Rafael Ramírez Says Maduro Destroyed PDVSA

(Energy Analytics Institute, Jared Yamin, 19.Aug.2018) – Former PDVSA President Rafael Ramírez says Venezuela produced 3 million barrels per day until December 2013. That figure has dropped by 1.8 million, according to his statements.

“When we were in the revolutionary government of Comandante Chávez, we had fiscal balance and enough income for all social programs, not because the price was 100 dollars a barrel, as the infamous say (we showed that we only had those prices for 4 years, the rest of the years prices were between 22 and 42 dollars a barrel, much less than now), but, precisely, because we charged transnationals and PDVSA all the taxes and royalties without exemptions of any kind. But, in addition, we had oil production of 3 million barrels per day until December 2013,” writes Ramírez in a blog post on Medium.

A PDV petrol station in the once popular Las Mercedes section of Caracas, Venezuela. Prior to its takeover, the station was controlled and run by Chevron Corporation. Source: Energy Analytics Institute (EAI)

“Now, the government has destroyed PDVSA, its production has fallen, in just 4 years (with a dramatic drop since Quevedo entered) to 1.2 million barrels a day due to the inability and irresponsibility of Maduro in the management of oil issues. In PDVSA, we have lost 1.8 million barrels per day, at an average price of 63 dollars per barrel, we are talking about 113.4 million dollars every day, which [is to say] they [have] stopped receiving, 4.139 million dollars a year!,” writes Ramírez, who also served as Venezuela’s Minister of Petroleum, among other posts during the governments of the late President Hugo Chávez and current Venezuelan President Nicolas Maduro, until his departure and rupture with the latter.

“Now, the owners of the petroleum, that’s to say, the Venezuelan citizens, have to pay the international price for gasoline, as if [Venezuela] were not a petroleum country.” — Ramírez

***

Former PDVSA Director Detained in Argentina

(Energy Analytics Institute, Ian Silverman, 17.Aug.2018) – A former PDVSA director has been detained and accused of money laundering.

Luis Abraham Bastidas Ramírez, the cousin of former PDVSA President Rafael Ramírez, was detained in Argentina, wrote reporter Dean Rojas in a tweet on his personal twitter account.

Ramírez’s capture was ordered by the Principality of Andorra as it related to the possible laundering of $5 million, wrote Rojas in his tweet.

State oil company PDVSA has yet to emit a statement regarding the developments.

***

Former Cerro Negro Workers Still Seek Payment

(Energy Analytics Institute, Piero Stewart, 23.Jul.2018) – It has been 11 years and the 7,000 direct and indirect Venezuelan workers of US oil company Exxon Mobil still haven’t received their social benefits or other liquidations.

Those payment were assumed by the government of late Venezuelan President Hugo Chávez when his administration nationalized Exxon Mobil’s Cerro Negro heavy oil project located in the Hugh Chavez Orinoco Heavy Oil Belt, also known as the Faja.

“Several coworkers have died during this long time waiting while others have left the country, but we continue to demand our rights,” reported the daily newspaper El Nacional, citing Luis Vega, spokesman for those affected. In 2007, labor liabilities reached $5.2 billion, a figure that has increased due to accumulated interest, he said.

Many of the workers are from the Venezuelan states of Monagas, Sucre, Anzoátegui, Bolívar, Guárico and Delta Amacuro, said Vega.

About a month ago, Venezuela’s President Nicolás Maduro instructed PDVSA President Manuel Quevedo to solve the problem.

“PDVSA recognizes the debt, but doesn’t want to pay us alleging that [former PDVSA President] Rafael Ramírez stole the money,” added Vega.

***

Ex-Venezuelan Energy Official Pleads Guilty

(AP, 16.Jul.2018) – A former official at a state-run electric company in Caracas, Venezuela, pleaded guilty to money laundering conspiracy relating to an alleged multibillion-dollar graft scheme in the Venezuelan oil industry.

Luis Carlos de Leon-Perez, a 42-year-old dual citizen of the United States and Venezuela, admitted his role in the scheme to bribe officials of Venezuela’s state-owned-and-controlled oil company, Petroleos de Venezuela, or PDVSA, the U.S. Attorney’s Office in Houston announced. He also pleaded guilty to conspiracy to violate the U.S. Foreign Corrupt Practices Act. He is scheduled to be sentenced Sept. 24.

