country ———————- Natural Gas Reserves (Tcf)
1 ——— Iran ————————– 1,201.4
2 ——— Russia ———————– 1,139.6
3 ——— Qatar ———————— 866.2
4 ——— Turkmenistan ————– 617.3
5 ——— USA ————————- 368.7
6 ——— Saudi Arabia ————— 294.0
7 ——— United Arab Emirates —- 215.1
8 ——— Venezuela * ————— 198.4
9 ——— Nigeria ——————— 180.5
10 ——- Algeria ———————- 159.1
Note: PDVSA reported that Venezuela’s natural gas reserves were 201.349 trillion cubic feet (Tcf) at year-end 2015, the last time the company reported annual auditing operational data. Of this total, 64.916 Tcf corresponded to associated gas in the Hugo Chávez Heavy Oil Belt, and 36.452 Tcf corresponded to associated gas related to extra heavy oil in Venezuela’s Eastern Basin, according to PDVSA data.
(Energy Analytics Institute, Piero Stewart, 11.Mar.2017) – PDVSA said that the start of the Jusepin 200 gas processing plant will allow its affiliate PDVSA Gas to reduce gas flaring by 100 million cubic feet per day (MMcf/d), announced Venezuela’s oil ministry in a twitter post.
The compression plant, located in the NIF Complex (Hato El Limón), is comprised of four compression trains with capacity to handle 200 MMcf/d of gas at a level of 60 pounds per square inch gage (PSIG).
(Energy Analytics Institute, Piero Stewart, 11.Mar.2017) – The water level at Venezuela’s Guri Dam was at 261 meters above sea level as of March 1, 2017, and up 12 meters over the same period in 2016 when the water level was at 249 meters above sea level, reported the daily newspaper El Universal, citing Venezuela’s Electric Energy Minister Luis Motta.
In 2016, the water level at the Guri Dam — the fourth largest hydroelectric power plant in the world in terms of generating capacity — fell to 241.35 meters above sea level on May 28, 2016.
(Harvest Natural Resources, Inc., 6.Mar.2017) – Harvest Natural Resources, Inc. announced 2016 fourth quarter and year-end earnings.
Harvest posted a fourth quarter 2016 net income of $100.6 million, or $9.00 per basic and diluted share, compared with a net loss of $73.2 million, or $5.70 per basic and diluted share, for the 2015 fourth quarter. For the year-ended December 31, 2016, Harvest’s net income was $66.6 million, or $5.35 per basic and diluted share, compared with a net loss of $98.6 million, or $8.71 per basic and diluted share, for 2015.
The fourth quarter 2016 results include non-recurring items of (i) gain on the sale of Harvest-Vinccler Dutch Holding B.V. of $118.9 million or $10.64 pre-tax per basic and diluted share; and (ii) loss on extinguishment of debt of $10.3 million, or $0.92 pre-tax per basic and diluted share. Adjusted for these non-recurring items, Harvest would have had a fourth quarter net loss, unadjusted for any income tax effects, of $8 million, or $0.72 per basic and diluted share.
The year-end 2016 results include exploration charges of $2.4 million, or $0.19 pre-tax per basic and diluted share, and non-recurring items of (i) gain on the sale of Harvest Holding of $115.5 million, or $9.29 per basic and diluted share; (ii) loss on the impairment of oilfield inventories of $1.5 million, or $0.12 pretax per basic and diluted share; (iii) interest expense of $4.2 million, or $0.34 pre-tax per basic and diluted share; (iv) loss on the change in fair value of warrant liabilities of $9.4 million, or $0.75 pre-tax per basic and diluted share; (v) gain on the change in fair value of derivative assets and liabilities of $2.4 million, or $0.19 pre-tax per basic and diluted share; (vi) loss on the extinguishment of debt of $10.3 million, or $0.83 pre-tax per basic and diluted share; and (vii) impairment of a note receivable of $5.2 million, or $0.41 per basic and diluted share. Adjusted for exploration charges and these non-recurring items, Harvest’s net loss, unadjusted for any tax effects, for 2016 would have been $18.5 million, or $1.49 per basic and diluted share.
Sale of Venezuela Interests
On October 7, 2016, Harvest completed the sale of all of its interests in Venezuela. The sale occurred pursuant to a June 29, 2016 share purchase agreement under which HNR Energia B.V. sold its 51 percent interest in Harvest Holding to Delta Petroleum N.V., a limited liability company organized under the laws of Curacao. Harvest Holding indirectly owned a 40% interest in Petrodelta S.A., through which all of the company’s interests in Venezuela were owned. As a result of the sale, Harvest Holding’s effect on results of operations and other items directly related to the sale have been reported as discontinued operations.
CT Energy Holding SRL, a private investment firm organized as a Barbados Society with Restricted Liability, assigned all of its rights and obligations under the Share Purchase Agreement to its affiliate, Delta Petroleum, on September 26, 2016. Harvest has no control or ownership interest in Delta Petroleum.
At the closing, the company received consideration consisting of:
— $69.4 million in cash paid after various closing adjustments. — An 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum. This note plus accrued interest is due April 7, 2017. — The return of all of the company’s common stock owned by CT Energy, consisting of 2,166,900 shares to be held by the company as treasury shares. — The cancellation of $30 million in outstanding principal under the 15% Note. — The cancellation of the warrant issued to CT Energy in 2015 to purchase up to 8,517,705 shares of common stock for $5 per share (after adjustments for the November 3, 2016 stock split).
The relationship between the company and CT Energy effectively terminated upon the completion of the sale under the Share Purchase Agreement. All company securities held by CT Energy were terminated or relinquished, and Oswaldo Cisneros and Alberto Sosa resigned as CT Energy’s non-independent designees to the company’s board of directors. Additionally, all liens securing company debt formerly owed to CT Energy were released at the closing. Upon the closing, the company’s primary assets were cash from the proceeds of the transaction and the company’s oil and gas interests in Gabon.
NOL Poison Pill
Rights Agreement to Protect Net Operating Losses
On February 16, 2017, the Board adopted a Rights Agreement designed to preserve the company’s tax assets. As of December 31, 2016, the company had cumulative net operating loss carryforwards (NOLs) of approximately $56 million, which can be utilized in certain circumstances to offset possible future U.S. taxable income.
Harvest’s ability to use these tax benefits would be limited if it were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code. An ownership change would occur if stockholders that own (or are deemed to own) at least five percent or more of Harvest’s outstanding common stock increased their cumulative ownership in the company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The Rights Plan reduces the likelihood that changes in Harvest’s investor base would limit Harvest’s future use of its tax benefits.
At the company’s special meeting of stockholders on February 23, 2017, the stockholders voted to (1) authorize the sale by us, indirectly through a subsidiary, of all of our interests in Gabon upon the terms and conditions set forth in the Sale and Purchase Agreement; (2) approve, on an advisory basis, compensation that will or may become payable by us to our named executive officers in connection with the sale of our Gabon interests; and (3) authorize the complete liquidation and dissolution of Harvest.
Proposed Dissolution and Liquidation
Following the successful sale of our Venezuelan interests in October 2016 and in light of the proposed sale of our Gabon interests, our board of directors considered dissolution and liquidation as a possible alternative. On January 12, 2017, the Board unanimously determined that the dissolution and liquidation of Harvest was advisable, authorized the dissolution and liquidation and recommended that the proposed complete dissolution be submitted to a vote of Harvest’s stockholders.
Our Board also adopted a plan of complete dissolution, liquidation, winding up and distribution (the “Plan of Dissolution”) on this date. Harvest’s stockholders approved the proposed dissolution and liquidation at the special meeting on February 23, 2017.
Under the dissolution, liquidation and winding up process, which remains subject to the control of the Board and company management, the proceeds from the Gabon transaction would be combined with other Harvest assets to be distributed to Harvest’s stockholders, subject to the payment of certain costs and expenses. The company currently expects to commence dissolution proceedings as soon as practicable after the closing of the sale of its Gabon interests.
Distributions to Shareholders
The Board intends to declare a distribution payable to the shareholders after the Gabon transaction has closed. The exact amount of the distribution has not been determined at this time. Once the record date is set, the company will disclose the proposed distribution.
(Energy Analytics Institute, Piero Stewart, 2.Mar.2017) – The Mariscal Sucre offshore project is expected to be producing 300 million cubic feet per day (MMcf/d) in the fourth quarter of 2017, PDVSA announced in an official statement.
The Mariscal Sucre project is comprised of four fields: Dragón, Patao, Mejillones and Río Caribe.
(PDVSA, 24.Feb.2017) – PDVSA, through its subsidiary PDVSA Servicios SA, has been involved in a legal battle against PetroSaudi Oil Services Ltd.
Among other claims, PDVSA seeks to obtain compensation for damages incurred due to the poor performance of the offshore drilling unit contracted to carry out drilling and well completion activities in the gas reservoirs located north of Sucre state, as part of the Gran Mariscal Sucre project.
Following a PDVSA Executive Committee decision, a series of legal actions were agreed upon in August 2015, leading to Commercial Arbitration based in Paris and governed under the laws of the Bolivarian Republic of Venezuela.
During the course of legal actions several decisions have been made in favor of PDVSA, thus preventing the defendant, PetroSaudi Oil Services Ltd. from continuing to abuse, in an unscrupulous manner, the good faith of the parties in the execution of the activities related to the rendering of the offshore drilling services. The Arbitral Tribunal, which has heard the reasons for the contractual disputes, is expected to issue a Final Award during the fourth quarter of this year.
The High Court of Justice in England, having heard the case in first instance, issued a judgment last October 2016, declaring fraudulent, null and void the actions taken by PetroSaudi Oil Services Ltd. to execute guarantees and obtain payments in flagrant contravention to the decision by the Arbitral Tribunal prohibiting access to amounts of money that are in dispute in said proceedings until a final judgment on merits is rendered.
This Judgment was appealed by the contractor to the Court of Appeal of England, which erroneously overturned the decision of the High Court of Justice. However, the execution of this Judgment has been temporarily suspended and accordingly, PDVSA is taking all pertinent legal actions.
Pursuant to the foregoing, on February 9 of the current year an application for permission to appeal was made to the Supreme Court of the United Kingdom to ask for a correction of the errors made by the aforementioned Court of Appeal.
PDVSA will tirelessly pursue all means to defend its assets, which belong to the Venezuelan people.
(PDVSA, 23.Feb.2017) – PDVSA and the Russian company Rosneft held a technical conference on strategy, innovation and technology for a sustainable future, February 22-23, 2017 at PDVSA Intevep’s headquarters in Los Teques, Miranda state.
The event brought together 150 PDVSA and Rosneft specialists from various fields to strengthen cooperation, exchange and technological integration between the People’s Power Ministry of Petroleum, PDVSA, Intevep, joint ventures and Rosneft.
At the opening event, President of PDVSA Intevep Omar Uzcátegui spoke about the potential of this PDVSA subsidiary for the development of technologies and providing specialized technical assistance services. He also spoke about the participation of PDVSA Intevep in the Hydrocarbons Economic Driver to facilitate the massification and implementation of its technologies.
Technical Director of Rosneft in Venezuela Kim Gobert, spoke about the importance of the Hugo Chávez Orinoco Oil Belt, the worl’s largest proven hydrocarbon reserve base. He said that it was necessary to make progress in the strengthening of relations between the two companies to accelerate research projects on the development of heavy and extra heavy crude oil.
The conference brought together specialists from PDVSA and Rosneft, who spoke on diluent management, enhanced hydrocarbon recovery technologies for heavy and extra heavy crude, infrastructure and transportation of crude oil, electricity demand in oil and gas areas, gas management and handling, innovative technological solutions in oil and gas areas including offshore, and a new vision in the improvement and management of solids, effluents and gases.
There are technical round tables for the discussion of four priority issues, such as: integrated gas management, reservoir development and enhanced hydrocarbon recovery, crude oil upgrading and diluent management, and infrastructure and transportation.
The conference aimed to boost the development of PDVSA and Rosneft joint ventures, such as Petromonagas, Petromiranda and Petrovictoria in the Hugo Chávez Orinoco Oil Belt for extra heavy crude oil, and Petroperija and Boquerón in traditional areas.
(PDVSA, 22.Feb.2017) – The vice president of trade and supply of PDVSA Ysmel Serrano, concluded a work trip to Cuba in order to strengthen energy cooperation ties as part of the Cuba-Venezuela Agreement.
Key issues for the development of integration policies with the peoples of the Caribbean were discussed in a meeting with the Minister of Energy and Mines Alfredo López Valdez, and the General Director of state-owned company Unión Cuba-Petróleo (CUPET) Juan Torres.
Serrano said this bilateral agreement, since its inception in 2000, has fulfilled the obligations set forth in the comprehensive energy cooperation accord, “having a positive impact on the economic and social development of both nations.”
Accompanied by Operations Manager and President of PDV Marina Admiral Franklin Montplaisier, he visited the Matanzas Supertanker Base, the main marine terminal for the reception of hydrocarbons and operations logistics system for storage and distribution.
Supply strategies to ensure ongoing and efficient shipment reception operations were discussed. “It was made clear to us the excellent conditions and the high operational level of this base,” said Serrano.
They also held a meeting with Vice President of the Executive Committee of the Council of Ministers Ricardo Cabrisas Ruiz, on refining, production, exploration, commercialization and distribution of hydrocarbons, highlighting the key role of Venezuela in the development of their Economic and Social Plan 2017-2030.
Cabrisas acknowledged efforts made by Venezuelan President Nicolás Maduro to support the recovery of oil prices. He also expressed his solidarity and emphatic support for the Bolivarian Revolution and the Vice President of the Republic Tareck El Aissami, in the midst of the U.S. empire’s vile attack of recent days.
Finally, Serrano ratified the support and commitment of oil industry workers in the construction of a multipolar world where the sovereignty of the peoples is respected, as dreamed by Commander Fidel Castro and our Supreme Commander Hugo Chávez.
