Venezuela Doubles Down on Chinese Money to Reverse Crisis

(AP, 20.Sep.2018) — Venezuelan President Nicolas Maduro said Tuesday that new investments from China will help his country dramatically boost its oil production, doubling down on financing from the Asian nation to turn around its crashing economy.

Already a major economic partner, China has agreed to invest US$5 billion more in Venezuela, Maduro said following a recent trip to Beijing, adding that the money would help it nearly double its oil exports to China.

“We are taking the first steps into a new economic era,” he said. “We are on track to have a new economy, and the agreements with China will strengthen it.”

A once-wealthy oil nation, Venezuela is gripped by a historic crisis deeper than the Great Depression in the United States. Venezuelans struggle to afford scarce food and medicine, many going abroad in search of a better life.

Venezuela’s inflation this year could top one million per cent, economists predict.

After two decades of socialist rule and mismanagement, Venezuela’s oil production of 1.2 million barrels a day is a third of what it was two decades ago before the late President Hugo Chavez launched the socialist revolution.

Maduro says that under the deal, Venezuela will increase production and the daily export of oil to China to one million barrels a day.

However, China is taking a strong role in its new agreements. Over the last decade, China has given Venezuela US$65 billion in loans, cash and investment. Venezuela owes more than US$20 billion.

FINALISING OIL PLANS

The head of the National Petroleum Corporation of China will soon travel to Venezuela to finalise plans on increasing oil exports.

Russ Dallen, a Miami-based partner at brokerage Caracas Capital Markets, said the influx of money appears to be investments China will control.

“The Chinese are reluctant to throw good money after bad,” Dallen said. “They do want to get paid back. The only way they can get paid back is to get Venezuela’s production back up.”

Venezuela also agreed to sell 9.9 per cent of shares of the joint venture Sinovensa, giving a Chinese oil company a 49 per cent stake. The sale will expand exploitation of gas in Venezuela, the president said.

Maduro also recently launched sweeping economic reforms aimed at rescuing the economy that include a creating new currency, boosting the minimum wage more than 3,000 per cent, and raising taxes.

Economist Asdrubal Oliveros of Caracas-based firm Econalitica said he doubts that Venezuela can reach the aggressive goal to boost oil exports to China to one million barrels a day, given problems faced by the state corporation PDVSA.

“Increased production I see as quite limited,” Oliveros said. “The Chinese companies alone have neither the muscle nor the size to prop up production.”

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Venezuela’s Maduro Says Relationship With China ‘Win-Win’

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — In terms of bilateral cooperation, Venezuela and China are seeking a ‘win-win’ scenarios.

“Relations with China are very clear and have been framed around mutual respect and under the premise of win-win, which has allowed for the reactivation of financial funds, and revival of sustained development,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

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Maduro Looks to China to Bolster Venezuela’s Collapsing Economy

(Afp, 12.Sep.2018) — Venezuela’s President Nicolas Maduro departed Wednesday for China in search of agreements to bolster the oil-exporting country’s collapsing economy.

Maduro said the trip was “very necessary, very opportune and full of great expectations.”

“We are leaving under better conditions, having activated a program of economic recovery, growth and prosperity. We are going to improve, broaden and deepen relations with this great world power,” he said in a televised address.

Maduro’s government has massively devalued the national currency as part of a raft of measures intended to halt the economy’s free-fall into hyperinflation.

The International Monetary Fund projects Venezuela’s inflation rate will reach 1,000,000 percent by the end of the year.

Hundreds of thousands of Venezuelans have fled the country, most of them into neighboring Latin American countries.

The trip to China is Maduro’s first outside the country since he was allegedly targeted by exploding drones at a military parade in Caracas August 4.

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Venezuela Oil Production Continues to Collapse

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — The decline is consistent and constant as well as consistently and constantly bad, writes Caracas Capital Market in a research note emailed to clients.

Summary details from the research note follow:

OPEC released the production counts for its member states today and while overall OPEC production was up 278,000 barrels per day (bpd) during the month, Venezuela’s production continued to collapse.

According to OPEC’s August calculations, Venezuela production fell another 36,000 barrels per day (bpd) to 1.235 million bpd. (Venezuela production actually fell 43,000 bpd from the original OPEC July count of 1.278, but OPEC revises their numbers as new data comes in later in the month and moved Venezuela’s July production count down to 1.272 million bpd from the original 1.278 bpd), according to the research note.

“The decline is consistent and constant.”

OPEC calculated that July’s Venezuelan production fall was 42,000 bpd and that June’s fall was 48,000 bpd. In May, Venezuela production fell 43,000; in April, -42,000 bpd; in March, -55,000 bpd; in February -52,000 bpd; in January, -47,000 bpd. Consistently and constantly bad.

In the one year period from August 2017 — when PDVSA was producing 1.918 million bpd — Venezuela has lost 683,000 bpd of production. At the current year average price, that is lost income of $47 million a day and $17.5 billion in a year.

Making this situation worse is that Venezuela’s current 1.235 million bpd production is just a shade more than a third of what the country was producing 20 years ago before Chavez came to power. Hundreds of billions of dollars lost through communism, corruption and incompetence in a country that can ill afford it.

“By the way, we are seeing just one example of how that corruption works in a case playing out before the U.S. Federal District Court in Miami that sucked $1.2 billion from PDVSA in what I label a ‘perpetual money machine for bad guys’ in today’s Miami Herald and El Nuevo Herald, writes Caracas Capital Markets Managing Partner Russ Dallen. “The cast of characters reaches all the way to the top and includes the Derwick boys (especially Francisco Convit), the Boligarch Raul Gorrin (who bought Globovision), the Maduro family (especially the stepsons ‘los chamos’ but also mentions mother Celia Flores and Nicholas Maduro), and a Swiss banker who has copped a deal to tell all (but still had to put up a $5 million bond yesterday).”

Drilling Rigs Fall

Meanwhile, Venezuela’s drilling rig count dropped by one in August, continues the Caracas Capital Market report.

Baker Hughes reports that the number of active drills operating in Venezuela fell to 27 last month, after popping up 2 in July off June’s thirty year low of 26. One of the two drills that was added in July was drilling for gas – the first in over a year. It was still deployed in August.

Having failed to capitalize on its natural gas (much less build the Mariscal Sucre LNG plant) for decades, Venezuela signed a deal last week to link into an already existing gas pipeline at a Shell platform in bordering Trinidad waters and through that pipeline pump gas to Trinidad’s Atlantic LNG plant where it will be converted into LNG for export.

Long time readers will also recall that Rosneft was given a 30 year totally wide-open lease on a gas field in that area last year.

Maduro Goes to China

Finally, as we predicted in our “China Promises Venezuela More Money” Report yesterday and correctly forecast in a Report and Wall Street Journal column in July, Venezuela seems to be making headway in getting help from the Chinese, writes Dallen.

“No one else seems to have been able to accurately uncover and read these Chinese tea leaves, so I am especially proud of our Caracas Capital team. We continue to knock the ball out of the park for our clients,” writes Dallen.

Maduro has just announced that he is going to China to sign some big new deals.