De Leon admitted seeking bribes from owners of energy companies in the United States and elsewhere and directing some of the bribes to PDVSA officials.

In 2016, Venezuela’s opposition-led National Assembly said $11 billion went missing at PDVSA in 2004-2014, when Rafael Ramirez was in charge of the company. In 2015, the U.S. Treasury Department accused a bank in Andorra of laundering some $2 billion stolen from PDVSA.

Ramirez was one of Venezuela’s most powerful officials until he resigned as Venezuela’s ambassador to the United Nations in December. He was not charged in the indictment and has denied any wrongdoing, dismissing the U.S. probe into PDVSA as a politically motivated attempt to undermine President Nicolas Maduro’s socialist government.

De Leon was arrested in Spain last October and extradited to the United States after a federal grand jury in Houston returned a 20-count indictment against him, Nervis Gerardo Villalobos Cardenas, 51; Cesar David Rincon Godoy, 51: Alejandro Isturiz Chiesa, 33; and Rafael Ernesto Reiter Munoz, 39.

Cesar Rincon has already pleaded guilty to money laundering conspiracy. Roberto Enrique Rincon Fernandez, 57, of The Woodlands, Texas; and Abraham Jose Shiera Bastidas, 55, of Coral Gables, Florida, have pleaded guilty to violating the Foreign Corrupt Practices Act and await sentencing. Prosecutors say they paid bribes in exchange for contracts to build electricity generators for PDVSA at a time Venezuela was suffering widespread power outages.

In all, 12 suspects have entered guilty pleas relating to the investigation, the Justice Department said.

Villalobos, Ramirez’s former deputy at PDVSA; Reiter, PDVSA’s former corporate security chief, and Isturiz all await trial on charges of money laundering and money laundering conspiracy. Villalobos also is charged with conspiring to violate the Foreign Corrupt Practices Act. He and Reiter remain in Spain awaiting extradition, while Isturiz still has not been arrested.

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Venezuela’s Ex-Oil Czar Sees Economic Collapse Accelerating

(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.”
***

Venezuela Moving Towards Oil Industry Restructuring

(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.

***

LatAmNRG: Heard on the Street 1Q:15

(Energy Analytics Institute, 30.Mar.2015) – Information in this section, provided by Energy Analytics Institute editors and reporters, is hearsay and thus should be treated as such.

REGARDING COLOMBIA

* A small group of Venezuelans are interested in acquiring an interest in Colombian oil company Pacific Rubiales.

REGARDING VENEZUELA

* To stimulate investments in the oil sector, Venezuela has allowed almost all of the companies sell part of their dollars at the new Simadi Fx rate, which most recently closed at 191 bolivars per dollar.

* In 2014, Malaysa’s Petronas released its 11 percent interest in the PetroCarabobo heavy oil joint venture back to the Venezuelan government. PDVSA has assumed the interest in the meantime. Partners in PetroCarabobo include: PDVSA, Spain’s Repsol, and Indian companies ONGC, Oil India and Indian Oil Corp.

* Former PDVSA President Rafael Ramírez supposedly wants to run for the presidency of Venezuela.

* Venezuelan social programs are at risk unless there is an increase in the price of crude oil or there is a change by the Venezuelan government to reduce its reliance on oil income to sponsor its social programs.

* Supply of dollars unable to satisfy dollar demand thus forcing government to reduce allocation of dollars to importers and other seeking dollars.

* Russian president Vladimir Putin is expected to visit Venezuela soon to discuss bilateral trade between the countries.

* After the longest oil sector boom period in recent history in Venezuela, the country has no money set aside in a strategic oil fund or others to weather the pull back in oil prices.

* Parliament elections could take place in early December 2015.

Discussions between AVHI, PDVSA, and Venezuela’s Oil Ministry

Complaints from oil companies operating or contemplating operating and/or investing in Venezuela include, but are not limited to the following:

* The need to access the new competitive foreign exchange rate for all investments (CAPEX) and costs and expenses (OPEX) required by the mixed enterprises, licenses and PDVSA.