(PDVSA, 22.Feb.2017) – On February 21, 2017, Schlumberger CEO Paal Kibsgaard, visited the headquarters of Petróleos de Venezuela S.A. (PDVSA) to hold a meeting with PDVSA President Eulogio Del Pino.
The agenda focused on Venezuela opportunities as the low oil price cycle is coming to an end. They exchanged views on the existing portfolio and the future that brings together both companies.
It is important for Schlumberger to strengthen its activities in Venezuela; they are working on models to cover the needs of both companies, while at the same time creating new jobs thus increasing the efficiency of operations for PDVSA, said Kibsgaard.
Del Pino expressed satisfaction with the discussion of projects and proposals made by Schlumberger. This is an ideal time for the industry to come up with creative solutions to bring about necessary investment for the benefit of both companies and the stability of the oil market, he said.
(PDVSA, 20.Feb.2017) – PDVSA informed all holders of PDVSA Bonds maturing in 2022, that payment of interest was made on February 17, 2017 corresponding to the semester ending February 2017, according to preset conditions on paper issued February 2011.
(PDVSA, 20.Feb.2017) – As has been informed, PDVSA subsidiary Bariven, S.A., has been the victim of a fraud perpetrated by former contractors and suppliers of the company led by Roberto Enrique Rincón Fernández and Abraham José Shiera Bastidas, who in complicity with former employees of a foreign PDVSA subsidiary obtained procurement contracts through acts of corruption.
To date, eight implicated persons, including Rincón and Shiera, have pleaded guilty to such fraud before the United States District Court for the Southern District of Texas Houston Division.
Upon learning of the fraud, the company’s internal control bodies were immediately instructed to thoroughly investigate the situation.
PDVSA has made significant progress in this ongoing legal case. To compensate for the damage suffered as a result of these acts of corruption, the following actions have been taken:
— Bariven, as a direct victim of the acts of corruption, has introduced before the criminal court in Houston, Texas familiar with the criminal proceedings against the accused, a request for restitution to be recognized as a victim and order the defendants to compensate financially for the damages suffered by Bariven.
— On January 17, 2017, the trial judge adopted Bariven’s position and ordered all parties to the proceedings, including the federal prosecution representing the interests of the United States government as well as the accused, to submit their positions on Bariven’s request no later than February 20, 2017. This is a major breakthrough for Bariven, that had opposed the request by the federal prosecutor’s office to defer this process indefinitely. With this order, the judge ensures that Bariven will be heard and that the accused individuals will have to face up to their responsibilities.
— Companies linked to the persons accused in Houston, Texas were ordered to immediately stop receiving payment. Several of these companies initiated claims in arbitration tribunals requesting the payment of allegedly owed invoices. Bariven, as the other party in such contracts, has opposed said payment and furthermore, it has filed a counter claim against the plaintiff companies for damages caused as a result of contracts that show elements of corruption. The plaintiff companies in these cases are directly linked to Rincón and his family.
— We have investigated and identified in several countries, assets and property of persons linked to these acts of corruption and their possible front persons. The filing of all corresponding legal actions, both civil and criminal, has been authorized in the appropriate foreign jurisdictions.
Finally, the company has strengthened its internal controls and implemented new procedures to prevent situations such as these from happening again and ensure its prompt prevention, detection and response.
PDVSA and its affiliates will not tolerate acts of corruption and will continue to investigate and act with the aim of establishing responsibilities for all identified facts.
(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – PDVSA announced a fire along a section of an oil pipeline located in Barinas state was controlled with the assistance of the state fire department, state police and civil protection personnel.
The fire occurred along the San Silvestre–El Real section of the 20-inch pipeline in Barinas Municipal, the company announced in an official statement on February 12, 2017.
PDVSA is investigating the causes of the fire. No injuries were reported to PDVSA workers, or residents living or working near the pipeline, the company said.
(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – Venezuela signed 22 agreements with China, including eight (8) related to heavy and extra heavy oil ventures in the OPEC-member country, with an estimated value of $2.7 billion, announced Venezuelan President Nicolas Maduro during a signing ceremony in Caracas.
(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – PDVSA estimates that the deep conversion project at its 100 percent owned Puerto La Cruz refinery, which will require foreign investments of $10.5 billion and allow the refinery to process 210,000 barrels per day, will conclude in late 2018.
(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – A Paris Court of Appeal’s rejection of an annulment from Venezuela will force the cash-strapped South American country to pay $730 million to Canada’s Gold Reserve Inc.
This lawsuit and others pending in international courts, should they be rendered with final decision against Venezuela, could push the country to the brink of default.
(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – Citgo Petroleum Corporation has yet to the report on a possible replacement to head the company after its CEO and President Nelson Martinez was appointed as Venezuela’s Oil Minister by the country’s President Nicolas Maduro.
The appointment leaves Citgo, the Houston-based refining arm of PDVSA, leaderless amid approval of the Keystone XL Pipeline which intends to send more Canadian oil to the U.S. Gulf Coast where Citgo has a large presence.
(PDVSA, 14.Feb.2017) – Members of the China-Venezuela High Level Joint Commission toured the facilities of the Puerto La Cruz Refinery in Anzoátegui state, to review the progress of the Deep Conversion Project, a big scale project of PDVSA for the processing of heavy and extra heavy crude from the Hugo Chávez Orinoco Oil Belt.
For the president of PDVSA, Eulogio Del Pino, investment continues in Venezuela and is making headway.
“This is the largest engineering project being done in the Americas. It is in the order of $10.5 billion, with HDH Plus® Venezuelan technology made by Intevep, the research and development center of the oil industry,” Del Pino said.
Approximately 210,000 barrels per day (mb/d) of heavy and extra heavy crude oil will be processed through Puerto La Cruz Refinery’s deep conversion project, with international financing. The project is expected to be completed by the end of next year.
It will change the refinery’s current light crude diet to include heavy and extra heavy crude oil from the Hugo Chávez Orinoco Oil Belt, also known as the Faja, and will generate world quality end products.
For the development of this project 850 families that lived around the complex’s expansion area were relocated and received homes through the Great Housing Mission Venezuela, said Del Pino.
PDVSA Vice President of Planning and External Director Ricardo Menéndez, together with the Chinese ambassador to Venezuela Zhao Bentang, and the Vice Chairman of the National Development and Reform Commission Ning Jizhe also participated in the inspection of the works.
“This project is strategic for the development of our country, reflecting the vision of the Eternal Commander Hugo Chávez to use the Orinoco Oil Belt as the main reserve for the future of the country. President Nicolás Maduro has continued this legacy,” said Menéndez.
The Chinese ambassador to Venezuela spoke about the vision of development that both countries have supported. “We have made a number of agreements that have expanded and deepened cooperation in all areas. Today, I join the working commissions to seek more opportunities for future cooperation. I am convinced that this relationship will contribute to the development of our peoples,” he said.
Through the China-Venezuela High Level Joint Commission, social, cultural and academic projects have been supported such as the Great Housing Mission Venezuela, Barrio Nuevo-Barrio Tricolor, and the Confucius Center which strengthen the relationship between both countries.
According to Menéndez, these international investments show that “they believe in Venezuela, they believe in our country and only the revolution can deal with situations and lead us into the future.”
(PDVSA, 13.Feb.2017) – The 15th China-Venezuela High Level Joint Commission took place at the José Félix Ribas Hall of Teresa Carreño Theater in Caracas, with the aim of discussing the progress of the Economic Agenda for Binational Cooperation and continue strengthening relations between the two nations throughout the year.
The Commission was chaired by Venezuela’s Vice President of Planning Ricardo Menéndez, accompanied by the country’s Oil Minister Nelson Martínez, PDVSA President Eulogio Del Pino, the Economic Vice President Ramón Lobo, the Communes Minister Aristóbulo Istúriz, the Vice President of the National Development and Reform Commission of China Ning Jizhe and representatives of Chinese companies.
The Commission will review issues related to mining, investment of Chinese companies in Venezuela and mechanisms to strengthen the process of domestic industrialization while at the same time addressing critical issues of the Venezuelan economy, said Menéndez.
“This High Level Joint Commission aspires to take a fundamental leap forward with the issue of production lines and placing China’s surplus capacity in Venezuela as a new stage from the point of view of the relationship between our countries,” Menéndez said.
With regard to investment, Menéndez said that new construction and cargo transportation companies will be set up in Venezuela, and announced the signing of new production agreements for the factories set up by both nations as well as the visit to flagship projects in oil fields.
“The strengthening of the national industry will be reflected in the production lines and development capacities of the 15 economic drivers of the Bolivarian Economic Agenda, created by the President of the Republic Nicolás Maduro to boost the economy of the country,” said Menéndez.
(PDVSA, 13.Feb.2017) – PDVSA ratified its cooperation with the People’s Republic of China with the signing of eight agreements at the 15th China-Venezuela High Level Joint Commission, which was held at the José Félix Ribas Hall of the Teresa Carreño Theater in Caracas.
The event was headed by Venezuela’s President Nicolás Maduro, and the Vice Chairman of the National Development and Reform Commission (CNDR) Ning Jizhe, with the participation of Vice President of Planning and External Director of PDVSA Ricardo Menéndez, Venezuela’s Oil Minister Nelson Martínez, PDVSA President Eulogio Del Pino, Economic Vice President Ramón Lobo, Communes Minister Aristóbulo Istúriz, Foreign Minister and Vice President of International Affairs of PDVSA Delcy Rodríguez, and others.
PDVSA signed a memorandum of understanding (MOU) to participate in the construction project of Nahai refinery in China; the engineering, procurement and facilities construction contract to increase extra heavy crude production at the facilities of Petrolera Sinovensa, S.A.; a MOU for the development of the Petrozumano JV; and financing by China Development Bank as part of the Special Fund for oil projects.
PDVSA also signed a MOU for a well exploitation pilot test work plan for the Petrourica JV; set up the mixed capital company Venezolana de Mantenimientos Especializados Remensa; set up a JV between PDVSA and Shandong to develop maintenance capacities for the delivery of specialized services; and a MOU between PDVSA and Shanghai for the corporate insurance and reinsurance program of PDVSA and its subsidiaries.
These agreements were signed by PDVSA President Eulogio Del Pino, PDVSA Vice President of Exploration and Production Nelson Ferrer Sánchez, the representative of PDVSA Servicios Petroleros Osmel Molina, and their Chinese counterparts.
President Maduro said these 22 agreements are for $2.7 billion.
“This makes 2017 the year of the economic recovery of our country, with the collaboration of a friendly nation like China, in a win-win relationship,” Maduro said.
Speaking about these financing projects for the people of Venezuela, he said: “Nothing and nobody will be able to stop them; it is the ultimate will of our government and the people to continue to expand the mechanisms that have proven their viability.”
He said he was satisfied with the results of the work of the Joint Commission, “which has been the ultimate expression of the success of China-Venezuela relations.”
(PDVSA, 13.Feb.2017) – Venezuela’s Foreign Minister Delcy Rodríguez and Oil Minister Nelson Martínez visited the People’s Democratic Republic of Algeria to continue working visits to member a and non-member countries of the OPEC.
The officials discussed bilateral cooperation issues during their meeting with Algerian Foreign Minister Ramtane Lamamra, and Energy Minister Noureddine Bouterfa.
Algeria is a member of the Joint OPEC-Non OPEC Ministerial Monitoring Committee that oversees compliance with the production adjustment agreement of 24 oil producing countries.
The ministerial tour has included OPEC countries such as Iran, Iraq, Qatar, Kuwait, Saudi Arabia and Algeria, and not OPEC, such as Russia and Oman, following instructions by Venezuela’s President Nicolás Maduro, to continue with the Bolivarian Peace Diplomacy and strengthen relations with strategic partners in energy matters.
The initial OPEC decision to freeze production between 32.5 and 33 million barrels per day (MMb/d), with individual country quotas, was taken in Algeria. Venezuela made the proposal for non OPEC countries to join in the agreement.
(PDVSA, 10.Feb.2017) – Venezuela’s Foreign Minister Delcy Rodríguez and the country’s Oil Minister Nelson Martínez traveled to the Sultanate of Oman to meet with Omani Oil Minister Mohammed bin Hamad Al Rumhy, as part of a tour of member and non-member countries of OPEC.
Oman, together with Venezuela, Algeria, Kuwait and Russia make up the Joint OPEC – non OPEC Ministerial Monitoring Committee to monitor compliance with the agreement signed last December by oil producing countries to bring balance to the market.
At this meeting with Minister Rumhy, they assessed compliance with the agreement as good, said Rodríguez.
Producing countries have the historical responsibility to defend oil market stability, Martinez said.
Oman was one of the non OPEC producers that provided ongoing support to the strategy of adjusting production to recover oil prices.
Both countries agreed to strengthen bilateral relations and cooperation mechanisms for mutual benefit, according to a Twitter post by Rodríguez.
As part of the Peace Diplomacy promoted by the President of the Republic Nicolás Maduro, Rodríguez and Martinez delivered a letter to the Sultan of Oman Qaboos bin Said al-Said addressed to him, on the OPEC-non OPEC agreement.
(Igor Hernández, IESA Professor, 8.Feb.2017) – For oil-dependent Venezuela, the drop in oil prices since 2014 has been hard. Combined with the collapse in production, it has created an unprecedented economic crisis.
Output decreased by 337,000 barrels per day (bpd) between December 2015 and December 2016 to 2.27 million bpd, according to figures Venezuela’s government provided to OPEC. This is more than other OPEC countries over the same period and is on par with Nigeria. This follows a 359,000 bpd cut between 2005 and 2012.
Why has the industry crisis been so severe in Venezuela? I address the question at length with my colleague Francisco Monaldi in a recent working paper for the Center for International Development at Harvard University. Here are a few insights from our analysis.