Minister of Oil and PDVSA head Manuel Quevedo is also in Beijing meeting with CNPC and is offering to expand natural gas agreements as well. Yesterday, Venezuela’s oil ministry released a statement touting that the Sinovensa joint venture had increased oil production from 70,000 bpd to 110,000 bpd.

Aside from oil, gas and drilling, we are anticipating some other upcoming ventures in gold mining, coltan and diamond mining, concludes the Caracas Capital Market note.

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OOS Drillship to Support Pemex Campaign

Photo: OOS Energy

(Offshore, 4.Sep.2018) — OOS Energy has won its first drilling contract offshore Mexico.

The OOS Tiger 1 drillship will support Marinsa & PPS (Pemex Drilling) for a 15-month program.

The vessel, built at Shanghai Shipyard in China, is a moored drillship capable of working in water depths up to 5,000 ft (1,524 m), and to drilling depths of up to 31,500 ft (9,601 m).

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Venezuelan Oil Assets to be Seized by Creditors

(Express, Simon Osborne, 16.Aug.2018) – Venezuela’s oil assets are being targeted by angry creditors after a US court granted a Canadian mining company permission to send in the bailiffs.

Firms owed billions by the beleaguered South American country and its state-owned oil firm PDVSA are now lining up to make sure they get a pay-out.

The Venezuelan economy is crippled by hyperinflation and the discredited regime of President Nicolás Maduro faces trade sanctions from the US, EU, Canada and Latin America’s biggest countries.

The country is essentially bankrupt and creditors see its oil assets as their best bet with the biggest target being Citgo, a Texas-based oil refiner that processes Venezuelan crude oil and is estimated to be worth roughly £3.15bn.

Oil tankers could also be targeted as US hedge fund Elliott Management did with an Argentine ship in 2012 after it won a US court ruling to collect on unpaid debts.

Venezuela, which is overdue on about £4.5bn in debt payments, is reportedly transferring oil cargoes to safe harbours including Cuba to avoid such risks.

Canadian mining company Crystallex won a key battle in its attempts to force Venezuela to pay £1.1bn in compensation for expropriation of a mining project when a US judge accepted its argument that PDVSA was an “alter ego” of the Venezuelan state and gave it the right to seize PDVSA assets in the US.

Francisco Rodriguez, chief economist of Torino Capital said the ruling could serve as a precedent.

He said: “This judgment is unambiguously negative for Venezuela, given its loss of an asset of significant value. In all likelihood the ruling will spur creditors to attempt to pursue PDVSA assets.”

ConocoPhillips has already won a £1.57bn arbitration award against PDVSA from the International Chamber of Commerce, the US oil major seized the company’s assets in the Caribbean.

The seizures left PDVSA without access to facilities that process almost a quarter of Venezuela’s oil exports.

To avoid the risk of other assets being taken, PDVSA asked its customers to load oil from its anchored vessels acting as floating storage units.

Citgo’s complicated ownership – half the company is security against more than £2.36bn of PDVSA bonds and half is collateral for a £1.18bn loan from Russian oil giant Rosneft – means any immediate plundering of its assets is extremely unlikely.

Robert Kahn, a professor at the American University and a former International Monetary Fund official, said: “The ruling is a win for Crystallex, no doubt. But I’m not convinced that it immediately marks a tipping point.”

Richard Cooper, senior partner at New York law firm Cleary Gottlieb Steen & Hamilton, said: “The Crystallex ruling doesn’t mean that every Republic of Venezuela bondholder can automatically assume that PDVSA assets are available to them.”

Venezuela also owes tens of billions of dollars to China and Russia but its sole foreign-exchange generating industry is in steep decline with oil output dropping below the 1947 levels of 1.3m barrels per day.

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Guyana Oil Find Quadruples FDI Flows

(Jamaica Gleaner, CMC, 8.Aug.2018) – Regional commission ECLAC is reporting that foreign direct investments, FDI, in Guyana increased to US$212 million last year in part as a result of the oil and gas sector preparing for First Oil.

The flows nearly quadrupled relative to 2016 when foreign investments in the country were estimated at US$58 million.

Guyana has “bucked the trend” for flows to Latin America and the Caribbean as a region, which contracted 3.6 per cent last year, said the Economic Commission for Latin America.

“FDI grew in all sectors, except in manufacturing,” said ECLAC in a report on regional FDI flows. “The energy sector received US$90 million as part of a first wave of inward FDI related to ExxonMobil’s discovery of major oil reserves off Guyana’s coast. While it continues with its successful exploration efforts, ExxonMobil decided to launch the first development phase of the Liza field with an investment of US$4.4 billion,” the report added.

ExxonMobil expects to begin oil extraction in 2020.

The report also noted that Guyana hopes to take advantage of the international interest in the oil finds to promote other sectors, such as agriculture and mining.

“In the latter, Canadian mining company First Bauxite Corporation announced a bauxite production project valued at US$50 million, with construction of facilities set to begin in 2018,” ECLAC said.

Meanwhile, Guyana is putting together a list of priority projects it wishes to complete with resources provided under the China Belt and Road Initiative.

Under a Memorandum of Understanding signed with China, Minister of State Joseph Harmon said at a press briefing that Guyana will be able to tap into resources from the Belt and Road, which is intended to make available resources to recipient countries for projects related to transportation, and information and communications technology.

Guyana has now joined Panama, Bolivia, Trinidad & Tobago and Antigua & Barbuda as countries in Latin America and the Caribbean that have signed on to the initiative.

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Petrobras Targets China with New Crude Oil

(Reuters, Florence Tan and Alexandra Alper, 27.Jul.2018) – Brazil’s state-controlled energy company Petrobras plans to push more crude oil to top importer China by marketing a new medium-sweet grade that could be shipped from October, two sources with knowledge of the matter said.

Petrobras expects to start pumping pre-salt oil from new platforms in the fourth quarter that would add to output from Latin America’s biggest producer and lift its exports.

The new supply could enlarge Brazil’s market share in China as buyers there cut oil imports from the United States following Beijing’s announcement it would impose tariffs on U.S. crude in retaliation against similar moves by Washington.

“Petrobras’ oil export curve is increasing and China is currently the company’s main market,” a Petrobras spokesman said in an e-mail.

“With (Chinese) refineries’ growing interest in buying oil directly from producers … Petrobras will grow its presence with these refiners.”

Petrobras started production in April at its wholly-owned Buzios pre-salt field in the Santos basin from platform P-74, located about 200 km off the Rio de Janeiro coast in water depths of 2,000 metres, according to the company’s website.

Two more platforms, P-75 and P-76, are to come online in the fourth quarter. Total Buzios output is expected to grow to 750,000 bpd by 2021, once an additional four platforms come online, the company said.

Buzios crude has API gravity of 28.4 degrees and contains about 0.31 percent sulphur, similar in quality to Brazil’s Lula crude, one of the most popular oils in China, the company said.

The new supply could help lift Petrobras’ crude oil exports, which dropped 53.8 percent in June from a year ago to 696,000 barrels per day (2.86 million tonnes) as the company hiked its refinery output.