* The need for diluents for the projects in the Orinoco Heavy Oil Belt or Faja; application of the proposed extension to the Special Contributions Law.

* The need to be granted fiscal incentives (royalties, income taxes, etc.) according to results from basic engineering studies; the need to revise the payment of LCE over royalty volumes; the need to revise natural gas royalty payments for re-injected volumes; and the need to define a mechanism for CERTs.

In response to these stated issues, Venezuela’s Oil Ministry Asdrubal Chávez responded as such:

* We recognize this is a difficult situation and we want to work together with AVHI more intensely to find solutions to the problems.

* We acknowledge the effects of the foreign exchange system over production costs; progress has been made to solve this issue (i.e. Sicad I and Sicad II), but we need to make proposals to the government to reach a solution.

* Vice-Minister Angel González has been designating with this assignment to determine a reasonable value for a foregin exchange rate applicable to the petroleum industry.

* We are going to continue granting autonomy to the mixed enterprises or joint ventures.

* We need to work together to improve production costs, and become more efficient; it’s critical to adjust service companies’ costs.

* We want to form joint AVHI-oil ministry-PDVSA executive working groups, tasked with maintaining more regular meetings and studying proposals to solve issues of common interest.

* We are working in the oil ministry to solve the issues related to production of diluted crude oil mixed with naphtha.

In response to these stated issues, PDVSA’s President Eulogio Del Pino responded as such:

* Within our competences, we have been taking measures to solve issues discussed in the AVHI-oil ministry-PDVSA institutionalized dialogue mechanism.

* In terms of the agenda presented by AVHI, we recognize the critical issues of the foreign exchange regime and the decline in oil prices and their impact over the economic viability of the oil industry.

* We can advance information regarding the new foreign exchange system announced by President Nicolas Maduro and we plan to announce that new investments and exports from these investments will be exchanged at the new floating, market rate.

* All the resources stemming from financing and from exports from new projects will be exchanged at a new floating rate (new foreign agreement to be announced soon).

* Reviewing the previous meetings’ minutes of the AVHI-oil ministry-PDVSA dialogue, we have progressed in most of the issues discussed: increasing financial authorization levels, adapting the mixed enterprises’ structure to develop major projects, a mixed payments scheme for natural gas licenses (agreement with YPERGAS), drilling rigs and personnel managed by mixed enterprises, delegation of procurement activities to mixed enterprises, diluent availability to Faja’s new developments, internal auditing process of our HSSE policies and activities, payments of dividends to partners.

* In the Faja’s Boyacá division, we are proposing the creation of a National Strategic Development Zone aimed at the development of exploration and production activities: the objective will be to provide incentives to improve the economic viability of the projects. Some of the possible fiscal incentives applicable to the projects are: accelerated depreciation, carry-over of ten-years of losses (for income tax calculations), shadow tax exemption, royalty reduction to twenty percent, and petroleum exports exchanged at the Sicad II rate.

* We need to improve our communication with our partners; we want to enhance cooperation and use the capabilities and best practices of AVHI member companies.

* One of our main objectives is to regulate all of the activities and contracts with mixed enterprises.

* We want to maintain and reinforce this institutionalized dialogue mechanism with AVHI: we support the proposal of a joint workgroup that can agree on proposals and present them at our quarterly meetings.

***

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.

***

Ramirez Moving Forward with Energy Policy

(Energy Analytics Institute, Ian Silverman, 10.Oct.2013) – Venezuelan President Nicolas Maduro seems to be allowing Oil Minister Rafael Ramirez to take charge of moving forward with the country’s energy policy, which could be a good move since investor may have more confidence in Ramirez or it could be a bad move since it is still not clear what the nature of the relationship is between Maduro and Ramirez.

***

1St Venezuela-India Round-table in Caracas

(Energy Analytics Institute, Ian Silverman, 7.Oct.2013) – The 1st Business Round-table meetings between Venezuelan and Indian companies took place in Caracas from October 7-9, 2013.