Financially, state-owned oil company PDVSA—which controls upstream activities directly or through tightly controlled joint ventures with private companies—is losing on all fronts: it is missing out on revenue collection and it is spending its shrinking budget on noncore activities. Meanwhile, production costs in Venezuela have increased.
PDVSA is losing a quarter of its revenue to fuel subsidies, oil imports and shipments of oil that do not generate revenues for the company:
USD (in millions) ——————– 2015
Gasoline and diesel subsidy —– $11,165
Non-cash exports value ———- $9,547
Oil imports from the U.S. ——– $1,672
TOTAL ——————————- $22,384
Note: PDVSA reported total revenues of 88,554 Source: Igor Hernández and Francisco Monaldi. Weathering Collapse: An Assessment of the Financial and Operational Situation of the Venezuelan Oil Industry. (Harvard University, The Growth Lab, November 2016)
The deviation of resources into general public expenditures, such as development funds and social spending, limits PDVSA’s ability to invest in exploration, production and maintenance. The extent of this deviation is unclear given inconsistent government statements. Data shows that the difference between what PDVSA reports for social program spending in its financial statements and in its annual report is as large as $90 billion for the cumulative period between 2010 and 2015.
Moreover, there are several factors affecting the cost structure of petroleum projects: geological constraints, taxes, the exchange rate, the lack of infrastructure for crude transport and financing costs. Developing extra-heavy crude oil, which constitutes most of the country’s remaining reserves, is costlier than lighter crudes. It requires particular infrastructure, technology and skilled labor that Venezuela lacks. Extra-heavy oil must also be blended with lighter crudes to meet refinery requirements. A lack of locally sourced light crude has forced PDVSA to import light crude oil from the United States.
Successive modifications in the hydrocarbons law have produced the current tax structure. These changes increased royalties and income taxes, and introduced other contributions. Gross taxes now account for almost 40 percent of the total cost of oil projects, higher than any other major oil producer but Russia.
Production costs are also highly sensitive to inflation, as the currency is pegged to the dollar. Accelerating inflation levels and the government’s policy in maintaining a fixed exchange rate have led to a large real appreciation of the exchange rate. This has led to higher domestic costs for PDVSA and its joint venture partners.
PDVSA’s cash-flow constraints led it to resort to direct financing from the central bank to cover local expenses and increase its debt from less than $3 billion in 2006 to almost $41 billion in 2016. Central Bank financing has led to an exponential increase in money supply and has been a direct cause of the rapid acceleration in prices. PDVSA has also delayed payments to suppliers, which led to a halt in activities from contractors such as Schlumberger, Halliburton and Baker Hughes. This has accelerated recent production declines.
PDVSA’s response to its financing crisis is short term in nature. It transformed debt to suppliers into financial debt, agreed on direct payments in kind to some creditors, emitted costly bond swaps and used overseas assets as collateral for mortgages. This combination means that PDVSA is further reducing its future cash flows and could end up losing valuable assets to creditors.
PDVSA is also facing tremendous operational challenges, including basic ones like a shortage of inputs and access to electricity. There is a lack of skilled labor, particularly since the massive layoff of expert technical and management personnel in 2003. Safety, environmental and security risks are concerning as well.
Companies engaged in joint ventures with PDVSA have expressed concern at the high concentration of decision-making power inside the company and at the discretional use of financial resources that lead to project execution delays and additional operational risks.
All of these considerations are reflected in a recent survey by the Fraser Institute. The study places Venezuela at the bottom of a global ranking of jurisdictions attractive for petroleum investments. Lack of a solid institutional framework and increasing uncertainty regarding future political developments have not helped.
Profound reform of Venezuela’s oil industry is urgent. But in a country so dependent on oil exports, any attempt to improve the operations of the oil sector would have to address the distribution of oil rents, the quality of public institutions and the governance of PDVSA.
Igor Hernández is a professor at the Center on Energy and the Environment (CIEA) at IESA in Caracas and a graduate student fellow at the Center on Energy Studies at the Baker Institute at Rice University.
Editor’s Note: The link to full article with tables can be found here: http://www.resourcegovernance.org/blog/why-venezuela-oil-sector-so-shattered
(Gold Reserve Inc., 7.Feb.2017) – Gold Reserve Inc. announced that on February 7, 2017, the Paris Court of Appeal rejected all of Venezuela’s arguments and issued a judgment dismissing the annulment applications filed by Venezuela pending before the French courts in relation to the arbitral award dated September 22, 2014 rendered by the International Centre for Settlement of Investment Disputes (ICSID), against the Bolivarian Republic of Venezuela.
At the Court in October 2014 and January 2015, respectively, Venezuela filed annulment applications regarding the Award and regarding the December 15, 2014 arbitral decision dismissing its request for rectification. During the same period, the company applied to the Court for exequatur of the Award, which entails recognition and enforcement of the Award in France. The Court issued the exequatur on January 29, 2015 declaring the Award to be recognized and enforceable in France.
The Court considered and rejected each of the arguments raised by Venezuela, confirming that (a) the arbitral tribunal properly took jurisdiction over the matter, (b) the parties were treated equitably, and the rights of defense and the adversarial principles were respected, (c) the arbitral tribunal ruled within the mandate conferred upon it, and (d) the Award is not contrary to French international public policy.
As a result, the Court has dismissed the annulment applications filed by Venezuela, and therefore the Award in the amount of $713,032,000 plus interest remains enforceable in France. The Court also ordered Venezuela to pay an amount of €150,000 for the company’s legal fees and costs. Venezuela can consider the option of appealing the judgment before the French Cour de cassation, which is the court of final resort in the French judicial system.
James Coleman, Chairman of the Board, stated, “Even though we prevailed in this matter we consider Venezuela our partner and look forward to satisfaction of the Settlement Agreement and advancing the development of the gold copper silver Siembra Minera Project (Brisas Cristinas).”
(PDVSA, 4.Feb.2017) – PDVSA Vice President of Exploration and Production Nelson Ferrer, led a tour of the facilities of the Orinoco Drill Operators Cooperative Association, which absorbed former Petrex Sudamérica workers, in the Hugo Chávez Orinoco Oil Belt.
He was able to see the progress of the new labor scheme promoted by the oil workers and spoke with those involved in this new way of protagonist participation of the workers. He listened to their experiences and learned how the hydrocarbons extraction process has been optimized.
He also visited drilling rigs LGV-103 and PDV-57, located 15 minutes from the Ayacucho Division, in southern Anzoátegui state. Both rigs are currently part of the restoration of 28 wells, which represent an associated production of 10,000 barrels per day (mb/d) since August 2016.
“We believe in the workers; with them we generate production and added value. The organized mass of workers, with commitment and loyalty to Chávez, President Nicolás Maduro and the homeland, can achieve excellent results,” said Mr. Ferrer.
The President of the Orinoco Drill Operators Cooperative Jesús Díaz, said the workers are proud that their work transcends the borders of the state of Anzoátegui all the way to Caracas.
“We are heads of households committed to the homeland, workers’ President Nicolás Maduro and the legacy of Hugo Chávez the Giant, who always shared the idea that the workers should take over their work places,” Díaz said.
PDVSA continues to promote actions for the transformation of the oil industry, deepening its socialist vision by meeting the objectives and following the guidelines of the Homeland Plan Act and the “Golpe de Timón” or “The Turnaround”, a legacy of Supreme Commander Hugo Chávez.
(Energy Analytics Institute, Piero Stewart, 2.Feb.2017) – Venezuela’s Electric Energy Minister Luis Motta Domínguez announced three persons planned actions to sabotage the sub-station El Tablazo 400 in Zulia state.
One of the persons unfortunately was electrocuted during the process, reported the daily Panorama, while the other two are currently in police custody.
(Energy Analytics Institute, Piero Stewart, 2.Feb.2017) – A newly appointed Board of Directors at PDVSA will be charged with taking actions to prepare the company for the eventually turn around in the crude oil export market.
Venezuela’s President Nicolas Maduro said during his weekly broadcast that the new board would work on recuperation of issues vital at PDVSA including but not limited to sustainability, growth and advance investments.
(Energy Analytics Institute, Piero Stewart, 2.Feb.2017) – PDVSA reduced operating costs by more than 30 percent, announced the entity in an official statement, citing company President Eulogio Del Pino.
(Energy Analytics Institute, Piero Stewart, 2.Feb.2017) – Venezuela’s President Nicolas Maduro called on the Venezuelan citizens to reduce their consumption of fuels so that they could be used for exports to international markets.
(Piero Stewart, Energy Analytics Institute, 1.Feb.2017) – Venezuela’s Mariscal Sucre natural gas project offshore has a production potential of 600 million cubic feet per day.
The company plans to use this gas production to supply export markets in Colombia, Ecuador, Central America and the Caribbean, announced PDVSA in an official statement.
The fields associated with the Mariscal Sucre project, located in water depths between 328-427 feet (100130 meters), are situated nearly 25 miles north of Venezuela’s Paria peninsula in Sucre state, according to Technip. PDVSA expects peak production from the four fields that comprise the Mariscal Sucre project: Mejillones, Rio Caribe, Dragon and Patao, will reach 1.2 billion cubic feet per day (Bcf/d) of natural gas and 28,000 barrels per day (b/d) of condensates. Production will be destined for export markets as well as the Venezuelan’s domestic market via the CIGMA gas plant located in Guiria in Sucre state, according to PDVSA.
(Energy Analytics Institute, Piero Stewart, 29.Jan.2017) – Members of the Hydrocarbon Motor of the Bolivariana Economic Agenda met in Caracas to discuss advances under the plan.
The meeting, held January 26, 2017 at the headquarters of PDVSA, in La Campiña in Caracas was attended by representatives from the Bolivariana Energy and Petroleum Federation (FEBEP), Venezuela’s Hydrocarbon Chamber (CPV), Venezuela’s Hydrocarbon Association (AVHI), Venezuela’s Gas Processors Association (AVPG), the Venezuela’s Industrial Federation (Fedeindustria) for small, medium and artisans as well as Covencaucho, announced PDVSA in an official statement.
(Energy Analytics Institute, Pietro D. Pitts, 29.Jan.2017) – Venezuela’s President Nicolas Maduro announced changes to the Board of Directors at PDVSA and said the members would be expected to assume the homework of deepening the transformation of the entity into a Socialist Corporation.
PDVSA’s President Eulogio Del Pino was restated to head the company and will preside over the board, reported PDVSA in an official statement, citing comments made by Maduro during his Sunday program that took place in the Ciudad Guayana in Bolivar state.
The board of PDVSA, as the Caracas-based company is known, is comprised of the following members: Maribel Parra, the new Executive Vice President; Nelson Ferrer, the new Exploration & Production Vice President; Guillermo Blanco Acosta, the new Refining Vice President; Simón Zerpa, the new Finance Vice President; Delcy Eloína Rodríguez, who maintains her post as Vice President of International Affairs; Ismel Serrano, the new Commerce and Supply Vice President; Marianni Gómez, the new head over Planning and Engineering; and César Triana, new Director of PDVSA Gas.
Maduro also announced new external directors Yurbis Gómez and Ricardo León would be the spokespersons for the oil sector workers and said that Rodolfo Marco Torres, Ricardo Menéndez and Wills Rangel would retain their existing posts.
(PDVSA, 28.Jan.2017) – Bariven, S.A., a PDVSA subsidiary, has taken legal action to obtain compensation for damages suffered due to fraudulent actions by former contractors and suppliers who in collusion with former workers of Bariven and some of its subsidiaries, obtained procurement contracts through acts of corruption, causing property and moral damage to the company.
Legal actions include this restitution request made by Bariven so that is recognized as a victim of acts of corruption and the accused of such acts are ordered to compensate financially for damages suffered by Bariven. This restitution request is currently before a criminal court in Houston, Texas, which is familiar with the criminal proceedings against those accused with acts of corruption.
On January 17, 2017, the judge hearing the case adopted Bariven’s position and ordered all parties to the proceedings, including the Federal Prosecutor’s Office representing the interests of the U.S. government, and the accused to present their positions on Bariven’s request no later than February 20, 2017. This is an important development for Bariven, which opposed the Federal Prosecutor’s request to defer this process indefinitely. With this order, the judge ensures that Bariven will be heard and that the accused individuals will face up to their responsibilities.
PDVSA will continue to inform the nation and the international community on the ongoing actions against these persons and their property. Bariven reiterates its commitment to the pursuit of justice and will fight relentlessly so that those responsible, with no exceptions, are criminally and materially punished.
(PDVSA, 26.Jan.2017) – Members of the Hydrocarbons Economic Driver of the Bolivarian Economic Agenda, met at La Campiña headquarters of PDVSA in Caracas, for the presentation of the first annual report.
The first session of 2017 was attended by more than 30 representatives from the Bolivarian Federation of Energy and Oil (FEBEP), Venezuelan Oil Chamber (CPV), Venezuelan Hydrocarbons Association (AVHI), Venezuelan Gas Processors Association (AVPG), Federation of Small and Medium Size Industries and Artisans (Fedeindustria), and Covencaucho.
“This was one of the economic drivers with the most activity, dynamism and results; it was extremely productive,” said Eulogio Del Pino, president of PDVSA and coordinator of the hydrocarbons sector. He said the agenda is already set for the first four meetings which will focus on each of the sectors that are particularly important for the hydrocarbons sector, on a weekly basis.
He also announced key achievements, including $5 billion financing obtained for oil production joint ventures with the main partners, both national and international. Also, large scale projects continued, such as Puerto La Cruz Refinery’s Deep Conversion in the state of Anzoátegui, with an investment of more than $8 billion.
New joint ventures were created with the national private productive sector. “Traditionally, they had imported supplies which now we will produce in the country, such as grooved pipes. About eight of these companies are already in full production,” he said. And a discussion group is being formed to look at the production, supply and remand of lubricants.
“We signed export agreements with our neighboring countries and strengthened our efforts geared at the Caribbean refineries where we have operations, including Aruba and Curacao. We also held binational events with Trinidad and Tobago, specifically in the border areas where we have common reservoirs,” he said.