Petrobras’ overall production in June stood at 2.03 million bpd, down 1.5 percent from May.

Brazil’s oil liquids output, including biofuels, is expected to rise by 200,000 bpd to 3.5 million bpd in 2019, after holding steady in 2018, according to consultancy Energy Aspects.

CHINA RISING

China’s demand for low-sulphur crude, such as oil from Angola and Brazil, jumped over the past two years after its independent refiners, also known as teapots, were allowed to import crude.

That has moved Brazil up two notches since 2017 to fifth on China’s supplier list, with 657,000 bpd in the first quarter this year, according to data from China customs.

The teapots’ oil imports from Brazil more than doubled in the first half of 2018 to 350,000 bpd compared with the same period a year ago, according to Beijing consultancy SIA Energy.

More than half of Brazil’s shipments to China went through ports in Shandong province, home to most of China’s independent refiners, according to Thomson Reuters Eikon data.

Petrobras also supplied the first crude cargo to Chinese chemical producer Hengli Group for the start-up of its new refinery in northeast China in the fourth quarter of this year. New Brazilian crude Mero was also delivered to Shandong in June.

Petrobras has expanded its trading team in Singapore to step up marketing efforts in China, the two sources familiar with the matter said. The company has appointed a business development person from within the company and hired a crude trader from a Chinese refiner who will join in September, the sources said.

“In order to improve market share in China, and considering the entry of the teapots in the international market, Petrobras considers that it is necessary to have a professional fluent in Mandarin for the specific development of this market,” the company said, without confirming the new hire.

Asia’s largest refiner Sinopec bought a third of China’s Brazilian oil imports in the first half of 2018, up 13 percent from a year ago, SIA Energy analyst Seng Yick Tee said.

“Sinopec and independents have the appetite for additional crude imports from Brazil, and the potential tariffs on U.S. crude is one of the reasons,” Tee said.

Trade flow data on Eikon, however, shows Brazilian exports to Shandong look set to drop in the third quarter – before the additional Buzios platforms start up – as poor margins and tighter credit have forced teapots to cut runs.

The tough environment is expected to push independents to seek more competitive oil supplies, Tee said.

Other sellers of Brazilian crude include Royal Dutch Shell and Equinor. State-owned China National Petroleum Corp (CNPC) and CNOOC Ltd also have equity stakes in Brazilian oilfields.

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China Gives New Life to Venezuela Despite US’ Ire

(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.

US President Donald Trump has repeatedly made tough statements against the Venezuelan government. He even went so far as to discuss a potential invasion of the Latin American country and the removal of President Nicholas Maduro with his aides.

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.

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Petrobras, CNPC to Finish Rio Refinery

(Efe, 4.Jul.2018) – Brazilian state oil company Petrobras and China’s state-owned China National Petroleum Corporation signed a letter of intent to conclude construction of a refinery in Rio de Janeiro, the South American company said.

Work on the refinery, known as the Rio de Janeiro Petrochemical Complex (Comperj), has been stalled since 2015 due to the sprawling Car Wash probe, initially focused on a massive bribes-for-inflated contracts scandal centered on Petrobras

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China to Invest $250 mln to Boost Venezuela’s Oil Sector

(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.

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China Throws Venezuela’s Oil Industry $5B Lifeline

(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.”

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Sterlite, State Grid Win Brazil Power Licenses

(Reuters, 29.Jun.2018) – India’s Sterlite, China’s State Grid, and Colombia’s Isa clinched licenses to build power transmission lines in Brazil in a government auction on Thursday that is expected to draw a total of 6 billion reais ($1.55 billion) in investment.

Some 47 companies and consortia registered to present bids at the auction at Sao Paulo’s stock exchange B3, which led to a competitive round.

Under auction rules, the companies that offered the biggest discounts in the tariffs would win. Brazil’s electricity regulator, Aneel, registered a 55 percent fall in average tariffs the companies will be allowed to charge.

Sterlite, which debuted in Brazil last year, clinched six projects that will require around 3.6 billion reais to build, according to Aneel.

Cteep, a unit of Colombia’s Isa, won two projects, with projected investments of 880 million reais, while CPFL, a subsidiary of China’s State Grid, was granted a project that is slated to cost about 102 million reais.

Electricity heavyweights such as Portugal’s EDP and Spain’s Iberdrola, bidding through their joint venture Neoenergia, left empty-handed, amid the hot competition.

The licenses include a 30-year contract to operate the lines, with pre-defined annual revenues coming from the tariffs to be charged for the service.

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China Generates Energy, Controversy in Argentina

(Inter Press Service, Daniel Gutman, 22.Jun.2018) – As in other Latin American countries, in recent years China has been a strong investor in Argentina. The environmental impact and economic benefits of this phenomenon, however, are a subject of discussion among local stakeholders.

One of the key areas is energy. A study by the non-governmental Environment and Natural Resources Foundation (FARN) states that China has mainly been financing hydroelectric, nuclear and hydrocarbon projects.

Just four per cent of these investments are in renewable energies, which is precisely the sector where the country is clearly lagging.

“China’s main objective is to export its technology and inputs. And it has highly developed hydraulic, nuclear and oil sectors. There are no more rivers in China where dams can be built and this is why they are so interested in the dams on the Santa Cruz River,” María Marta Di Paola, FARN’s director of research, told IPS.

China is behind a controversial project to build two giant dams in Patagonia, on the Santa Cruz River, which was approved during the administration of Cristina Kirchner (2007-2015) and ratified by President Mauricio Macri, despite strong environmental concerns.

The dams would cost some five billion dollars, with a foreseen a capacity of 1,310 MW.

However, expert Gustavo Girado said that it is not China that refuses to get involved in renewable energy projects, but Argentina that has not yet made a firm commitment to the energy transition towards clean and unconventional renewable sources.

“Like any country with a lot of capital, China is interested in all possible businesses and takes what it is offered. In fact, in Argentina it also has a high level of participation in the RenovAr Plan,” explained Girado, an economist and director of a postgraduate course on contemporary China at the public National University of Lanús, based in Buenos Aires.

He was referring to the initiative launched by the Argentine government to develop renewable energies and revert the current scenario, in which fossil fuels account for 87 per cent of the country’s primary energy mix.

Also participating in this industry are Chinese companies, which during the period January-September 2017 produced 25 per cent of the total oil and 14 per cent of the natural gas extracted in the country.

Since 2016, the Ministry of Energy has signed 147 contracts for renewable energy projects that would contribute a total of 4,466 MW to the electric grid, most of them involving solar and wind power, which are currently under development.

The goal is to comply with the law enacted in 2015, which establishes that by 2025 renewables must contribute at least 20 per cent of the capacity of the electric grid, which today is around 30,000 MW.
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PDVSA Completes First Ship-to-Ship Transfer

(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.
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China Looks to Invest $10 Billion in Peru Over 3 Years

(Energy Analytics Institute, Piero Stewart, 1.Jun.2018) — China plans investments of $10 billion across various sectors in Peru over the next three years.