Highlights from the round-table follow:

Venezuelan Oil Minister Rafael Ramirez addressed opening ceremony:

  • Venezuelan-India create working tables to collaborate on development of the six topics/areas: 1. The Orinoco Heavy Oil Belt, 2. Gas offshore and onshore, 3. Refining, petrochemicals and commercialization & supply, 4. Engineering and construction, 5. Procurement of goods and services, and 6. Technology interchange.
  • Indian Cos. participating in 1st Venezuela-India Business Roundtable include: Engineers’ India Limited, Essar, Hpcl-Mittal Energy Ltd (HMEL), Indian Oil Corporation (IOC), Oil India Ltd (OIL), ONGC VIDESH (OVL), Reliance Industries Ltd (RIL) and Larsen & Toubro Ltd.
  • Ramirez hopes that Indian cos. visiting country can sign agreements sooner, rather than later.
  • Venezuela-India to discuss business and partnership opportunities over the next 6 months.
  • India cos. have technology to develop Venezuela’s oil reserves in the Orinoco Heavy Oil Belt, Ramirez says. As such, Venezuela is in discussions with Indian cos. for participation in new refinery projects, Ramirez says.
  • Venezuela looking to create JVs with Indian cos. to build oil tankers, Ramirez says.
  • Venezuela looks to expand petrochemical sector with the assistance of Indian cos.

***

Rafael Ramirez Speech in Puerto La Cruz

(Energy Analytics Institute, Piero Stewart, 4.Oct.2013) – Venezuela’s Oil Minister President Rafael Ramirez spoke with journalist in Puerto La Cruz, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez on the economic sector:

Ramirez: We have bonds that we are using to bring in food stuffs to guarantee supply to the Venezuelan people.

We will not use our dollars to create a parallel market. However, there are actors that are misusing these dollars to feed the speculative market.

We have to neutralize the elements that are conspiring against our economy in the parallel market that are creating distortions in Venezuela and of course affecting the people.

We will use our existing $600 million bonds to buy foodstuffs from Colombia. We will conduct whatever operation that is necessary to reestablish equilibrium in the area (of food distribution).

There are people in the private sector that have all the responsibility for everything that is happening to the Venezuelan economy. We will not use our dollars to create a parallel market, it would be a foolish move, right?

However, there are actors that are directing the use of the dollars that PDVSA is generating to supply this speculative sector. This is something that cannot be done by a maid or a student but economic actors that control large bolivar volumes and that continue to attack our economy. The actors working against the economy are different from those in the government.

On the petroleum sector:

Ramirez: We still need to finish work on the ICO pipeline system which will allow us to carry all of our gas from Eastern Venezuelan to Western Venezuela. The Northern Monagas region has become a great gas producer with 400 MMcf/d of gas.

The Faja did not have infrastructure to transport gas since the old associations said the Faja contained bitumen. Now that we are finding sufficient gas in the Faja coupled with gas from offshore, we will have sufficient gas to cover domestic demand as well as supply the Colombian market.

On gasoline/component imports from the U.S.:

Ramirez: We continue to import components to produce gasoline. It is a complex situation that we continue to evaluate.

We have taken control of the JV we had with Eni and we expanding the JV to produce the MTBE that we need. We continue to move forward with ethanol projects with the goal to mix 10% ethanol with our gasoline.

The Venezuelan driver consumes primarily 95 octane gasoline since the price between 95 and 91 octanes is the same, and under the perception that 95 octane is better for the automobiles.

On the Faja; companies leaving the Faja:

Ramirez: OPIC and PetroCanada were never in the Faja. Lukoil’s decision to leave Junin 6 was taken by the Russian consortium. It is a problem between the Russians. Rosneft President Igor Sechin has said his company wants to have a controlling or operating company in the consortium. We think it is a good decision since we would have one principal Russian voice in the JV.

PDVSA has to have a majority/controlling stake in the Faja projects because the transnational companies have their international strategies while PDVSA has a national strategy.

We have different options/offers to explore regarding Petronas’ 11% stake in Carabobo 1.

We are producing 3 MMb/d and working hard to increase production capacity.

The internal market in Venezuela is consuming 700 Mb/d, up due to increased demand for diesel. Venezuela is exporting 2.4 MMb/d, we want to send more gas to our electric sector which will allow them to switch from diesel to gas.

We plan to export at least 150 MMcf/d of gas to Colombia in July/June of 2014.