Del Pino said that the meeting was productive. “It definitely means that 2017 will be of great boost and advance.”
For the president of PDVSA, reducing PDVSA’s financial debt in an economically difficult year was particularly important. This was possible thanks to the bond swap and timely payments.
“We were required to publish our consolidated debt before January 20. Currently, the debt is down by $2.7 billion from the previous year,” Del Pino said.
Finally, he spoke about new financing strategies and novel oil industry hiring schemes which contributed to positive results, and indicated that PDVSA lowered costs by 30%, which is fundamental for the Venezuelan economy.
(Energy Analytics Institute, Aaron Simonsky, 20.Jan.2017) – Cash-strapped PDVSA went out on a limb again last year to reduce its long-term financial debt.
PDVSA, as the Caracas-based company is known, may not have invested heavily in exploration and production activities to boost falling crude oil production or in its six ailing domestic refineries but it did somehow manage to reduce its total financial debt by $2.7 billion in 2016, the company announced in an official statement.
“This figure demonstrates the financial strength of the Venezuelan Bolivariana Republic and PDVSA, whom have honored all their obligations despite the cycle of low oil prices,” announced PDVSA.
Energy investors have continued to take a wait and see attitude regarding Venezuela’s oil and gas sectors among others in this South American country amid ongoing economic and political crises that have triggered negative economic growth, three-digit inflation, and scarcity of medicines and foodstuffs. As expected, energy sector investments and subsequently oil production in the country continues to wane.
(Energy Analytics Institute, Aaron Simonsky, 20.Jan.2017) – Venezuela President Nicolas Maduro announced the appointment of Nelson Martínez, the actual president of Citgo Petroleum Corporation, as the country’s new petroleum minister. Martínez replaces outgoing Petroleum Minister Eulogio Del Pino.
“Our friend Eulogio Del Pino remains in front of PDVSA,” reported state oil company PDVSA in an official Twitter post, citing Maduro. PDVSA, as the Caracas-based company is known, also reported Maduro as saying they “we’re going to restructure the industry,” without providing details and referring to the troubled oil sector of the member country to the Organization of Petroleum Exporting Countries (OPEC).
Houston-based Citgo is capable of refining 749,000 barrels per day of crude at refineries in the United States of America located in Texas, Illinois and Louisiana. Citgo markets more than 600 different types of lubricants and sells motor fuels through more than 5,300 independently owned, branded retail outlets, according to data on the company’s website.
(Energy Analytics Institute, Piero Stewart, 16.Jan.2017) – Venezuela’s newly appointed Vice President Tareck Aissami announced that the country’s President Nicolas Maduro had ordered the dismissal of Pequien President Juancarlo Depablos Contreras due to issues related to shortfalls in production and supply of raw materials.
“Serious acts of corruption have been uncovered at Pequiven and he [Contreras] is being held in custody in order to soon discuss the irregularities within the company,” reported the daily newspaper El Nacional, citing Aissami.
Maduro subsequently named military General Rubén Ávila Ávila as the new president of Pequien.
(Energy Analytics Institute, Aaron Simonsky, 16.Jan.2017) – Refining utilization rates at PDVSA’s six domestic refineries averaged 30.7 percent in 2016 owing to permanent and temporary plant shut downs, and continued problems procuring replacement parts all due to finance issues.
PDVSA’s domestic refineries – Amuay, Cardón, Bajo Grande, Puerto la Cruz, El Palito and San Roque – which have a combined installed processing capacity of 1,303,000 barrels per day only processed an average 400,000 barrels per day in 2016, said oil union official Iván Freites, who represents the United Federation of Venezuelan Oil Workers (FUTPV) in an phone interview from Punto Fijo.
Cash-strapped PDVSA, as the state oil company is known, needs a cash infusion of $5 billion to boost the utilization rates to 60 percent, he added.
(Energy Analytics Institute, Aaron Simonsky, 4.Jan.2017) – “Venezuelan President Nicolas Maduro says ‘we’re going towards a restructuring of the (oil) industry’ and names Nelson Martínez, the actual president of Houston-based Citgo Petroleum Corporation, as Venezuela’s Petroleum Minister. Martínez replaces Eulogio Del Pino in this position. Del Pino retains his post as the president of PDVSA.
The announcement is a departure from the dual post assignments held by Del Pino and his former boss Rafael Ramirez, who also simultaneously held the posts of oil and mining minister and president of PDVSA, as the Caracas-based company is known. I view any separation of persons and/or powers between the two entities (PDVSA and the oil ministry) as a good starting point for further restructuring and much-needed and welcomed restructuring to come to the industry, if it indeed does,” wrote contributing writer Pietro D. Pitts in a series of Twitter posts.
(Energy Analytics Institute, Piero Stewart, 2.Jan.2017) – PDVSA PetroMonagas initiated directional drilling activities in Río Yabo — located in the Aceital del Yabo community in Anzoátegui state — and plans to install 800 meters of 30-inch tubing over 60 days.
The tubing will have a transport capacity of 70,000 barrels per day (b/d) and handle production from the Basic Construction and Production Units (UBCP by its Spanish acronym) #14 and #21, PDVSA reported in an official statement.
PDVSA PetroMonagas expects to produce 16,000 b/d of extra heavy crude oil from UBCP #14. To-date, capital expenditures at this project have surpassed $7 million and an additional $5 million are expected to be invested in 2017 during the second phase of the project, reported PDVSA, as the state oil company is known.
(PDVSA, 27.Dec.2016) – PDVSA announced implementation of an agreement to reduce production reached by member and non member countries of the Organization of the Petroleum Exporting Countries (OPEC). Under the agreement, Venezuela must implement a production cut of 95,000 barrels per day.
As of January 1, 2017 PDVSA and /or its subsidiaries will implement a reduction of the volumes of the main crude oil sales contracts without prejudice to PDVSA’s international contractual commitments and in accordance with the terms and conditions of current contracts.
It is public knowledge that Venezuela, together with the other members of OPEC, agreed to curb production to 32.5 million barrels per day as of January 1, 2017 at the 171st Meeting of the Conference which was held November 30, 2016 in Vienna, Austria.
PDVSA honors the commitment made by Venezuela, and reaffirms its commitment to comply with the decisions reached by it and contribute to the stability of the world oil industry.
(Energy Analytics Institute, Piero Stewart, 27.Dec.2016) – OPEC member nation Venezuela, which produced 2.097 million barrels per day (MMb/d) in November, according to the December 2016 Monthly Oil Market Report published by the Organization of Petroleum Exporting Countries (OPEC), which cited secondary sources, could see its crude oil production reach 2.002 MMb/d after it implements recently announced production cuts of 95,000 barrels per day by the organization.
Using OPEC direct communication data for Venezuela, the South American nation’s production could reach 2.179 MMb/d, down from 2.274 MMb/d in November.
Venezuela — reeling in political and economic crises and suffering from the world’s highest inflation — is preparing to reduce its oil production as part of a reduction agreement reached on November 30, 2016 in Vienna, Austria by OPEC and non-OPEC nations, reported PDVSA in an official statement.
Effective January 1, 2017, PDVSA and/or its affiliate companies will reduce production volumes in total conformity with the terms and conditions of existing contracts, the statement said.
(Energy Analytics Institute, Piero Stewart, 27.Dec.2016) – An accident between a fuel transport truck owned by PDVSA and a vehicle carrying six persons from Venezuela’s armed forces unfortunately claimed resulted in the death of all the military personnel.
The accident occurred in Tachira state and is under investigation by personnel employed with the state oil entity, according to reports from Venezuelan journalist Anggy Polanco in numerous twitter posts.
PDVSA has yet to emit an official statement about the accident.
(Energy Analytics Institute, Ian Silverman, 26.Dec.2016) – Three officials from PDVSA participated in a graduation ceremony in San Tomé, south of Anzoátegui state, whereby 124 graduates received diplomas and were immediately incorporated into the payroll of state oil company PDVSA.
The officials included PDVSA Exploration and Production Vice President Orlando Chacín, Orinoco Oil Belt Production Executive Director Pedro León, and Orinoco Belt Formation Plan Coordinator Héctor Andrade, reported PDVSA in an official statement.
To-date, more than 2,000 engineers — and others with specialties in geophysics, chemicals, petrochemicals, gas and the environmental as well as other graduates specializing in administration and accounting – have participated in the program dubbed ‘The Socialist Project for the Formation of the Hugo Chavez Orinoco Heavy Oil Belt,’ also known as the Faja.
(Energy Analytics Institute, Ian Silverman, 25.Dec.2016) – PDVSA maintains full ownership and control over its Houston-based subsidiary Citgo Petroleum Corporation.
PDVSA, in an official statement, also downplayed media versions and comments emitted by persons it claims are only interested in generating political instability in Venezuela based on speculation, rumors and biased information in an attempt to discredit the company.
In October, PDVSA used a 50.1 percent interest in Citgo as a guarantee for bond swap operations and the remaining 49.9 percent interest in its U.S.-based refining subsidiary as a guarantee to raise new financing, according to the statement.
Redd Intelligence, on November 30, uncovered a Delaware Uniform Commercial Code (UCC) filing and broke initial news regarding the filing against Citgo parent PDV Holding, Inc. that revealed Venezuela had secretly mortgaged its Citgo refineries in the U.S. to Russia’s state-controlled oil company Rosneft.
(Energy Analytics Institute, Piero Stewart, 23.Dec.2016) – Looting in Bolivar state will not yet affect Venezuela’s crude oil production or export capacity.
However, fears of similar looting spreading to oil producing regions raises concerns about the potential impact they could have on Venezuela’s main export revenue source during a time when the country’s oil production is already in a free-fall.
(Energy Analytics Institute, Piero Stewart, 23.Dec.2016) – Venezuela’s relentless search for a fair oil price continues as President Nicolas Maduro prepares to travel to various oil producing countries to finalize a strategy reached last month to stabilize oil prices, announced the official during his weekly radio and television program En Contacto con Maduro #75.
The US Federal Reserve’s raised interest rates with the objective to impact oil prices, said Maduro “It’s the obsession of Obama against Russia, Iran, Venezuela and OPEC,” he proclaimed.
(PDVSA, 15.Dec.2016) – As of 2019, PDVSA, through Puerto La Cruz Refinery’s Deep Conversion Project, will industrialize crude oil from the Orinoco Oil Belt using HDHPLUS®, a Venezuelan technology, announced the People’s Power Minister of Foreign Trade and International Investment Jesus Faría.
Minister Faría and the Ambassador of South Korea to Venezuela Kyung Tea Hwang, travelled to the state of Anzoátegui to meet with the Executive Director of New Refinery Projects, Upgraders and Terminals Gabriel Oliveros, and the General Manager of Eastern Refining Diego Astudillo. The General Manager of the VONE Consortium B.I. Kim, and state governor Nelson Moreno were also at the meeting.
This is the largest crude oil refining project in our continent; it will receive an investment of $9 billion, said Faria, who was satisfied with its 73.8% progress. It currently employs 6,500 workers, and uses technology developed by PDVSA Intevep. This demonstrates the trust of large companies in South Korea, the People’s Republic of China and Japan that invest in Venezuela and its potential and sets the foundations for a productive, independent, and technologically sovereign Venezuela.
The Ambassador of South Korea Kyung Tea Hwang highlighted the investment made by Hyundai in Venezuela, which is a clear indication of the strengthening of bilateral relations between the two countries.
The General Manager of Eastern Refining Diego Astudillo said that when it is fully operational, Puerto La Cruz Refinery will process 210,000 barrels of heavy crude oil per day into light products of high commercial value. Additionally, social investment projects are being implemented to benefit the community.
Anzoátegui state governor Nelson Moreno said that this PDVSA project goes hand in hand with human development. 820 families that lived within the safety zone of Puerto La Cruz Refinery were moved away and craftsmen involved in the construction of the project received training.
(PDVSA, 5.Dec.2016) – PDVSA and Shell Venezuela signed two agreements at Miraflores Palace.
Both companies have stakes in the joint venture Petroregional del Lago, S.A. and plans to boost its production to 344 million barrels from 2017 to 2035, the first agreement provides for an investment of $2.8 billion ($400 million on a first phase and $100 million in early 2017). These are heavy crude reservoirs and they will use multilateral drilling technology.
The second agreement aims to reduce gas venting or burning in northern Monagas state.
Venezuela’s President Nicolás Maduro thanked PDVSA and Shell executives for all the work they do for the nation, and called on international companies to work embracing this vision.
“Venezuela is the country of investment opportunities in oil and gas. We have 15 powerful economic drivers that we are developing with a new strategic vision. We will work together, be good partners and seek out new paths”, Maduro said.
(Energy Analytics Institute, Piero Stewart, 5.Dec.2016) – Together with President Nicolas Maduro and Prime Minister of Trinidad Keith Rowley we reached historic energy agreements, wrote PDVSA President Eulogio Del Pino in a series of twitter posts.
“Together with Shell Venezuela we agreed to start negotiations to obtain financing for Petroregional del Lago, S.A.,” wrote Del Pino.
(PDVSA, 5.Dec.2016) – During a meeting in Miraflores Palace, the People’s Power Minister of Petroleum and President of PDVSA Eulogio Del Pino and the Prime Minister of Trinidad and Tobago Keith Rowley, signed an agreement to implement the Natural Gas Supply Project from Venezuela to Trinidad and Tobago through a gas interconnection from the Dragon Field in northeastern Venezuela.
This agreement will boost gas production and exports, as Venezuela continues with its policy of strategic alliances. Through this partnership, one or more gas pipelines will be built from the Mariscal Sucre area in Venezuela to Trinidad and Tobago.
The interconnection to export gas will be established from the Venezuelan Dragon Field to the Hibiscus platform in Trinidad and Tobago. Another potential route will be evaluated from Güiria, in Sucre state, to Point Lisas in Trinidad.