The Asian giant is planning to focus investments on sectors including energy, mines, telecommunications, construction and finance, reported the daily newspaper El Comercio, citing China’s Ambassador to Peru Jia Guide.

Work at Peru’s largest copper mine is at the forefront of China’s planned investments.

Expansion of the Toromocho copper mine located in Junín, which is controlled by Chinalco, will require an estimated investment of $1.355 billion. Plans for the mine include boosting production to 170,000 metric tons per day from 117,000, with an additional personal of some 3,500, announced Guide.
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Mexican Drillers Sign 1st Deal Without State Oil Giant

(Bloomberg, Amy Stillman, 22.May.‎2018‎) – Two upstart Mexican drillers have signed the first farm-out deal in Mexico’s oil sector that doesn’t include state company Petroleos Mexicanos.

Jaguar Exploracion y Produccion agreed to sell a 50 percent stake of three onshore areas in Tabasco and Veracruz to Vista Oil & Gas for $37.5 million, plus contingency payments if oil prices rise above $65 a barrel in the next two years. Vista, Mexico’s first listed crude producer following a $650 million share sale last year, will pay and operate two of the areas that are already in production, while Jaguar will remain the operator of the third exploratory block.

The deal will help Vista “position ourselves in Mexico,” said Chief Executive Officer Miguel Galuccio, former head of Ypf SA and the architect of Argentina’s shale boom. The areas Vista will operate in Tabasco are already known to Galuccio from his prior experience as a Schlumberger executive, he said. “These areas have a lot of potential. This year we are going to conduct a lot of studies, and next year we will drill eight wells.”

Jaguar, a subsidiary of Mexico’s Grupo Topaz, won the blocks last year in competitive bid rounds. Sharing the financial burden of the development of the blocks will allow Jaguar “to grow and participate in other rounds,” said Dionisio Garza Medina, founder of Grupo Topaz.

Jaguar will bid in Mexico’s upcoming onshore auction in September, said Medina, which could be among the country’s last should presidential front-runner Andres Manuel Lopez Obrador win elections on July 1. The leftist candidate, who is leading in the polls, has said he would cancel new oil contracts and review those already awarded. That could see farm-outs, or joint ventures in which help in developing an oil area is exchanged for a stake, become one of the only alternatives for oil drillers seeking to enter Mexico.

Other companies are considering farming out areas won in Mexican oil auctions, including Italy’s Eni SpA, which could sell a stake of its two-billion-barrel oil discovery in the Campeche Bay. China’s Cnooc Ltd. has also said it will seek to farm out blocks it won in Mexico’s first deep-water oil auction in 2016.

Galuccio shrugged off market concerns that Lopez Obrador could derail the reforms that opened the country to private investment several years ago, ending three-quarters of a century of state monopoly over the oil market.

Vista could participate in Mexico’s onshore and unconventional auctions in September, and will probably sell shares in New York by the end of the year, he noted. “If you ask me, pragmatism will come first,” he said. “There are always alternatives.”

***

Shell Made Mistake Pulling Out of Guyana basin

(CaribbeanLife, Bert Wilkinson, 31.Jan.2018) — Now that Guyana’s oil and gas basin has been deemed as one of the hottest and most exciting prospects in the world, Shell Oil has to be regretting its decision to withdraw as an investment partner with United States giant ExxonMobil, which has so far drilled six successful wells offshore Guyana worth about 3.2 billion barrels of oil, officials said Monday, Jan. 29.

Minister of Natural Resources Raphael Trotman said Exxon’s mid 2015 “world class” oil and gas find has clearly taken away all the fears and apprehensions about wasting investor dollars exploring offshore Guyana and Shell is one company which has missed out on the chance to cash in on one of the world’s largest oil finds in more than a decade. Exxon plans to begin producing about 120,000 barrels of oil daily in early 2020. This will make Guyana the largest producer in the Caribbean Community. The others are Trinidad, Suriname and Barbados.

“Shell was with Exxon on the Stabroek block and pulled out. They now maybe rue the day that they ever did that. Now, Shell has signaled that it wants to come back to Guyana,” Trotman noted, saying that all the major oil and gas companies in the world are either vying for their own offshore blocs or buying into smaller companies which have deep water concessions near Exxon’s highly successful offshore fields.

Exxon spokeswoman Kimberly Brasington Monday confirmed that Shell was the original partner with Exxon in the six million acre-plus concession area after Exxon had signed its exploration agreement with Guyana back in 1999 “but chose to pull out. They made the decision not to take the risk. We therefore had to go out there and look for new partners in Hess Oil and Nexen (of China). Yes that was indeed the case,” she said.

Geology and Mines Commissioner Newell Dennison said Shell pulled out about a decade ago and has been sending signals about coming back into the basin but he has seen no paper work regarding this so far.

Exxon and its partners plan to drill 17 wells in the first phase of their offshore venture and up to 40 others ion phase two. The company has already filed paperwork for permission to begin preparations for phase two of its offshore operations and has begun public consultations about this phase.

Spain’s Repsol, Tullow Oil of the United Kingdom, Chevron, Brazil’s Petrobras, Eni of Italy, TOTAL of France and British Petroleum are among big oil players all vying for participation in the country’s fledgling oil and gas sector.

“These companies are only expressing interest because ExxonMobil has de-risked the basin. Zero from zero is nothing. If you have oil and no one is troubling it, then it is worth zero. The oil may be worth a lot, but only if it is produced. We are moving to production, but it took ExxonMobil to find what others have been looking for,” Trotman said.

***

PDVSA’s Barinas Plant Ready in June 2017

(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.

***

Venezuela, China Sign 8 Oil Deals

(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.

***

Venezuela Advances with PLC Conversion Project

(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.”

***

Venezuela, China Hold High Level Commission

(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.

***

Venezuela Signs Eight Agreements with China

(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 Completes Directional Work on 70th Well in Maracaibo

(Energy Analytics Institute, Jared Yamin, 20.Jun.2016) – PDVSA’s Western Petroleum Services division has performed services on a total of 70 drilling wells with the recent completion of work on a directional drilling well located in Lake Maracaibo.

Work at the LB-2963-ST well where the PDV-142 rig is located, was completed with equipment and personnel from Venezuela. In previous years these services were performed by international companies, announced PDVSA in an official statement on its website.

PDVSA’s Western Petroleum Services division owns 12 directional drilling rigs, which were acquired from China under agreements initially signed by late Venezuelan President Hugo Chávez. PDVSA completed 29 percent of its activities in the Western region of the country with these Chinese rigs and estimates this figure could increase to 50 percent in 2016.

***

Venezuela in Talks with China About Grace Period

(Energy Analytics Institute, Jared Yamin, 14.Jun.2016) – Venezuela continues to discuss matters with China regarding a grace period for the South American country to pay back loans to the Asian country, reported Reuters, citing three sources familiar with the discussions.

During the period Venezuela would pay back only the interest associated with the loans it receives, in exchange for crude shipments to China and not the principal on the loans.

***

Petro San Félix Cos Study Swapping Coke

(Energy Analytics Institute, Piero Stewart, 16.May.2016) — A number of international and national coke processing companies visited the Petro San Félix solids terminal located in the José Antonio Anzoátegui Industrial Complex (CIJAA by its Spanish acronym) with the intention to study the potential to swap green coke for calcined coke.