We are looking for alternatives so that early production materializes. Early production should approach 50,000 b/d from seven projects in 2013.

Junin 1: Sinopec agreement signed and companies working to constitute the JV and achieve production of 200,000 b/d. Junin 10: CNPC has agreed to participate in the JV and in the upgrader expansion with PDVSA. PDVSA has increased production at the project by 15,000 b/d in one year. We plan to expand the existing upgrader.

On the Abreu e Lima refinery project in Brazil:

We are still in discussions with Petrobras regarding the Abreu e Lima refinery project but this is a topic we will not discuss over a microphone. However, we want to be in the project.

***

Petronas Exits Carabobo Project in Venezuela

(Energy Analytics Institute, Ian Silverman, 11.Sep.2013) – Malaysia’s Petronas will exit the Petrocarabobo project in Venezuela’s Orinoco Heavy Oil Belt or Faja, according to Venezuela’s Oil Minister Rafael Ramirez.

The Petrocarabobo project, which requires an investment of $20 bln, will last for 25 years and includes construction of a 200,000 b/d upgrader.

PDVSA holds a 60% interest in the project while a consortium of companies holds the remaining 40% interest and is comprised of Repsol Exploración, S.A. (WI 11%); Petronas (WI 11%); ONGC Videsh Ltd. or OVL (WI 11%); and Oil Indian Ltd. or OIL (WI 3.5%) and Indian Oil Corporation Ltd. or IOC (WI 3.5%).

PDVSA President Rafael Ramirez said Repsol and ONGC had expressed interest in assuming Petronas’ 11% interest, without providing more details about the matter.

***

PDVSA Initiates Production at Dragon Field

(Energy Analytics Institute, Piero Stewart, 25.Aug.2013) – Development of the offshore fields Dragon, Patao, Mejillones and Rio Caribe located in the Northern Paria Pensula will allow for initiate production of 200 MMcf/d of gas and 20 Mb/d of condensates which will be destined initially for the Venezuelan domestic market, PDVSA said.

Completion of the DR 5A well located in the Dragon field in Sucre state will result in 75 MMcf/d of production. When combined with production from the DR 11, DR 9 and DR 8 wells, the Dragon field will be able to produce 300 MMcf/d.

PDVSA also expects to develop the Patao field.

“We are focused on exploring the first two fields, Dragon and Patao, which will produce 600 MMcf/d,” Ramirez said. “The Mejillones and Rio Caribe fields will produce 650 MMcf/d.”

The Rio Caribe field will produce condensates as well, Ramirez said.

All of the production from Mariscal Sucre project will be shipped to Güiria.

“Gas from Mariscal Sucre and Cardon IV offshore will be destined to fulfill demand in the domestic market,” Ramirez said.

The Deltana Platform project was originally called Cristobal Colon, which was under ExxonMobil’s leadership, and contemplated a gas extraction export plant. The Venezuelan government has assumed leadership of the project and the initial production from Mariscal Sucre will be destined for the domestic market while initial production from Platforma Deltana will be destined for liquefaction, Ramirez said.

Venezuela’s gas importation agreement with Colombia expires in August 2014, the minister said.

“We have plans to start exporting 100 MMcf/d of gas to Colombia in September of 2014,” Ramirez said.

“Venezuela has gas pipelines that span the entire East-West direction of the country, we will be open to export gas to whomever we like,” Ramirez said. “Be it with gas from fields with partners such as Rosneft or Chevron in Deltana Platform.”

Ramirez said that shale gas had changed the gas export market.

“We envision completion of a 4.7 million ton per year liquefaction plant and we have already have agreements with countries in the Caribbean as well as with Brazil and Argentina,” Ramirez said.

Principal Objective

The primary objective is to build the necessary infrastructure that will allow for transport of 600 MMcf/d from the Patao and Dragon fields offshore to the Internal Market Gas Conditioning Plant (PAGMI by its Spanish acronym) located within the Gran Mariscal Sucre Industrial Complex (CIGMA by its Spanish acronym) in Güiria. The offshore gas will be used by thermoelectric plants, residential, commercial and industrial (especially petrochemical) sectors.