Decade for energy integration
For President Nicolás Maduro, this strategic alliance makes a reality a decade of Latin American and Caribbean integration.
“We are working on our maritime borders with blocks of gas. We have reached agreements for their joint exploitation, taking advantage of the strengths of both nations for a win-win. This is what we call Bolivarian Peace Diplomacy. Through a dialogue we seek to develop common interests,” Maduro said.
He asked Minister Del Pino to accelerate implementation and investment on these projects.
Prime Minister Rowley described the signing of the agreement as a historic development that will improve relations between the two nations.
“Today’s development marks a commitment to develop face to face, holding onto opportunities that are beneficial to the people of Venezuela, to the people of Trinidad and Tobago and the wider Caribbean,” Rowley said.
The prime minister believes the agreement will open opportunities for various “significant and necessary commercial developments in the hydrocarbons sector.”
“These units of commerce open doors towards a staircase upon which Trinidad and Tobago can walk confidently into the international marketplace…We look forward to climbing these stairs, side by side with Venezuela as we enjoy the benefits of our petro Caribbean basin,” concluded Rowley.
(Harvest Natural Resources, Inc., 9.Nov.2016) – Harvest Natural Resources, Inc. reported a third quarter 2016 net loss of approximately $7.1 million, or $0.55 per diluted share, compared with net income of $5.7 million, or $0.52 per diluted share, for the same period last year. The third quarter results include exploration charges of $0.6 million, or $0.05 pre-tax per diluted share, and transaction costs related to the sale of Harvest-Vinccler Dutch Holding B.V. of $1.8 million, or $0.14 pre-tax per diluted share. Adjusted for exploration charges and transaction costs, Harvest would have posted a third quarter net loss of approximately $4.7 million, or $0.36 per diluted share, before any adjustment for income taxes.
Sale of HNR Energia
On October 7, 2016, the company, and its wholly owned subsidiary, HNR Energia, completed the sale of all of HNR Energia’s 51% interest in Harvest Holding, to Delta Petroleum, pursuant to the Share Purchase Agreement. Harvest Holding owns, indirectly through wholly owned subsidiaries, a 40% interest in Petrodelta, S.A., a mixed company organized under Venezuelan law, through which all of the company’s interests in Venezuela were owned. Thus, under the Share Purchase Agreement, the company sold all of its interests in Venezuela to Delta Petroleum.
Delta Petroleum is an affiliate of CT Energy, which assigned all of its rights and obligations under the Share Purchase Agreement to Delta Petroleum on September 26, 2016.
At the closing, the company received consideration consisting of:
— $69.4 million in cash paid after various closing adjustments;
— an 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12.0 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum;
— the return of all of the company’s common stock owned by CT Energy, consisting of 8,667,597 shares (approximately 2,166,900 shares taking into account the November 3, 2016 one-for-four reverse stock split) which was approximately 16.8% of all outstanding shares pre-closing, to be held by the company as treasury shares;
— the cancellation of $30 million in outstanding principal under the 15% Note; and
— the cancellation of the CT Warrant.
At the closing, the outstanding principal and accrued interest totaling $38.9 million and $1.4 million, respectively, under both the 15% Note and the Additional Draw Note, were repaid, net of withholding tax, as a closing adjustment to cash, and the 15% Note and Additional Draw Note were terminated. To fund Harvest’s transaction expenses and operations until the closing under the Share Purchase Agreement, CT Energy had loaned Harvest $2 million on each of June 21, 2016, July 20, 2016, August 24, 2016 and September 21, 2016 under the Additional Draw Note.
The relationship between the company and CT Energy effectively terminated upon the closing under the Share Purchase Agreement. In addition to the termination or relinquishment of all company securities held by CT Energy, Oswaldo Cisneros and Alberto Sosa resigned as CT Energy’s non-independent designees to the company’s board of directors. The company decreased its number of board members from seven to five immediately after the resignations.
Additionally, the Securities Purchase Agreement and certain agreements related to the Securities Purchase Agreement, including the Management Agreement, terminated. Finally, all liens securing company debt formerly owed to CT Energy were released at the closing.
NYSE Listing Requirements
On October 25, 2016, the company announced that it would conduct a one-for-four reverse split of its authorized, issued and outstanding common stock. The one-for-four reverse stock split became effective after the market closed on November 3, 2016, and the company’s common stock began trading on a splitadjusted basis at market open on November 4, 2016. The reverse stock split will not impact any stockholder’s ownership percentage of the company or voting power, except for minimal effects resulting from the treatment of fractional shares. Following the reverse split, the number of outstanding shares of the company’s common stock was reduced from 44,171,215 to approximately 11,042,804. Additionally, the number of authorized shares of the company’s common stock decreased from 150,000,000 to 37,500,000. On November 3, 2016, the company completed a one-for-four reverse split of its common stock. As of November 4, 2016, the closing price of the company’s common stock had increased to $4.45 per share. Given the increase in the company’s share price, the company expects that it will have regained compliance with the Pricing Standard by December 19, 2016.
On April 25, 2016, the company received a notice from the NYSE stating that the company was not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.
The company believes that the sale of its Venezuelan interests on October 7, 2016 ultimately will allow it to regain compliance with the Financial Standard by increasing its stockholders’ equity. However, the company must demonstrate compliance for two consecutive financial quarters before the deficiency can be cured.
(Energy Analytics Institute, Pietro D. Pitts, 14.Sep.2016) – On a brief taxi ride from Punto Fijo’s Josefa Camejo International Airport to the main highway that crosses this city and connects to one of the many refining complex entrances here, a scrawny dog with mange can be seen emerging from an endless pile of discarded trash.
In this small refining town broken beer bottles, dirty diapers, and discarded personal items cling to trees and bushes as far as the eye can see in either direction along the short stretch of highway that separates the two massive refineries here: Amuay and Cardón. The refineries comprise the lion’s share of the processing capacity at PDVSA’s 971,000 barrel-a-day Paraguana Refining Complex, also commonly known as the CRP by its Spanish acronym. The CRP refineries combined with three others spread across this country have produced cumulative financial losses of $53 billion in the last eight years. Definitely not chump change.
Venezuela is home to a wealth of natural resources from gold to iron ore and holds the world’s eighth-largest natural gas reserves and the largest crude oil reserves, according to BP’s Statistical Review of World Energy. Yet, images of the immediate surroundings of the CRP paint a different financial storyboard about the well-being of Venezuela’s all important oil sector – which generates 96 percent of the country’s foreign export earnings.
Despite Venezuela’s claim to fame in terms of the size of its oil reserves, the South American country has been reduced to importing refined products because its refineries can’t meet local demand. The country’s refining sector is in a virtual state of emergency due to low processing rates, numerous unplanned plant stoppages, as well as accidents and injuries that state oil company Petróleos de Venezuela S.A. prefers to not report, according to oil union officials here. All summed up, PDVSA’s refining sector – especially within Venezuela – is a financial drain on the company as operating losses continue to mount year after year.
Venezuela – a founding member of the Organization of Petroleum Exporting Countries or OPEC — is engulfed in an economic crisis that started way before oil prices began their long downward trend. Political uncertainty, an ongoing threat of asset expropriations as well as currency and price controls have only helped to starve the capital-intense oil sector here of necessary foreign investments. PDVSA, as the Caracas-based company is known, continues to lack the necessary cash to properly revive the country’s oil sector in its majority partnership role, while local Venezuelan oil companies are few and in between and often lack the financial firepower of many of their international peers.
Many Venezuelan-based economists from Datanálisis President Luis Vicente León to Ecoanalitica Director Asdrubal Oliveros blame part of the economic crisis on the failure by former populist Venezuelan President Hugo Chávez to divert financial resources to the country’s private sector importers and the all-important upstream, midstream and downstream sectors during his tenure from 1999-2013 amid robust oil prices. In general, PDVSA’s problems mirror Venezuela’s economic crisis. The country’s economy has not fared any better under the presidential tenure of Nicolas Maduro, the man hand-picked by Chávez to succeed him prior to his untimely death in 2013. By most people’s accounts, considering the scarcities here of everything from milk to basic medicines, widespread looting, and runaway crime, things are much worst.
Oil-dependent Venezuela continues to rely heavily on its exploration and production or upstream sector to generate the bulk of its petroleum sector revenues. However, Venezuela’s oil output appears to be on an unstoppable decline, reaching 2,095,000 barrels per day in July of 2016 compared to 2,361,000 barrels per day in 2014, according to Organization of Petroleum Exporting Country’s Monthly Oil Market Report, citing secondary sources. Data from direct communications is just slightly more optimistic. Nevertheless, the downward continues.
Oil workers in red work overalls can be seen everywhere in the streets of Punto Fijo, either hailing taxis or waiting in the shade of trees for public transportation. Due to the ongoing economic crisis that has also affected Venezuela’s transportation industry – like countless other industries here – many cars and taxis in these parts and others in this resource-rich country don’t have air conditioning and/or visually lack some part or another such as a rearview or side mirror, working locks, a speedometer or a functioning trunk. The market for used tires, or anything used, is booming in Venezuela as new tire imports have come to a virtual halt.
Inside the CRP complex – physically off limits to visitors without permission from PDVSA but very visible through the wired fences — the scene within is arguably not much better, as years of under-investment on maintenance, upgrades and safety protocols by the state oil company have unfortunately left the refineries and the grounds similarly forsaken. Against a backdrop of a country in the midst of an ongoing political crisis, many refinery workers here say a combination of 12-16 hours work days, a lack of employee benefits and arguably the lowest salaries for refinery workers anywhere in the world (in dollar terms) has also taken a toll on them as well as their colleagues.
Whether the refineries or the workers are in worst condition, is a judgment call, but at first glance they both appear to be on their last legs.
In the last eight years, PDVSA’s refining, trade and supply division accumulated net losses in each of the consecutive years since 2008, which was the last time the division reported a positive gain from its combined operations in Venezuela. All tallied, the division accumulated losses of $53 billion during 2008-2015, according to data compiled from PDVSA’s financial reports.
“With a cash crunch they have focused all efforts in the upstream where you make the money,” said Francisco J. Monaldi, Ph.D. and Fellow in Latin American Energy Policy & Lecturer in Energy Economics at Rice University’s Baker Institute for Public Policy in an e-mailed response to questions. “The lack of human resources adds to the lack of investment to generate the operational difficulties.”
Refining sector stoppages and costly repairs are generating large production and economic losses for PDVSA, said oil union representative Larry López during a late afternoon sit down chat at a run-down restaurant just two blocks from the Amuay refinery.
Venezuela doesn’t need refineries to be a major exporting country, former PDVSA President Rafael Ramírez told me in 2014 during a company-sponsored media trip to visit the CRP on the anniversary of the deadly explosion at Amuay that left at least 48 people dead. To this day, it is unclear if those comments justify the lack of attention that has been given to the country’s refining sector even now under the leadership of Stanford-trained Eulogio Del Pino.
Venezuela’s Information Ministry, the clearing house for questions for all of the country’s ministries, and media officials with PDVSA and the Venezuelan Oil Ministry did not reply to emails seeking comment on the company’s refining sector strategy or general comments for this article. Venezuela’s newly elected Petroleum Chamber President was also unavailable to comment on this article.
“Our refineries have always produced products to cover demand in the domestic market as well as the Caribbean. To export to the US and Europe we really don’t need to have refineries,” said Carlos Rossi, president of Caracas-based consulting firm EnergyNomics and formerly an economist with the Venezuelan Hydrocarbons Association or AVHI, in an interview in Caracas.
“Because the refineries have been seen as a low priority, PDVSA has focused more attention on the Faja,” said Rossi referring to the Hugo Chávez Oil Belt, formerly known as the Orinoco Heavy Oil Belt, home to one of the largest non-conventional oil deposits in the world.
PDVSA’s total hydrocarbon workforce mushroomed during 2000-2015 as the company stressed more importance on political affiliation and less on university or technical experience, said Eddie Ramírez, the director of Gente del Petróleo and a former PDVSA employee, in a phone interview from Caracas. At year-end 2015, PDVSA employed 114,259 direct hydrocarbon sector workers, up from just 42,267 when Chávez rose to power in 1999, according to PDVSA data.
PDVSA’s refining sector, which employed 9,391 workers in 2015, represented just 8.2 percent of the company’s total workforce in that year. In 2010, just 3,584 workers were employed in the refining sector, which represented a mere 3.8 percent of PDVSA’s total workforce.
Given PDVSA’s cash problems and its inability to generate positive free cash flow, the company’s plans to build six new multi-billion dollar upgraders, boost oil production and refining capacity to 6,000,000 barrels per day and 1,800,000 barrels per day respectively by 2019 seem to be optimistic and represent a major challenge for the state oil company.
PDVSA owns six refineries in Venezuela, which the company reports are strategically located to supply refined products to its major consumers. The refineries – which had a total combined processing capacity of 1,303,000 barrels per day, as of year-end 2015 – produce a product slate including but limited to: 91 and 95 grade gasolines, jet and diesel fuel, light naphtha, liquefied petroleum gas, solvents and residuals.
Due to a combination of problems, the six refineries were just processing a combined 616,000 barrels per day in August 2016, translating into an average utilization for PDVSA’s domestic refineries of 47.3 percent, said Ivan Freites, an oil union official with the United Federation of Venezuelan Oil Workers or FUTPV, which represents a large portion of PDVSA’s workers, during an interview in Punto Fijo.
Two refineries are located in Venezuela’s western Falcon state including: Amuay, with a 645,000 barrel-a-day processing capacity; Cardón, with a 310,000 barrel-a-day capacity; while the smaller Bajo Grande is located in Zulia state, with a 16,000 barrel-a-day capacity. Together, the three refineries make up the CRP, according to PDVSA’s annual report for 2015, with a product slate destined 55 percent for the domestic market and 45 percent for the export market.