Via the swapping, PDVSA aims to fulfill the second and commercial phase of the project utilizing Venezuelan coke.

Companies visiting the terminal included representatives from Japan’s Mitsubishi, China’s Chalieco and Printemps Limited, USA’s Aminco Resources Inc. and Premier Trading Supply Llc, Switzerland’s ICARE, as well as Venezuela’s Alcasa and PDVSA Intevep, reported PDVSA in an official statement on its website.

The visit allowed for the interchange of information and potentially formation of sustainable projects in the future in accordance with desires by the Venezuelan government to provide solutions that permit the development of investment plans in the country, said ICARE representative Andrew Loken.

***

Petrobras Signs Credit with China Exim Bank

(Petrobras, 9.May.2016) – Petrobras signed a term sheet with China Exim Bank (Export-Import Bank of China) containing the main terms and conditions for a $1 billion loan. The final loan agreement is already being negotiated, anticipating the funding planned for 2017.

The agreement is related to supply contracts for equipment and goods that Petrobras has already signed with Chinese companies to meet the company’s projects that are included in the 2015-19 Business and Management Plan.

This transaction is part of Petrobras’ financial strategy to diversify its sources of funding.

***

IFC, China-Mexico to Invest $200 Mln in Citla

(IFC, 21.Apr.2016) – International Finance Corp. (IFC), a member of the World Bank Group, and the ChinaMexico Fund (CMF), a $1.2 billion private equity fund managed by the IFC Asset Management Company (AMC), will invest $200 million in Citla Energy, SAPI de CV (Citla or Citla Energy), a Mexican independent oil exploration and production (E&P) company sponsored and controlled by affiliates of ACON Investments, L.L.C. (ACON).

IFC will commit an equity investment of $60 million and CMF will commit $140 million. The $200 million investment is IFC’s and the CMF’s first investment in Citla Energy as part of a greater equity financing package provided by ACON, which includes capital from Mexican pension funds through a CKD managed locally by ACON.

Founded by ACON in 2015, Citla is actively building a portfolio of selected E&P assets in Mexico, both independently and in partnership with other industry participants.

Mexico is one of the leading oil and gas producers in the world, yet faces a consistent decline in output due primarily to underinvestment. A groundbreaking constitutional reform passed in 2013 aims to promote private sector involvement in the Mexican oil industry through an unprecedented market liberalization coupled with the mobilization of resources by Pemex, among other measures. This investment is a result of the attractive economic conditions fostered by the reform.

Citla is uniquely positioned to develop a balanced portfolio of oil and gas assets, thereby opening up new hydrocarbon discoveries in the region, spurring broader participation of local companies and triggering economic stimulus and growth for the country. Citla’s portfolio expansion and growth will be achieved through bidding awards, acquisitions, farm-ins and partnerships with other operators.

“This investment reinforces Citla’s position as an independent and institutional platform with resources to access carefully selected opportunities of the Mexican Energy Reform,” said Citla CEO Alberto Galvis.

As Mexico opens its oil and gas sector to private competition, IFC’s goal is to support new players that combine strong sector expertise, local and global know-how, and adequate capitalization, and Citla Energy reflects all them. With this investment, IFC, AMC, Citla Energy and ACON send a strong signal of confidence in the Mexican Energy Reform agenda, said IFC Mexico Country Manager Ary Naim.

IFC’s strategy in Mexico focuses on supporting private sector investment to accelerate growth, improve competitiveness, foster social inclusion, and reduce poverty. As of Fiscal Year 2015, IFC’s portfolio in Mexico totaled $1.4 billion representing investments in 57 companies. Mexico ranks seventh for IFC in terms of investment volume in a single country.

***

LatAmNRG: Heard on the Street 3Q:15

(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.

REGARDING 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.”

***

Pemex to Supply Isthmus Crude to Japan

(Pemex, 24Jul.2015) – Pemex, through P.M.I. Comercio Internacional (PMI), and the largest refining company in Japan, JX Nippon Oil & Energy Corporation, agreed to ship 6 MMbbls of Isthmus crude oil through 6 cargoes beginning in Aug.2015 and until Jan.2016, from the Salina Cruz maritime terminal located in the state of Oaxaca.

The contract is additional to the occasional cargoes shipped during the 1H:15 for an approximate volume of 4 MMbbls to JX Nippon, which has a total refining capacity of 1.3 MMb/d in its 7 refineries located in Sendai, Kashima, Negishi, Osaka, Mizushima, Marifu and Oita.

These operations contribute to the consolidation of Mexico as an important oil supplier in the Far East, region with the highest growth globally, where Pemex provides alternative sources of supply through contracts with refiners in China (Unipec/ Sinopec) and South Korea (Hyundai).

***

Petrobras Signs $5 Bln Deal with CDB

(Petrobras, 20.May.2015) – On 19.May.2015, Petrobras signed a cooperation agreement with the China Development Bank (CDB) for the years 2015-2016.

The deal encompasses funding of $3.5 billion already disbursed, as announced on 1.Apr.2015, and an additional disbursement of $1.5 billion, adding up to $5 billion in 2015.

The agreement was signed by Petrobras CEO Aldemir Bendine and CDB Chairman Hu Huaibang at a ceremony in Brasília.

This deal furthers the strategic partnership between CDB and Petrobras, strengthening cooperation between the two countries’ economies.

***

Petrobras Libra Consortium 2nd Extension Well

(Petrobras, 24.Mar.2015) – The Libra consortium has finished drilling extension well 3-BRSA-1267-RJS/3-BRSA-1267A-RJS (3-RJS-735/735A). The drilling results confirmed the presence of a hydrocarbon column approximately 200 meters deep in reservoirs with good permeability and porosity characteristics.

Informally known as C1, the well is located in the central part of the Libra block, in Santos Basin, around 220 km offshore from the city of Rio de Janeiro.

The final depth reached was 5,780 m, including a water depth of 2,160 m. This is the second well successfully drilled by the Libra consortium, and is 18 km from the first well, called 3-RJS-731.

The hydrocarbon and CO2 bearing intervals were calculated through electrical profiles and fluid samples, which are being characterized through laboratory analysis.

The consortium will continue with the exploration plan by drilling new wells in order to evaluate the Libra area, which covers around 1,550 km2.

The Libra consortium is composed of Petrobras (Operator, 40% WI), Shell (20% WI), Total (20% WI), CNPC (10% WI) and CNOOC (10% WI), as well as Brazilian state-owned company Pré-Sal Petróleo S.A. (PPSA), which is the contract manager.

***

PDVSA Incorporates New Tankers into Fleet

(Energy Analytics Institute, Ian Silverman, 25.Oct.2013) – PDVSA President Rafael Ramirez speaks to reporters in Puerto la Cruz, Venezuela about introduction of news tankers into fleet.

Highlights of the discussion follow:

PDVSA incorporates VLCC Ayacucho and Suezmax Rio Arauca tankers, both built in China, into its fleet.