Dragon-CIGMA Pipeline

The Dragon-CIGMA 36-inch diameter gas pipeline will span 103 km (99.8 km subsea offshore and 3.2 km onshore.

The Mariscal Sucre Project

Phase I: 600 MMcf/d of production to come from Dragon-Patao fields.

Phase II: 650 MMcf/d of production to come from Rio Caribe-Mejillones fields. This will require a separate pipeline.

Summary: Dragon-Patao fields

Fields: 4 Geographic extension: 906 km2 Type of wells: Vertical Average production/well: 75 MMcf/d Platforms: 4 Gas pipelines: 247 km Initial production: 2014 Water depths: 300-500 feet

Summary: Venezuela’s Projects for Offshore Gas Production 2013-2019

Year —– Gas production (MMcf/d)

2013 —– 0

2014 —– 252 (Dragon)

2015 —– 600 (Dragon and Cardon IV Perla)

2016 —– 600 (Dragon and Cardon IV Perla)

2017 —– 1,191 (Dragon, Cardon IV Perla, Rio Caribe and Patao)

Note: Under Phase I, Dragon-Patao fields will produce 600 MMcf/d. Under Phase II, the Mejillones-Rio Caribe fields will produce 650 MMcf/d and 24 Mb/d of condensates from Rio Caribe. Also, Deltana Plataforma gas will also be sent to CIGMA, according to Ramirez.

“We are signing deals with gas consuming nations (Caribbean, Brazil and Argentina) for the supply of gas to these nations in the future,” Ramirez says. “All gas from Mariscal Sucre will be for the internal market,” Ramirez says. “Gas for export will come from Platforma Deltana.”

“We have invested $1.8 bln on activities offshore in Mariscal Sucre. The investment in Mariscal Sucre could surpass $4 bln,” Ramirez said. “We are in discussions with Rosneft for assistance to develop Mejillones and Rio Caribe.”

According to Ramirez, Venezuela pays between $3/MMcf and $4/MMcf for gas from Colombia and expects to charge same price to Colombia when it begins to export gas to its neighbor in 2014.

***

PDVSA President Comments on Citgo

(Energy Analytics Institute, Ian Silverman, 25.Aug.2013) – During a trip with reporters in Guiria, PDVSA President Rafael Ramirez commented about the company’s CITGO Corporation refineries in the USA:

“PDVSA’s USA refining circuit has certain problems due to its geographic distribution and the fact that they receive little Venezuelan crudes.”

***

Rosneft and PDVSA Evaluate Gas Projects

(Energy Analytics Institute, Ian Silverman, 15.Aug.2013) – Rosneft and PDVSA are reviewing plans to extract gas in Sucre state and in the Gulf of Venezuela, according to a PDVSA official.

“We are looking at areas with gas and condensate reserves,” PDVSA President Rafael Ramirez told Energy Analytics Institute.

***

Venezuela Inaugurates Nororiental Gas Pipeline

(Energy Analytics Institute, Ian Silverman, 15.Aug.2013) – Venezuela inaugurated the first part of the Northeastern Gas Pipeline in Jefe Jose Francisco Bermudez.

The pipeline extends from Barbacoa in Anzoategui state to Güiria in Sucre state and Margarita Island in Nueva Esparta state. The pipeline spans 731 km and consist of a pipeline that is of 36 inches in diameter. The pipeline has 34 valve stations, three compression plants with a processing capacity of 2 MMcf/d of gas.

“We will convert Sucre state into a Venezuelan gas potential as well as in South America,” Rafael Ramirez told reporters. “This will be the largest gas pipeline built in South America.”

Ramirez said the pipeline was important since Venezuelan gas has just been flared and not maximized. Ramirez said that with the arrival of the Revolutionary Government of Hugo Chavez that Venezuela had created a special gas law that initiated the country’s gas policies.

Non-associated gas from the Marsical Sucre project offshore will be shipped along a 110 km pipeline to Güiria where the CIGMA gas processing plant will be located. Gas processed in Güiria will be shipped to Barcelona in Anzoategui state.

The Francisco Bermudez gas pipeline will supply cities in Eastern Venezuela such as Cumana, Araya, Coche Island, Margarita Island, Carupano and Rio Caribe. The gas will also supply the Luisa Caceres de Arismendi and Juan Bautista Arismendi thermoelectric plants.