More centrally located is the El Palito refinery in Carabobo state with a 140,000 barrel-a-day capacity while the remaining two refineries located in Venezuela’s eastern Anzoátegui state include Puerto La Cruz, with an 187,000 barrel-a-day capacity and the smaller San Roque, with a 5,000 barrel-a-day capacity.
In 2015, Venezuela’s domestic refining sector reported average utilization rates of 66.2 percent, according to PDVSA’s operational and financial data from last year. This compares to an average utilization rate of 70.6 percent in 2014 and an average utilization rate of 72.8 percent during 2011-2014.
The CRP has suffered much more deterioration and lower utilization rates than the other refineries. Average utilization rates at the complex reached just 60.5 percent in 2015, down compared to 72 percent in 2011 and an average 67.7 percent during 2011-2014, according to PDVSA data, which differs to what oil union officials report.
“Average utilization rates at the CRP were just 53 percent in 2015,” said Freites, a stocky, long-time oil union official. “The complex is damaged to the point that it almost makes better sense to build new refineries than to fix the incalculable problems that exist.”
In contrast, average utilization rates at El Palito reached 71.4 percent in 2015, down from 90.7 percent in 2011 and an average 89.5 percent during 2011-2014 while at Puerto La Cruz rates reached 93.2 percent in 2015, up from 88 percent in 2011 and an average 88.6 percent during 2011-2014, according to PDVSA.
Figures reported by PDVSA are always overly positive and extremely optimistic, said Freites, 53, during an early happy hour brunch which included Venezuelan ‘tequeños’, a special mix here of fried cornmeal with cheese on the inside accompanied with another popular import here: whisky.
From oil towns in Midland, Texas to Maracaibo to Monagas and Punto Fijo in Venezuela, oil men have at least one thing in common: their love for food and the typical companions Grants, Chivas, and the rest of the supporting cast. However, the economic crisis here has forced many oilmen to settle for whatever is available at the kitchen table. With bottled water sometimes unavailable, Johnnie Walker becomes a name to trust.
PDVSA data differs significantly from that provided by oil union officials here and other international agencies due to the opaque operating and reporting nature of the state oil company. A quick comparison of Venezuela’s production figures as reported by PDVSA and Venezuela’s Oil Ministry as compared to figures reported by OPEC in its monthly reports or even BP in its yearly statistical review serve to prove the point.
Cash-strapped PDVSA recently reiterated plans to boost its domestic refining capacity to 1,800,000 barrels per day by 2019 but has not detailed plans for its existing refineries – which continue to process at less than optimal levels – and has been quiet about plans to build new refining capacity. Only the Puerto La Cruz refinery is known to be undergoing a deep conversion process aimed at boosting its ability to process heavier Venezuelan crudes, according to PDVSA.
Recent agreements signed by PDVSA with authorities from the governments of Aruba, Venezuela and Citgo Aruba related to the restart of a 209,000 barrel-per-day refinery located in San Nicolas, Aruba point to potential issues PDVSA may have building new refineries or even six planned new upgraders, a special type of refinery, due to financial constraints whereby at first glance it appears easier to buy refining capacity than build it from scratch.
It is not a priority to build refineries since it is much better to invest in upstream activities to maximize your limited resources, said Monaldi, also the founding director and a professor at the Center for Energy and the Environment at IESA in Venezuela. New refineries are not great moneymakers and require low capital cost to make any money, he said.
Just a handful of streets separate the Amuay refinery from the Las Piedras fishing neighborhood. Not far away, rusted out American gas-guzzlers like the Ford Maverick and even the Ford F-1, seemly pulled straight off the set of the 1970’s U.S. television show Sanford and Son, can be seen littering the narrow streets here as well as the ones behind Cardón refinery in the neighborhood that bears its name, Punta Cardón. Residents of the latter neighborhood, basically live under the constant flare of gas and whatever else might come from the refinery that is practically in their backyards.
All of PDVSA’s Venezuelan refineries seem to suffer from some type of operational deficiency. At any given time and sometimes at the same various units from different refineries are down for unplanned repairs ranging from the Amuay flexicoker, alkylation, and catalytic units; the Cardón distillation units; the three Puerto La Cruz atmospheric distillation units to the El Palito FCC unit, thus, drastically reducing domestic processing capacity and output, said Frietes. On a number of occasions in the past two years complete operations at PDVSA’s principal refineries have been halted due to operational issues.
Reduced utilization rates at the CRP have created shortages of oil derivatives including unfinished oils, lubricants, finished motor gasoline and special naphthas. As a result, Venezuela is importing more derivatives such as products for gasoline as well as light oils from the U.S. and even far off countries such as Russia and Algeria to mix with its heavy and extra-heavy crude oils produced in the Faja, even as it continues to offer oil to regional neighbors ranging from Cuba to Nicaragua under attractive financing terms.
Despite the need to import oil and products, Venezuelan oil exports continued to member countries belonging to regional initiatives ranging from the Cuba-Venezuela Cooperation Agreement (CIC) to PetroCaribe but declined 6.6 percent to 185,000 barrels per day in 2015 compared to 198,000 barrels per day in 2014, according to PDVSA data. The volumes in 2015 were down 27.3 percent compared to 255,000 barrels per day supplied to member countries in 2009.
“PDVSA continues to give away oil while in Venezuela inventories of gasoline, gasoil, diesel, LPG and lubricants are insufficient to cover domestic demand,” said Freites, a stern critic of PDVSA.
Operating deficiencies in Venezuela have created export opportunities for refiners along the North American Gulf Coast. U.S. net imports of oil and refined products from Venezuela ranging from distillate fuel oil to MTBE (oxygenate) averaged 751,000 barrels a day in the 12-month period ended June 2016 compared to 711,000 barrels a day in the same year-ago period, according to data posted to the U.S.-based Energy Information Administration’s website. However, U.S. net imports of the same products from Venezuela averaged 1,590,000 barrels-a-day in the 12-month period ended June 2001 in the early years of the Chávez government.
Productivity at the CRP is down due to the increase in workers and the decline in output, said a former PDVSA refinery safety manager who worked for 29-years at the company. He didn’t want to reveal his name since he still does contract work for PDVSA in Punto Fijo and feared retaliation from the company. Oil workers must be oil workers and not politically divided like today as it is affecting the productivity of the employees and the company, he said during an interview at a small building in downtown Punto Fijo which serves as the local office of the FUTPV.
“It is still politically hard to justify massive Imports. But the economics are very clear. In the long run, if you can sustain international market prices in the domestic market you may be able to open the downstream to private investment,” said Monaldi.
Grade school kids and university students blend into the scenery of an oil town gone bust. Many will never reach PDVSA’s professional ranks unless they have connections within the company and/or support the socialist ideas, or at least those expressed by Maduro and his government. More than anything, PDVSA refinery workers in faded red work overalls dominate the landscape in Punto Fijo and the surrounding towns seemingly unaffected by hot weather, strong wind gusts and refineries constantly emitting gas and other substances into the air. What has affected them is the continued economic crisis and low wages, many say here.
Under the sweltering sun, improvisations are the order of the day at the CRP for many refining workers frequently forced to scramble to solve recurring small problems turned into major ones due to the lack of basic replacement parts. The practice of using emergency stapling techniques to fix routine vapor leaks at processing units, or product leaks along pipelines, is commonplace nowadays, says Freites, who is the spokesperson for many refining and oil union workers not willing to go on record due to fear of retaliation or work dismissal from PDVSA.
Similar scenes are said to resonate at the Puerto La Cruz and El Palito refineries, said José Bodas, another oil union official, in a telephone interview from Carabobo state.
PDVSA is using stapling methods to fix pipeline and unit leaks instead of properly fixing or repairing them due to a lack of funds to procure the necessary replacement parts, said the former PDVSA safety manager. PDVSA is more reactive than preventative and is conducting more corrective maintenance than preventative maintenance due to the lack of financial resources. It’s not necessarily a money thing but just the way PDVSA works today, he said.
Lackluster security measures to protect the PDVSA refineries and workers have allowed crime incidents to edge up within the complexes’ gates. Stolen work bags and purses, missing clothing and other personal items and car break-ins are daily work hazards beyond those related to working in a domestic refining sector where accidents, sadly enough, are more the norm than in many other countries with refining operations. In the country with the highest murder rate in the world, according to the website WorldAtlas.com, not even the confines of the refinery complex are safe enough to shield workers from the realities on the streets in Punto Fijo, Ciudad Ojeda, Anaco and other major oil and gas towns across Venezuela.
Safety is no longer a priority for PDVSA as funds are being spent haphazardly on non-necessary projects, said the former PDVSA safety manager with his salt-and-pepper mustache and Italian surname. He says many current PDVSA bosses only respond to accidents when they are officially reported by the media.
On its part, PDVSA claims there were just 154 total injuries at the CRP, El Palito and Puerto La Cruz refineries in 2015. This compares to 173 in 2014, 276 in 2012, and 298 in 2010, according to PDVSA data in its social and environmental statements on its website. Still, union officials here say the numbers don’t reflect the real case scenario since a lot of accidents and injuries go undocumented.
As the sun falls over the horizon, workers use their mobile phones in some areas of the CRP seemly unaware of the work hazards. Thieves that regularly enter the complex via the various gate openings to rob copper, bronze, nickel as well as other materials and equipment, also rob workers of their mobile phones whenever possible. The resale market for mobile phone parts is big in Venezuela amid an economic crisis that has impacted not just food importers, but the telecommunications and airline industries as well, among others.
The multiplier effect on this town and surrounding communities can visibly be seen in the fishing regions of Punto Fijo from Las Piedras to Los Taques where white and blue collar oil workers in the good ole days would be seen almost everywhere eating and taking in the sun with family and coworkers or clients. That’s not the scene here anymore. Local mayors have for years promised money to fishing communities and fishermen in the region but many, like other family members, remain unemployed. Many have turned to crime to rob and steal things they can resell to get basics like food or medicines for their families.
“Whatever was taken over from the transnational companies doesn’t work here,” said Jaime Antonio Diaz, 44, during an interview at a lightless restaurant in Los Taques. “If the Fourth Republic was bad, then the Fifth Republic is the worst,” he said as a stray cat entered the premise through an entrance door kept open to let in fresh air and natural light.
Diaz’s comments refer to the two most recent republics in Venezuela. The Fourth Republic was the period in Venezuelan history marked by the Punto Fijo Pact in 1958 for the acceptance of democratic elections in that year. Nationalization of Venezuela’s oil industry was a point frequently criticized by Chávez as a one of many failures of the Fourth Republic. The Fifth Republic Movement (MVR by its Spanish acronym) was a leftist political party founded in the late 1990s by then-presidential candidate Chávez. It was later dissolved in 2007 to give way to Chávez’s new political party the United Socialist Party of Venezuela (PSUV).
From refinery workers fleeing low pay and increased worksite accidents to unemployed fishermen and engineers driving taxis, Punto Fijo is going through what many say is one of its worst periods in decades.
Within visible distance of the dirt roads of Los Taques nearly 30 or more towering wind power turbines can be seen off the immediate horizon on the return trip from Los Taques to Punto Fijo. Despite the strong winds here, the turbines are not operational and have yet to generate power for commercial or domestic usage, according to Freites, owing to corrupt deals between Venezuelan government officials and the company that supplied the towers. Venezuela – which has long suffered from a natural gas deficit in its industrialized western Zulia state – has plans to use non-associated natural gas production from the Cardón IV offshore project as well as power generated by these turbines to reduce the need to import costly diesel fuel. From the look of things here, it is quite obvious the latter is not something PDVSA officials want to openly talk or brag about. However, it’s safe to assume somebody made a killing on the turbine deal.
While the wind turbine project – like others envisioned in this small country with a population close to 31 million – looks good on paper in the boardroom, the corruption here more often than not turns the project into a financial bonus for some individuals at the costs of local jobs and wasted resources for a country teetering on the brink of financial default.
One thing continues to thrive here: the contraband of fuels. Contraband of cheap Venezuelan gasoline continues to nearby Colombia, Guyana, Trinidad and Tobago and Aruba despite efforts to deter it and a decision by this government to boost gasoline prices in February of 2016 to 6 bolivars a liter from 9.7 centavos. While demand for gasoline has declined in Venezuela due to economic crisis and a higher cost for gasoline, its elevated price is still quite low compared to nearby markets; thus, making it still very attractive for trade internationally.
Large fishing boats – refitted by the Venezuelan military and now under the control of military officers that pose as fishermen – continue to leave the pier near Las Piedras with domestic fuel. These so-called ‘gasoil mafias’ continue to exchange Venezuelan refined products on the high seas in international waters in seemingly another way the military is kept happy and loyal by Maduro and company, according to Rossi, author of the book ‘The Completion of the Oil Era: The Economic Impact (Energy Policies, Politics and Prices).’
Barefoot grade school kids with just shorts on, play baseball on the dirt roads and side streets in numerous poor communities in and around Punto Fijo. Using broomsticks and makeshift baseballs, they can be seen enjoying their game despite the extreme poverty they live in and not having gloves. Despite being a Latin American country, baseball, not soccer is the sport of choice here and seen here as the way to rise out of poverty, at least for many males. On the other side, females here dream of being Ms. Venezuela or Ms. World.
“This government only saves itself by changing the model,” said León, referring to what the Maduro government needs to do to stay in power.
Whether the model change comes tomorrow, next year or in 2019, Venezuela’s hydrocarbon sector is in need of drastic changes. However drastic and radical these changes may have to be, investors will continue to keep Venezuela on their radar screens, hoping for a chance to invest in the country with one of the largest resource bases on the planet. However, from the looks of things, with foreign diplomats and oil men continuing to get kidnapped here, Venezuela is not yet ready for the massive return of foreign companies or better yet the foreign companies aren’t ready to return under the existing circumstances.
The recently announced departure of Schlumberger, the world’s largest oilfield services company, should serve as a reminder to potential investors about the condition of the oil sector here which still contends with a massive brain drain of national and international talent from companies from Halliburton to Total, Chevron, Statoil and a host of smaller companies lacking the deep pockets to survive without quarterly or sometimes monthly cash flow.