The new PDVSA VLCC Ayacucho tanker (332 meters long x 60 meters wide) has oil capacity to transport 2 MMbbls.

The PDVSA VLCC Ayacucho tanker will cover the route Venezuela-Singapore-China-Venezuela.

PDVSA plans to incorporate 3 more VLCC tankers into its fleet by YE:13.

The new PDVSA Suezmax Arauca tanker has oil capacity to transport 1 MMbbls.

PDVSA plans to incorporate 3 more Suezmax tankers into its fleet over the next 40 days.

PDVSA tanker fleet numbers 81, of which 54 are controlled by Venezuelan gov’t, allowing co. to control 66.67% of the Venezuelan oil fleet.

We have obtained financing from international banks, as well as banks from Japan and China. These are long term financing deals that are paid by the fleet. We expect to pay back these financing agreements within 5 or 6 years.

PDVSA President Rafael Ramirez on arrival of new tankers:

The Ayacucho arrived on 5.Oct.2013 and the others will arrive accordingly: Boyaca, Nov.2013; Carabobo, May.2014; and Junin, Oct.2014.

We will be looking to acquire four additional VLCCs.

We have tankers that are being constructed in Portugal, Brazil, China, Iran, Korea, in a way to diversify the supply of tankers.

The Suezmax Rio Arauca has capacity to transport 1.2 MMbbls, we are waiting on a total of 4 tankers

We are taking steps to guarantee our sovereignty in respect the transport of our crudes.

In 2012, we had a 33 tanker fleet and PDVSA just owned 12, or 36% was under PDVSA control. The remaining fleet of 21 was controlled by third parties who controlled 64%

We now have 81 tankers in our fleet, 52 controlled by PDVSA and 30 owned by PDVSA. Allowing PDVSA to have 66.6% of tanker fleet under its control.

The VLCCs conditioned to transport 2 MMbbls of Merey heavy oil to China. A typical VLCC has a dead weight of 300,000 tons, has a 2 MMbbl capacity, and can be loaded in 20 hours.

It is uneconomic for Venezuela to send oil to China using tankers with capacity of just 0.500 to 0.600 MMbbls, which translate into a $12/bbl for transport costs. In contrast, using tankers of 2 MMbbls we are able to reduce our transport costs to less than $3/bbl.

Our business plan for 2015 calls for PDVSA to have 52 tankers that are owned by PDVSA.

Our goal with China is to maintain average exports at 640 Mb/d in 2013. We have committed 200 Mb/d with financing schemes depending again on oil price.

We do not have problems in terms of tanker transportation, but our tanker plan encompasses renovation of tankers since we have tankers with more than 20 years of operation that need to be renovated.

***

Rafael Ramirez Speech in Caracas

(Energy Analytics Institute, Piero Stewart, 7.Oct.2013) – PDVSA President Rafael Ramirez spoke with journalist in Puerto La Cruz, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez regarding shipments to China:

Ramirez: We are currently exporting 640,000 b/d to China and 430,000 b/d to India.

We are supplying oil to China but we are arriving to a point that we need to build new refineries in the country so that they can process our heavy oil. That is why we are working with CNPC on a refinery project in Jieyang. In contrast, India has installed refining capacity, so India is another natural market for our heavy oil.

Regarding Lukoil pulling out of Carababo project in the Faja:

Ramirez: The Russian companies are looking for one primary company and not so many small companies in Venezuela. As a result, Rosneft has been looking to increase its participation in projects.

The situation regarding Lukoil and Rosneft in the Carabobo project is between Russians. We have given Rosneft authorization to move forward with the assumption of Lukoil’s stake and we do not have a problem with this.

***

Journalist Round Table with Rafael Ramirez

(Energy Analytics Institute, Piero Stewart, 31.Jul.2013) – PDVSA President Rafael Ramirez held a small round table with journalist in Caracas, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez on the petroleum sector and the current government administration under Venezuelan President Nicolas Maduro:

Rafael Ramirez: We have firmly established our political strategy related to the oil sector.

We are currently entering a stage of production expansion and will concentrate all of our work and energies on reaching our goals and increasing production capacity in Venezuela.

If we look back, we received the petroleum sector (in late 1999) during a phase of privatization in the downstream, midstream, and upstream sectors, especially PDVSA.

But Venezuela has entered a new expansion stage of petroleum sector policies and PDVSA is entering into the Expansion Phase of the Faja development.

In terms of the sabotage that our oil industry has seen, we continue to feel the effects of these actions and damage mostly in Western Venezuela where we have experienced a drastic drop in production.

After the oil sector strike in 2002-2003, we established our petroleum sector plan. We oversaw the migration of operating contracts (of 33 companies with contracts we saw 31 of the companies migrate to the new contracts without problems, only ExxonMobil and ConocoPhillips decided to exit the migration process and eventually exit Venezuela altogether). We also oversaw changes and modifications to laws, fiscal changes such as reestablishing royalties and taxes.

The year 2010 marked the beginning of the new expansion stage for the Venezuelan oil sector. From 2004-2010 we worked on nationalization, migration process to new contracts, and PDVSA regaining control of the oil sector by increasing its participation from an average 49% in JVs to a minimum of 60%. We are now in the stage of increasing the production of oil.

In all, we spent ten years (2000-2010) recuperating PDVSA, under the watch of late-President Hugo Chavez Frias.

Ramirez: We are employing many engineers from public schools here in Venezuela for various jobs, including rig operations.

On the petroleum sector expansion process:

Ramirez: In 2013, we have been concentrating our efforts on recuperating production capacity of 4 MMb/d by year end 2014 and 6 MMb/d by year end 2019 (of which 4 MMb/d will come from the Faja). For this to happen, it is fundamental that we move two elements: development of the Faja and development of an industrial base. [See also information on industrial meetings with private sectors across the country].

We need to construct a production capacity of 3 MMb/d in the Faja. This runs parallel with work we have been conducting in the Faja related to the industrial meetings with the private sector.

The government is working hard with the private sector for the second phase of the Faja development. Hence the Six National Productive Meetings we had to gauge interest in the private sector to participate in projects with the government and PDVSA.

We are working with private (transnationals) companies as well as the Venezuelan Hydrocarbon Association or AVHI but I must reiterate: “The companies that do not want to help PDVSA increase its production capacity can simply leave the country.”

We have received positive feedback from CNPC and Chevron and we are awaiting response from other companies such as Repsol, among others, in terms of new financing deals related to petroleum sector projects.

We plan to create investment funds for all the Faja JVs whereby “the Venezuelan citizens” will participate.

The government will create four investment districts in the Faja. In Sep.2013 the government will announce plans and create development schemes, special fiscal schemes for the four districts that are located in each of the four Faja blocks.

Ciudad Bolivar will be the main city that Venezuela will use for the development of the Faja since it already has an airport and universities.

Development of the Faja will be the most important prospect for Venezuela in this Century.

The government is working with private companies regarding funding and the use of money solely to increase production.