The gas from Mariscal Sucre will supply thermoelectric plants that will allow Venezuela to substitute gas for combustibles, especially diesel. As a result, Ramirez said the use of diesel in Venezuela is expected to decrease in coming years.

“We have substituted 40,000 b/d of diesel,” Ramirez said. “The electric sector is actually consuming 160,000 b/d.”

Ramirez said that by YE:19 that Venezuela would be able to free up 241,000 b/d of diesel that was consumed by the electric sector.

“This will translate into a $37.4 bln savings for Venezuela,” Ramirez said.

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Rosneft to Use Russian Technology at PetroMonagas

(Energy Analytics Institute, Ian Silverman, 14.Aug.2013) – Rosneft President Igor Sechon said his company would utilize Russian technology at the Petromonagas heavy oil project to increase production to 160,000 b/d from 140,000 b/d.

Rosneft and PDVSA participate as partners in the following JVs in Venezuela: Petroperija, Boqueron, Petromonagas, Petrozamora, Petrovictoria and Petromiranda.

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Amuay Explosion in 2012 Cost PDVSA $1.8 Bln

(Energy Analytics Institute, Ian Silverman, 13.Aug.2013) – The Energy Orientation Center (COENER) announced the Amuay refinery explosion will cost PDVSA $1.8 billion.

The explosion at the Amuay refinery was caused by a gas leak at Block B23 and occurred at 1:10am on 25.Aug.2012 and was the largest tragedy to-date to affect Venezuela’s national refining circuit, COENER says. As a result of the explosion, 42 people died, 5 are still listed as missing and 150plus received seriously injuries.

The full COENER report includes approximately 500 pages and analyzes the accident, potential causes, and economic and environmental impacts for PDVSA and Venezuela.

The 645,000 b/d capacity Amuay refinery, 310,000 b/d capacity Cardon refinery and 16,000 b/d capacity Bajo Grande refinery make up the 971,000 b/d capacity Paraguana Refining Complex (CRP by its Spanish acronym), which is located in Venezuela’s western state of Falcon.

The COENER report said that PDVSA’s insurance company revealed approximately 100 fires at the CRP in 2011, of which the majority is yet to been investigated.

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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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Ramirez Comments on Oil, Mining Sectors

(Energy Analytics Institute, Piero Stewart, 27.Jul.2013) – Venezuelan Oil Minister Rafael Ramirez comments on development of the Orinoco Heavy Oil Belt and the Venezuelan mining sector.

“The Faja project was a dream of Hugo Chavez and I swear that we will complete the project.”

“We have establish order in the mining sector and recuperate our mining production capacity.”

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Rafael Ramirez Speech in from Cumana

(Energy Analytics Institute, Piero Stewart, 18.Jul.2013) – PDVSA’s and Venezuela’s Oil Minister President Rafael Ramirez spoke with journalist in Cumana, Venezuela.

What follows are excerpts from the discussion.

Rafael Ramirez on Mariscal Sucre:

Ramirez: PDVSA plans to send additional gas production from offshore (Mariscal Sucre) to thermoelectric plants in a move to reduce the use of diesel.

Plans to substitute diesel (40,000 bbls) with gas during 2010-2019 will save Venezuela $37.4 bln.

We will initiate our first gas test on 25.Jun.2013 and four in all with average production of 70-75 MMcf/d to take place monthly through year end 2013. As a result, PDVSA will add production of 280-300 MMcf/d by the end of 2013.

Gas from Mariscal Sucre in eastern Venezuela will be used to supply western Venezuela where there is a gas deficit.

It should be remembered that Mariscal Sucre is the old Cristobal Colon project.

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Japan, Venezuela Sign Energy MOU

(Energy Analytics Institute, Ian Silverman, 10.Jul.2013) – Venezuela’s Energy and Petroleum Minister Rafael Ramirez and his Japanese counterpart Toshimitsu Motegi meet in Tokyo to review advances under a MOU signed by Venezuela and Japan in 2007.

Ramirez also met with the Jogmec President Hirobumi Kawanon and Inpex President Toshiaki Kitamura to analyze different aspects of the JV company Petroindependencia.

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