“The low wages continue to produce brain drain and that makes worse the operational problems,” said Monaldi.
Top Venezuelan officials and PDVSA executives blame the economic and petroleum sector crisis here on an economic war waged they say by opposition leaders with the backing of persons and institutions from Bogotá, Miami, Washington and even Madrid. The open denial of internal problems created by widespread mismanagement, errored financial and economic decisions as well as a number of actions including asset expropriations have handcuffed the country’s private sector and brought the all-important petroleum sector to a near halt. That hasn’t stopped other countries from stepping in to fill the void when and where it is possible. Case in point: Algeria just started to supply oil to Cuba amid mounting issues at PDVSA.
The Amuay explosion on August 25, 2012, as regrettable as it was, was an early wake-up call about what PDVSA had (and has) become after more than a decade of so-called socialism. Amid continued corruption at PDVSA and a hydrocarbon sector where funds mysteriously disappear, the financial and economic dreams of a handful or more have smashed the hopes of many in Punto Fijo and all across this major oil producing South American country.
“A lot of people here are changing sides due to the mismanagement of resources by the Chávez and now the Maduro government,” said Ali, a 50-year old taxi driver of an old Toyota Corolla, who requested his last name not be used in this article for fear of retaliation from PDVSA or government officials.
Ali’s sentiment resonates across all parts of this country from many petroleum engineers and other professionals that have left the industry to drive a taxi, wait tables or do anything where the wages are better.
“The sad part of all this is that we could have another August 25th,” said Freites.
(Editing by Peter Wilson)
(Exxon Mobil, 18.Jun.2016) – Exxon Mobil Corporation has reached an agreement with PBF Energy Inc. for the sale and purchase of its 50 percent interest in Chalmette Refining, LLC in Chalmette, Louisiana.
PBF Energy will purchase 100 percent of Chalmette Refining, LLC, which is a joint venture between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.
The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, La. and the company’s 100 percent interests in MOEM Pipeline, LLC and 80 percent interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.
“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.
“We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies,” said Wascom. “ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement.”
Subject to regulatory approval, change-in-control is anticipated to take place by the end of 2015. Details of the commercial agreements are proprietary.
(Energy Analytics Institute, Piero Stewart, 8.Oct.2015) – A Venezuela delegation is expected to visit with Trinidad and Tobago Prime Minister K. Rowley, Venezuela finance minister Rodolfo Marco Torres writes in twitter post.
The Venezuela delegation could be comprised of Torres, Foreign Minister Delcy Rodriguez, and Oil Minister Eulogio Del Pino.
(Energy Analytics Institute, Pietro D. Pitts, 8.Oct.2015) – “OPEC should convert itself into a stronger actor in geopolitical, geo-economics, and social areas as well in the permanent search for peace,” PDVSA radio reports in a weekly broadcast, citing Venezuela’s energy minister and PDVSA President Eulogio Del Pino.
OPEC has had a fundamental role for the planet in the last 55 years and should strive to guarantee sustainable stability of energy resources that humanity needs, said Del Pino.
“OPEC is still under permanent attacks from world powers due to its role to promote the sovereign use of energy resources,” said Del Pino.
(Energy Analytics Institute, Piero Stewart, 1.Oct.2015) – This will be the first exploration well to search for and confirm the presence of oil and gas in Curazaito in Zulia state, PDVSA says in radio broadcast.
The well will be located in the Cabimas block on the eastern coast of Lake Maracaibo. Oil from the well could be heavy-to-extra-heavy.
(Energy Analytics Institute, Pietro D. Pitts, 1.Oct.2015) – The smuggling of Venezuelan gasoline to Aruba and other countries will continue as long as a large gap between gasoline prices exists, said EnergyNomics President Carlos Rossi in an interview in Houston, Texas.
“Contraband is a way to keep the military happy and loyal. With the increase in government seizures, the smuggling business of smaller smugglers is being affected.”
The Venezuelan government must increase the price of gasoline to halt or slow the smuggling and contraband business. Besides, increasing gasoline prices is good for following reasons: 1) it would be anti-inflationary, like a tax, 2) it solves or helps fiscal deficit, and 3) it assists PDVSA accounts, said Rossi.
“However, an increase in the price of gasoline can be seen as a case of a positive economic policy that will cause negative political backlash.”
(Energy Analytics Institute, 30.Sep.2015) – Information in this section, provided by Energy Analytics Institute editors and reporters, is hearsay and thus should be treated as such. The names of our many sources have been withheld to protect their identities and family members in Venezuela.
* China could ask for Sidor in Venezuela; China interested in steel industry; most of energy for Sidor is hydroelectric.
* Venezuela cannot default because that would affect its credit lines; in default a lot of export dollars would have to go to importing food and other essential products.
* Furial production declines in Venezuela continue and are ‘very worrisome.’
* PDVSA hearing related to PDVSA official Parada was stopped because he said we would spill the beans on everybody. ‘If I go down so will everyone else.’
* A default in Venezuela would verify what everyone is already suspecting, that the Venezuelan officials are incompetent since the country has the largest reserves in the world but is still going bankrupt. “People don’t like to lend money to incompetent people.”
(Energy Analytics Institute, Piero Stewart, 15.Sep.2015) – Venezuela’s Foreign Minister and Vice President of International Affairs at PDVSA, Delcy Rodríguez, accompanied by Minister of Commerce and Industry of Saudi Arabia Tawfiq bin Fouzan Alrabiah, opened the First High Level Joint Commission Venezuela-Saudi Arabia at the Antonio Jose de Sucre Casa Amarilla, the seat of the Venezuelan Foreign Ministry in Caracas, according to statements released by Venezuela’s Foreign Ministry.
“As President Nicolás Maduro said, our diplomacy is actively involved in the defense of energy resources,” said Foreign Minister Delcy Rodriguez during the ceremony.
The Joint Commission aims to strengthen relations between the two countries, covering a broad spectrum that includes petrochemical, industrial, agricultural, cultural, educational, diplomatic, and financial areas. These relations received a boost from Commander Chavez with his historic diplomatic tour of Arab countries in 2000. They have been relaunched by the Bolivarian government with the visit of President Nicolas Maduro to the Kingdom of Saudi Arabia earlier this year.
Venezuela and Saudi Arabia are founding members of the Organization of Petroleum Exporting Countries (OPEC), and maintain strategic bilateral agreements in the hydrocarbon sector, which is expected to strengthen through bilateral petrochemical cooperation.
“We hope to promote trade between the two countries, secure an effective environment for the development of the private market, and increase professional and technological cooperation,” said Minister Fouzan Alrabiah. “We have an export industry in the areas of food, plastics, fertilizer, and iron, among others.”
“The defense of crude oil market prices belongs to us,” said Rodriguez, echoing statements by President Maduro during OPEC’s 55th anniversary event.
Beyond oil, the future of bilateral cooperation is full of potential. Both nations share a policy for the integration and full sovereignty of the peoples.
“Saudi Arabia and Venezuela share the cause of the Palestinian people” said Rodriguez. “Venezuela is a nation of peace. We affirm our willingness and commitment to deepen bilateral relations. Feel at home! That is how we feel when we are in your country.”
(Energy Analytics Institute, Piero Stewart, 15.Sep.2015) – “A $40 per barrel oil price is not a low price for Venezuela,” says Ramon Espinasa, oil economist at the Inter-American Development Bank (IDB), from Washington during an interview broadcast by Venezuelan radio station 99.9 FM.
Venezuela’s oil sector is able to maintain operations with an oil price lower than $40/bbl, but better efficiency is required, says Espinasa.
“Venezuela first four major heavy oil upgrading projects developed in with oil prices much lower than $40 per barrel,” he concluded.
(Energy Analytics Institute, Piero Stewart, 14.Sep.2015) – In terms of a much talked about default, PDVSA would continue to function but the levels of output will likely decline due to a lack of investment and could see an increase in accidents at the company, said EnergyNomics President Carlos Rossi in an interview in Houston, Texas.
New projects will never advance while companies will make minimal necessary investments in producing projects and suppliers will likely move to a cash-basis ‘cascade scheme’, said Rossi.
Venezuela has already defaulted internally and not exterally yet. With oil prices at $50/bbl or below the country could theoretically have inflation somewhere between 140-150%, while with oil prices at $50/bbl or above the country could theoretically have inflation somewhere between 80-100% inflation, concluded Rossi.
(Energy Analytics Institute, Piero Stewart, 14.Sep.2015) – PDVSA is falsely accusing innocent workers of smuggling fuel, according to an oil union official.
“By falsely accusing innocent PDVSA workers of smuggling diesel and gasoline, the Venezuelan government is trying to cover up the smuggling being carried out by military officials,” oil union official Ivan Freites says in phone interview from Punto Fijo.
(Energy Analytics Institute, Piero Stewart, 10.Sep.2015) – A 4.5 magnitude quake was reported in Venezuela’s Sucre state (41km north of Guiria), Venezuelan Seismological Foundation (Funvisis) reported.
(Energy Analytics Institute, 10.Sep.2015) – “Let’s overcome our differences of opinion between OPEC and non OPEC producers to achieve consensus,” Venezuela’s oil ministry posted via twitter , citing the country’s oil minister Eulogio Del Pino.
“Let’s have a discussion on fair prices, minimum prices to ensure sustainability,” said Del Pino, who also serves as the president of PDVSA.
“We in South America play a key role in integration.”
(Energy Analytics Institute, Piero Stewart, 8.Sep.2015) – A gas treatment plant in the Triguadare sector of Paraguana peninsula in Falcon state is operating normally after a fire was reported there last week, reported the daily newspaper El Universal, citing Venezuela’s Gas Vice Minister José Gregorio Prieto.
(Petrobras, 20.Aug.2015) – Regarding media reports on the payment of a fine to U.S. authorities, Petrobras states there is nothing ongoing regarding any payment of a fine to close civil and criminal investigations into the violation of anticorruption legislation in the U.S.
Nor has there been any decision by U.S. authorities on the merits of such an investigation or the amounts involved.
(Ecopetrol S.A., 19.Aug.2015) – The Board of Directors of Ecopetrol S.A., in its meeting held on 14.Aug.2015, authorized the creation of a Colombian company indirectly wholly owned by Ecopetrol.
The creation of the new subsidiary seeks to develop offshore activities in Colombia, which the company currently carries out as operator and nonoperator, and take advantage of the benefits of Decree 2682/14, “pursuant to which the conditions and requirements are established for declaring the existence of Permanent Offshore Free Trade Zones.” Once the new company is created, the ANH’s approval will be sought in order to assign Ecopetrol’s contractual rights under the exploration and production contracts of the offshore blocks in which it is operator and non-operator.
(Energy Analytics Institute, Pietro D. Pitts, 11.Aug.2015) – The Paraguana Refining Center (CRP) will initiate a preventive shutdown of the Cardon Refinery’s Fluidized Catalytic Cracking Unit on August 13, 2015, according to a statement posted to PDVSA’s website.
Mechanical work will be performed on the equipment that is part of the unit in order to ensure the operational reliability of this plant that produces high-octane constituents used in fuel mixtures.
The CRP’s other Fluidized Catalytic Cracking Unit located at the Amuay Refinery is operating normally after the successful performance of its maintenance and safe start-up.
(Harvest Natural Resources, Inc., 7.Aug.2015) – Harvest Natural Resources, Inc. announced second quarter 2015 earnings and provided an operational update.
Harvest reported a 2Q:15 net loss of approximately $25.4 mln, or $0.60/share diluted, compared with a net loss of $1.7 mln, or $0.04/share diluted for the 2Q:14. The 2Q:15 results included a non-cash loss on issuance of debt, which is related to the CT Energy transaction, of $20.4 mln, or $0.48/share diluted. Adjusted for loss on issuance of debt, Harvest would have posted a 2Q:15 net loss of approximately $5 mln, or $0.12/share diluted, before any adjustment for income taxes.
The loss on issuance of debt is the result of the difference between (i) the issuance-date value of the CT Energia warrants of $40 mln, plus the net value applied to embedded derivatives related to the nonconvertible note and the convertible note issued to CT Energy of $10.95 mln, plus transaction costs of $1.65 mln less (ii) the loan proceeds received of $32.2 mln.
The sum is recognized as a non-cash pre-tax loss of $20.4 mln during the 2Q:15.
Petrodelta generated $173.3 mln in revenue during the 2Q:15 before deductions for royalties, compared to $365.2 mln for the 2Q:14. The average price of crude oil sold by Petrodelta during the 2Q:15 was $49.71/bbl, compared to $88.77/bbl for the 2Q:14. Petrodelta reported a 2Q:15 operating loss before taxes and non-operating items of $98.6 mln, compared to operating income before taxes and nonoperating items of $35 mln for the 2Q:14. Petrodelta posted a net loss of $74.8 mln during the 2Q:15, compared to net income of $42.3 milln for the 2Q:14. The Petrodelta financial results are prepared and presented under IFRS.
Highlights for the 2Q:15 include:
— During the 2Q:15, Petrodelta drilled and completed 6 development wells and sold approximately 3.45 MMbbls for an average of approximately 37,929 b/d), a decrease of 16% over the 2Q:14.
— Petrodelta’s current production rate is approximately 37,761 b/d and the 2015 expected average production rate is 38,921 b/d, with capital expenditures projected at $392 mln. — Harvest has entered into a term sheet with PDVSA, Harvest’s partner in Petrodelta, for the repositioning and growth of Petrodelta’s business.
— On 19.Jun.2015, the company entered into a strategic relationship with CT Energy and CT Energia designed to maximize the long-term success and value of Harvest’s Venezuelan operations and its 20.4% investment in Petrodelta.
— The company sold CT Energy a $25.2 mln, 5year, 15% non-convertible senior secured promissory note and a $7 mln, five year, 9% convertible senior secured note.