The government realizes that a number of private companies that have converted to JVs have had problems increasing production (operating costs around $12/bbl, including G&A). Regardless, the government wants the companies to maintain operations in Venezuela and increase production. However, private companies that cannot maintain these operating costs should be operated by PDVSA. We are looking to drastically reduce overhead costs. Again, we don’t want small operators to leave, but we want them to merge their operations to reduce overhead so that they can focus on increasing production.

We are starting a push for reduction of costs and more efficiency in our production. In the Western region of the country we have had a lot of success implementing this strategy and we have stopped the production declines in the region.

The government wants companies in Zulia in Falcon state to be more efficient and is trying to help them reduce their overhead.

On the Faja reservoir spanning into Colombia:

Ramirez: The Faja does not extend to Colombia, only to Guarico state in Venezuela in its most western extension. There are individuals in Colombia that are trying to convince investors that Colombia shares the same geology as Venezuela, which is not true. Pacific Rubiales has sold a lot of stock selling this story to investors. The Faja formation in Venezuela is different than the one in Colombia.

On the Chinese Fund and other financing issues:

Ramirez: Close to 94% of foreign income that Venezuela generates comes from the petroleum sector.

Venezuela will sign a $5 bln funding (Fondo Chino or Chinese Fund) in Sep.2013 in the presence of President Nicolas Maduro in China.

The amount of barrels that are sent to China to repay loans varies each month due to changes in oil prices. When oil prices are high, the barrels that need to be sent to China decline, while any excesses are returned to PDVSA.

We sold $21.9 bln to the Venezuelan Central Bank or BCV during 2001-Jun.2013. In 2013, we plan to sell $47 bln to the BCV.

In 2012, PDVSA paid down debt by about $4 bln, this figure stood at $34.4 bln at YE:12

Money on our Balance Sheet as of June 30, 2013 ($12 bln) includes investments (commercial credit) from Rosneft, CNPC, Gazprom, Chevron. Money from new JVs could be used in the SICAD weekly auctions when the companies need access to Bolivars. This will also reduce the companies’ needs to participate in illegal activities to obtain Bolivars.

PDVSA will not issue more debt in USA dollars but instead in Bolivars as it is easier to pay back this debt in the local market than in dollars.

On Venezuelan windfall tax scheme:

Ramirez: The following table (See Table 1) lays out Venezuela’s windfall tax scheme.

Table 1: Venezuela windfall tax payment to Fonden

Price of oil ——- Payment % to FONDEN

$80/bbl ——— 20%

$80-$100/bbl —- 80% of the difference

$100-$110/bbl —- 90% of the difference

>$110/bbl ——– 95% of the difference

Source: PDVSA

FONDEN is a national development fund which is similar to a fund that is run by the Norwegians. “I don’t see anybody criticizing the Norwegians,” but this government is overly criticized.

On oil exports, shale developments worldwide and other issues:

Ramirez: PDVSA is an operational company. We are constantly balancing things out. We have debts but we have revenues. We have financing but we have capitalization.

Increases in interest rates under the Petrocaribe initiative were not called for by PDVSA. The conditions remain unchanged.

Venezuelan oil exports are down due to increased use of diesel in the domestic market to generate electricity.

Shale oil developments do not affect Venezuela. We are not worried about shale oil developments going on worldwide. However, most of the shale resources in Venezuela are located in Maracaibo Lake area where they amount to about 13,000-19,000 MMbbls.

We are evaluating to what depths we have shale in the Urdaneta field. Venezuela has shale resources in Lake Maracaibo which are four times as much as those claimed by Colombia. We need to drive to deeper horizons where there are larger concentrations of oil. Although we have shale resources in Falcon state we will continue to look for convention oil and gas. There is tremendous liquids potential offshore Falcon state.

A $100/bbl oil price does not permit the development of shale oil. So we need a good oil price and $100/bbl is a good price, not just for Venezuela.

Oil price sensitivity: For each $1/bbl decline/rise in oil prices, Venezuela losses/gains $700 mln per year in revenues.

As a result of the Perla 3x offshore gas discovery which also unveiled large condensate potential, we have decided to drill offshore Falcon state in search of additional condensate potential.

Oil production at the Sinovensa JV is around 140,000 b/d but we expect this production to reach 165,300 b/d by year end 2013 and ultimately 330,000 b/d.

During 1992-1999, Venezuela’s 4th Republic reported fiscal revenues of just $23.5 bln, while the Revolutionary Government (under former Venezuelan President Hugo Chavez and now President Nicolas Maduro) has reported fiscal revenues of $448.8 bln during 2000-Aug.2013 (as of 1.Aug.2013), of which $310.3 bln came from changes in new laws (i.e. increasing taxes and royalties and increasing PDVSA’s participation in oil projects).

Venezuela’s oil production declines on average 700,000 b/d a year or around 20-25% per year. However, Venezuela adds an average 700,000 b/d of production to make up for the short fall and maintain production around 3,000 Mb/d.

In the Faja the production declines are not as pronounced since it is a newly developed area, but in Zulia state in Lake Maracaibo the declines are more pronounced.

On gasoline issues:

Ramirez: The government is working to install an automatic chip system and even GPS systems in Tachira state as there are reported cases of cars in Colombia with Venezuelan license plates that are crossing the Colombian/Venezuelan border each day to buy cheap gasoline in Venezuela to later sell it in Colombia.

The government is looking to implement the export of Venezuelan gasoline to Colombia to reduce the demand for gasoline in Colombia.

On refineries:

Ramirez: El Palito refinery will receive heavy oil from the Faja in the future while the Puerto la Cruz refinery will also process oil from the Faja. We will continue to use light oils for mixtures or for export.

Changes/upgrades at existing refineries are being done to increase the heavy oil processing capacity.

Plans to build three new refineries in Venezuela have not changed.

The government has proposed that companies convert upgraders into refineries or upgrade the oils to 42 degrees API so that it can be exported or mixed with other oils and thus avoiding potential bottlenecks in Venezuela.

Our agreements with Eni are to build a refinery and not an upgrader. The majority of the finished products from this refinery will be diesel with specifications established for European markets. The 300,000 b/d capacity refinery with Eni is a move by the Italian company to pay lower taxes.

On Ecuador:

Ramirez: PDVSA has reduced its interest in Ecuador’s Pacific Coast Refinery to 19% from 49% to allow entrance of CNPC with a 30% interest. Petroecuador will continue to hold a 51% interest in the project. Nonetheless, PDVSA still plans to send 100,000 b/d to the refinery for processing.

On the USA and potential divestment of CITGO refineries:

Ramirez: The US market has a large processing capacity for heavy oils. In regards to divesting of our interest in CITGO; it is not viable to sell individual refineries in the USA. It would only be interesting if they (the CITGO refineries) could be sold as a packaged deal.

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Speech by Rafael Ramirez from Puerto Ordaz

(Energy Analytics Institute, Piero Stewart, 27.Jul.2013) – PDVSA’s and Venezuela’s Oil Minister President Rafael Ramirez spoke at the closing of the Sixth National Production Meetings in Puerto Ordaz, Venezuela.

What follows are excerpts from the speech.

Speech by Rafael Ramirez on Venezuelan petroleum sector:

Ramirez: At the closing event for the 6th National Production Meetings here in Puerto Ordaz, we have many people and companies interested in working with PDVSA in the Faja.

We plan to use our petroleum resources to resolve problems created by capitalism, especially related to exclusion and poverty. Socialism is the alternative for humanity and the Venezuelan petroleum industry participates in the construction of socialism in Venezuela.

PDVSA oil exports for Jan.-Jun.2013 (See Table 1):

Table 1: PDVSA oil exports

—————– Jan-Jun.2013 —- Jan-Jun.2012

Oil (Mb/d) ——– 2,482 ———- 2,515

$/bbl ———— $100.14 ——– $105.41

Rev. ($mm) —— $48,490 ——– $51.092

Source: PDVSA

PDVSA spent $23.8 bln in 2012 on CAPEX and the plan for 2013 is to achieve CAPEX of $25.3 bln, of which $7.0 bln has been spent through the first half of the year. We have all the US dollars we need to execute our capital budget. PDVSA plans to finance 30-40% of required yearly investments.

Loans from China for $5 bln will allow us to continue to develop tremendous projects underway here in Venezuela.

PDVSA/Venezuela to continue to defend a $100/bbl oil price floor but would like prices to move above this level. Venezuela does not produce more because our political policy is to defend prices. We will maintain our 3 MMb/d production quota under OPEC.

Again, the 3 MMb/d production level is our OPEC quota, which represents about 11% of OPEC production volumes.

We are in the process of constructing production capacity that will be able to respond to additional barrels immediately for the market.

The effects of Sowing Oil Plan now allows Venezuelan state to capture 94% of the income per barrel while IOCs capture just 6%. During the 4th Republic PDVSA captured 47% while IOCs captured 53% (See Table 2).

Table 2: Tax Schemes

———————- 4th Republic —- New Gov’t

Royalties ————– 1% ———— 33.3%

Income Tax (ISLR) —— 34% ———– 50%

PDVSA participation —- 30% ———— 60%

Recovery factor ——– <8% ———– >20%

Source: PDVSA

Regarding discounts: We don’t offer discounts to anybody, we sell our petroleum at market prices.

Ramirez: The Old PDVSA sold gasoline with lead to the Venezuelan population and exported unleaded premium gasoline. We have assumed the cost of the gasoline subsidy but we have decided that we would sell to the Venezuelan population clean gasoline, gasoline that doesn’t pollute the environment.

The Faja will be produced with directional drilling platforms, which have an enormous potential and a very powerful effect, but with little effect on environment. For each acre we can achieve 40,000 b/d of production.

We have pilot projects in the Faja with recovery rates of 40%. We should aim for the maximum recovery rates in the Faja.

In the Faja we have to drill 10,200 new wells and build 560 directional drilling platforms in order to produce 4 MMb/d by the end of 2019.

With our resources and actual production levels (3 MMb/d) we have petroleum resources that can last for 300 years. With production of 6 MMb/d we have resources for 150 years.

Actually, we have 15,000 workers in the Faja, but we need to increase this number to 40,000.

The world’s last great oil province is here in the Faja. We are actually producing around 1.2 MMb/d in the Faja. 202 rigs are operating in the Faja each day, of these, 116 are owned by PDVSA.

Changes to existing refineries in Venezuela to assist them in processing more Venezuelan heavy oil.

We plan to convert the Paraguana Refining Complex (CRP) in a petrochemical plant.

We are evaluating a scheme whereby we will convert and increase our existing upgrader. We are looking to have upgraders that could be refineries and/or have upgraders that can upgrade crude to 42 degrees API.

We estimate that for our upgraders/production projects we need at a minimum $42/bbl oil price.

We are looking to produce crudes of better quality for mixing with other crudes.

We want to reduce cost and improve efficiency in production. We have stopped the production declines in Western Venezuela.

The U.S. Geological Service says there are more than 170 Tcf of gas in the Faja. We aim to certify all these reserves.

Perla 3X gas discovery (9.5 Tcf) is high in condensate that will be sent to the CRP. The government expects to extract 30,000-40,000 b/d of condensate from project.

We are consuming a lot of diesel due to increasing usage by electric plants.

We have used 229 MMcf/d of gas to substitute the use of 37,000 b/d of diesel, allowing us to generate 896 MW of new production.

The largest markets for oil outside the USA are the Asian countries, especially China and India. We are sending more than 1 MMb/d to these two countries and volumes are expected to increase in the future. The decision to send oil to China and India is the correct political decision.

We have gained our sovereignty fighting and this is the fight we have engaged in to diversify our export markets.

We expect the JV partners to put up at least 20% of the total investments in the Faja upgraders.

In Venezuela there is not enough supply (goods and services). As such, by the end of 2019, we expect the national petroleum sector to supply at least 80% of the goods/services to all the oil projects.

We are producing about 7,000 MMcf/d of gas but aim to reach 10,511 MMcf/d by the end of 2019.

In the Junin 10 North block, an agreement with Total/Statoil did not work out but PDVSA has been developing the field alone.

Sinovensa is producing 134,000 b/d but the goal is to reach 165,000 b/d by YE:13 and 330,000 b/d from the project over the long-term.

Companies have production targets they should try to hit these targets

We have always paid our bond obligations. Our bonds are one of the best investments out there.

We have around 6 million tons of coke, the amount that Brazil consumes in one year. We want to use this coke here to get around storage and transport issues. Coke is a problem for Venezuela and PDVSA and we hope to resolve this issue by using the coke to generate electricity.

Portable water is also a serious problem for us as we need it for our operations in the Faja.

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Q&A with Fitch’s Lucas Aristizabal

(Energy Analytics Institute, Pietro D. Pitts, 19.Jul.2013) – Fitch’s Latin America Corporates Group Director Lucas Aristizabal spoke with Energy Analytics Institute in a brief interview from New York City, New York.

What follows are excerpts from the brief interview.

Regarding PDVSA’s strategy to focus more attention on China:

EAI: PDVSA continues to shift its attention and oil exports to China, is this a good move?

Aristizabal: In recent years, Venezuela has been shifting production away from the U.S. and to countries such as China, which is part of the company’s strategy so I don’t think it is a secret that the company intends to strengthen its relationship with the Chinese.

The export trends indicate that PDVSA is moving away from the U.S. and moving closer to markets such as China and other Asian markets.

PDVSA’s strategy for the refining sector is to increase production of higher quality crudes so that they are widely accepted by refineries worldwide and to increase the value of product so that they are acceptable by refineries that cannot refine heavy crudes.

EAI: What is the biggest issue under PDVSA’s business plan:

Aristizabal: PDVSA has been slow on delivering its production targets.

PDVSA is facing challenges to increase production, even with the amount of capital that the company spends each year.

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Sinovensa Signs $4 Bln Financing Agreement

(Energy Analytics Institute, Ian Silverman, 12.Jul.2013) – Sinovensa President Erwin Hernandez and China’s Development Bank Vice President Wang Yongshen signed a financing agreement in Beijing for $4 million for the expansion of production at the company which is comprised of PDVSA and China National Petroleum Corp. (CNPC).

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