— Harvest also issued CT Energy a warrant to purchase up to 34,070,820 shares of Harvest’s common stock at an initial exercise price of $1.25/share. The warrant becomes exercisable only after the 30-day volume weighted average price of Harvest’s common stock equals or exceeds $2.50/share.
— At our upcoming annual shareholder meeting on 9.Sep.2015, Harvest stockholders will be asked to approve certain proposals relating to the transaction.
— If stockholder approval is not obtained, CT Energy has the right to accelerate full repayment of the non-convertible and convertible notes upon 60days’ notice.
During the 2Q:15, Petrodelta sold approximately 3.45 MMbbls for an average of 37,929 b/d, a decrease of 16% over the 2Q:14, and 6% lower than the 1Q:15. Petrodelta sold 1.10 Bcf of natural gas for an average of 12.1 MMcf/d in the 2Q:15, increasing 62% over the 2Q:14 and 13% over the 1Q:15. Petrodelta’s current production rate is approximately 37,761 b/d.
During the 2Q:15, Petrodelta drilled and completed 6 development wells, 5 in the El Salto field and 1 in the Temblador field. Currently, Petrodelta is operating 6 drilling rigs and 1 workover rig and continues with infrastructure enhancement projects in the El Salto and Temblador fields.
Petrodelta’s production target for 2015 is projected to be approximately 38,921 b/d. The 2015 Petrodelta capital expenditures are expected to be approximately $392 mln. Petrodelta expects to drill 21 oil wells during 2015.
(Energy Analytics Institute, 18.Jun.2015) – Petroleos de Venezuela SA (PDVSA) plans to boost investments in the Venezuelan natural gas sector over the next five years in order to almost double production to meet increasing domestic demand, reduce its reliance on fuel imports and eventually export excess gas volumes to generate additional dollar income.
PDVSA, as the state oil company is known, plans capital investments of $38.4 billion during 2015-2019 to increase natural gas production from 7.4 Bcf/d in 2014 to 10.5 Bcf/d by 2019, said PDVSA official Douglas Sosa on June 18, 2015 during a hydrocarbon congress in Maracaibo, Venezuela. Increased gas production will assist PDVSA met increasing demand in the domestic market and reduce its dependence on costly refined product imports. Excess gas production could be destined for export markets in Latin America as well as Trinidad.
“We are talking about exports to Trinidad, Central America, South America and if we consider the LNG projects that we are promoting we could export this gas to further destinations,” said Sosa.
(Harvest Natural Resources, Inc., 19.May.2015) – Harvest Natural Resources said that during the first quarter of 2015, Petrodelta drilled and completed four development wells and sold approximately 3.63 million barrels (MMbbls) for an average of approximately 40,377 barrels of oil per day (bo/d), a decrease of 6% over the first quarter of 2014.
Petrodelta’s current production rate is approximately 40,400 bo/d and the 2015 expected average production rate is 41,345 bo/d with capital expenditures projected at $265 million.
(Harvest Natural Resources, Inc., 19.May.2015) – Harvest Natural Resources, Inc. (HNR) reported a 1Q:15 net loss of approximately $5.6 million, or $0.13/share diluted, compared with a net loss of $8.0 million, or $0.19/share diluted, for the same period last year. The 1Q:15 results included exploration charges of $1.9 million, or $0.04/share diluted. Adjusted for exploration charges, Harvest would have posted a 1Q:15 net loss of approximately $3.7 million, or $0.09/share diluted, before any adjustment for income taxes.
Highlights for the 1Q:15 include:
During the 1Q:15 ended 31.Mar.2015, Petrodelta sold approximately 3.63 MMBO for a daily average of 40,377 bo/d, a decrease of 6% over the 1Q:14 and 1% lower than the 4Q:14. Petrodelta sold 0.96 billion cubic feet (Bcf) of natural gas for a daily average of 10.7 million cubic feet per day (MMcf/d), increasing 71% over the 1Q:14, and decreasing 2% over the 4Q:14. Petrodelta’s current production rate is approximately 40,400 bo/d.
During the 1Q:15, Petrodelta drilled and completed 4 development wells, 1 in the El Salto field and 3 in the Isleño field.
Currently, Petrodelta is operating 6 drilling rigs and 1 workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.
Petrodelta’s production target for 2015 is projected to be approximately 41,345 bo/d. The 2015 Petrodelta capital expenditures are expected to be approximately $265 million. Petrodelta expects to drill 24 oil wells during 2015.
Petrodelta generated $145.7 million in revenue during the 1Q:15 before deductions for royalties, compared to $326.5 million for the 1Q:14. The average price of crude oil sold by Petrodelta during the 1Q:15 was $39.69/bbl compared to $83.97/bbl for the 1Q:14.
Petrodelta reported a 1Q:15 operating loss before taxes and non-operating items of $66.9 million compared to operating income before taxes and nonoperating items of $84.8 million for the 1Q:14. Petrodelta posted a net loss of $32.0 million during the 1Q:15 compared to net income of $48.5 million for the 1Q:14.
Petrodelta’s financial results are prepared and presented under IFRS and it should be noted that the official exchange rate of 6.3 Bolivars per 1 US dollar is applied.
A new exchange rate called the Foreign Exchange Marginal System (SIMADI) has been created. The SIMADI rate published as of 31.Mar.2015 was 192.95 Bolivars per U.S. Dollars. The SIMADI’s marginal system is available in limited quantities for individuals and companies to purchase and sell foreign currency via banks and exchange houses. Currently the SIMADI marginal system more accurately reflects the exchange rate between Bolivars and U.S. Dollars in Venezuela. However, Petrodelta is not currently authorized to perform currency exchanges applying the SIMADI system.
(Wison Offshore & Marine Ltd., 21Apr.2015) – Wison Offshore & Marine Ltd. announced the delivery of its first batch of stick built for the key modularized components construction of the Petroleos De Venezuela, S.A.(PDVSA) Puerto La Cruz refinery project, achieving an important project milestone which demonstrated the strong capabilities of Wison Offshore & Marine in module fabrication.
“We’re quite confident in the on-time and quality delivery of the entire project,” said Mr. An Wenxin, Senior Vice President of Wison Offshore & Marine.
This is part of the contract awarded by HyundaiWison consortium (a consortium of Hyundai Engineering & Construction Co. Ltd., Hyundai Engineering Co., Ltd. and Wison Engineering Ltd.) to supply key modularized components including pipe racks and equipment modules. Under the contract, Wison Offshore & Marine is responsible for the shop drawing, material procurement, construction, precommissioning and load out.
There are altogether 94 modules and stick built totaling about 22,840 tonnes, which are to be delivered in 10 batches. While the first batch of stick built had been delivered, the module assembly has already commenced on 15.Mar.2015 at the same time and the first batch of modules shall deliver in Jul.2015 followed by progressive delivery with an interval of 1 month per shipment. The entire project shall complete in the 1H:16 as requested by the clients.
(Baker Hughes Incorporated, 21.Apr.2015) – Baker Hughes Incorporated announced results for the first quarter of 2015.
Latin America revenue was $493 million for the 1Q:15, down $37 million, or 7%, compared to the 1Q:14. The drop in revenue can be attributed to activity declines in the Andean area, as reflected in a 24% decline in the rig count, and revenue declines in Venezuela from both lower rig count activity and unfavorable exchange rates as a result of the currency devaluations that occurred in the 2Q:14.
These reductions in revenue were partially offset by share gains in Mexico’s marine region, increased unconventional activity in Argentina, and share gains in Brazil as a result of a recent drilling services contract.
Adjusted operating profit margin for Latin America in the 1Q:15 was 9.1%, down 180 basis points compared to the 1Q:14. Not unlike revenue, profitability was impacted by reduced onshore activity levels, along with $14 million in reserves for doubtful accounts and inventories, and $5 million for a currency devaluation in Venezuela as the company adopted the prevailing market rate of 192 Venezuelan Bolivars per U.S. Dollar.
In the 2Q:15, the Latin America rig count is projected to drop less than 5%. However, this forecast includes a decrease of 5 deep-water drilling rigs in Brazil relating to demobilization of a local drilling rig supplier facing potential bankruptcy. The reduction of deep-water activity is expected to have a negative impact on the 2Q:15 results.
(Seaway Heavy Lifting, 9.Apr.2015) – Seaway Heavy Lifting entered into a contract with Cardon IV in Venezuela for transportation and installation of the Perla project gas production platforms complete with tie-in of the subsea infrastructure.
The Perla development consists of 3 gas production platforms connected to the shore landing near Punto Fijo, through a 30 inch pipeline. The water depth in the field is 229 feet (70 meters). Seaway’s scope includes the transport and installation of the platforms and tie-in of the platforms to the pipelines, which have already been installed.
Cardon IV S.A. is a joint operating company currently owned by Italy’s Eni (50 percent) and Spain’s Repsol (50 percent). Petroleos de Venezuela SA has the option to back in to 35 percent share in the operation of this block, included in Rafael Urdaneta gas project in Venezuela.
Seaway’s crane vessel Stanislav Yudin will execute the lifting and installation work. The vessel will be out fitted with a saturation dive system to perform the tie-ins. In addition to the Stanislav Yudin and its two supporting vessels, a total of 7 tug/barge spreads will be operated to transport the platforms and subsea infrastructure from Gulf of Mexico ports to the site. The site is located northwest of Punto Fijo in Venezuelan offshore waters. Execution of the project is starting in 2Q:15, and will take approximately 5 months.
Project Management and Engineering has already started and is executed from Seaway’s home base in the Netherlands as well as from its new project office in the Woodlands near Houston.
“This challenging project is one of the largest in Seaway’s portfolio, and the project fits well with our experience and capabilities,” said Jan Willem van der Graaf, CEO of Seaway Heavy Lifting.
(Energy Analytics Institute, 8.Apr.2015) – “Venezuela is attractive to imperial politics because of the size of its petroleum reserves,” Venezuela’s Electric Energy Minister Jesse Chacon said in broadcast on state television.
(CB&I, 1.Apr.2015) – CB&I was awarded a contract for approximately $60 million for the engineering, procurement, fabrication and construction of storage tanks in Venezuela.
“CB&I has a long history in Venezuela for providing reliable storage solutions at the highest quality,” said Luke Scorsone, President of CB&I’s Fabrication Services operating group. “This award underscores the confidence the customer has in CB&I to continue to provide fabrication work for their projects safely and on-time.”
(Energy Analytics Institute, Ian Silverman, 30.Mar.2015) – “The exchange controls don’t have an economic justification and is used only as a form of political domination,” reported the daily Quinto Día, citing Victor Alvarez.
(Energy Analytics Institute, Piero Stewart, 31.Mar.2015) – Venezuela’s electric energy sector incurred investments of $444 million and 518 million Venezuelan bolivars in 2014 on three projects in Venezuela’s western region, the country’s electric energy minister Jesse Chacón said in Caracas on January 30, 2015 during an electric sector conference at Corpoelec’s headquarters.
In the western Region, $144 million and 180 million Venezuelan bolivars was spent on the Antonio José de Sucre Thermoelectric Plant in Cumaná. The plant will add 340 megawatts to Venezuela’s national electric system or SEN electric grid.
Additionally, $275 million was spent on the 230 kilowatt Chacopata-Margarita Sub-Marine cable that spans 40 kilometers. The cable has a 80 megawatt capacity.
Lastly, $25 million and 338 million Venezuelan bolivars and was spent on the 138 kilowatt La Vueltosa-Guasdualito transmission line that spans 148 kilometers.
PLANS FOR 2015
Venezuela’s electric energy sector will incur investments of $4,901 million and 4,295 million bolivars in 2015 on five large projects in the Andean and central regions of the country, said Chacón.
In the Andean region, $1.045 billion will be destined to the 170 megawatt closed cycle Luis Zambrano Plant in Meridá, while $529 million and 693 million Venezuelan bolivars will destined to the completion of the 257 megawatt Unit 3 of the Fabricio Ojeda project.
In the central region, $1,764 million and 2,922 million Venezuelan bolivars will destined to the 340 megawatt combined cycle India Urquia Plant. Another $99 million and 680 million Venezuelan bolivars will be destined to the completion of 400 megawatt Machine 5 of the Central Plant and $1,464 million will be destined to the construction and installation of the 600 megawatt Unit 6 of the Central Plant.
Another $795 million and 5,604 million Venezuelan bolivars will be destined to other projects as follows:
In the Eastern Region: $50 million will be destined to the Machine 2 of the Termobarrancas Plant (170 megawatts) in Barinas; $90 million for the installation of two simple cycle machines (340 megawatts combined) at Termo Zulia V; $190 million and 1,606 million Venezuelan bolivars on the Cojedes robust plan; $126 million and 1,836 million on the Portuguesa robust plan; $136 million and 858 million Venezuelan bolivars will be destined to transmission projects in the southern part of Lake Maracaibo.
In the Southern Region: $162 million and 1,193 million Venezuelan bolivars will be destined to southern transmission projects; $41 million and 111 Venezuelan bolivars on modernization schemes for the 765 kilowatt protection lines; and no specific amounts on closing work on the Tocoma Dam.
(Energy Analytics Institute, Piero Stewart, 31.Mar.2015) – Venezuela’s foreign minister Delcy Rodríguez met with San Cristobal and Nieves Prime Minister Timothy Harris to discuss bilateral relations.
The official also reviewed agreements signed between both countries and advances in the energy sector related to alternative energies, infrastructure, and housing. The officials also inspected the areas where diesel storage tanks are being installed through an agreement with PDV Caribe, reported PDVSA in an official statement.
(Energy Analytics Institute, Jared Yamin, 31.Mar.2015) – Venezuela’s Foreign Minister Delcy Rodríguez met with Antigua and Barbuda Prime Minister Gaston Browne to discuss bilateral trade and energy matters.
Antigua and Barbuda has capacity to store 1.5 million barrels of oil and refined products.