Foreign Oil And Gas Firms Look To Play Crucial Role In Venezuela

(Energy Global, David Bizley, 19.Oct.2018) — The majority of foreign companies are not making any profit or losing money in their partnerships with PDVSA to develop and produce hydrocarbons due to inadequate investment, shattered infrastructure and US sanctions.

However, in the long term, having access to the vast hydrocarbon reserves of Venezuela compensates the current country risks and current negative cash flows in joint ventures (JVs), says GlobalData.

In this way, foreign companies have formally or informally also gained operatorship in key upstream fields located mainly in the Orinoco Belt. Indeed, Rosneft gained operatorship in the Mejillones and Patao blocks and exporting rights for 30 years with an in-kind 20% royalty rate.

Chinese and Russian companies have invested the most in the Venezuelan oil and gas sector during recent years. China, through its Development Bank, has provided more than US$60 billion in loans to Venezuela. In 2018, it has given an additional US$5 billion loan to support oil developments in the country, on top of the US$6.3 billion in loans since 2014 from Rosneft.

David Bautista, Oil and Gas Analyst at GlobalData, comments: “In other important basins such as Maracaibo or East Venezuela, most companies have recovered their initial investments. Thus foreign participants will likely be able to improve their JV terms and conditions in exchange for capital injection in the sector if the critical situation ends when PDVSA is finally able to boost production.”

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#LatAmNRG

Venezuela’s Oil Exports Are Falling Even Faster Than Expected

(OilPrice.com, Irina Slav, 3.Oct.2018) — A delay in port repairs following a tanker collision is putting additional pressure on already pressured Venezuelan crude oil exports, Reuters quoted anonymous sources close to PDVSA as saying this week. It seems that Venezuela’s woes are only multiplying as time goes by, although news from official Caracas sources seems more upbeat. Oil, however, appears at the forefront of Venezuela’s plight.

A dock at Venezuela’s biggest oil port, Jose, was closed in late August after a tanker collided with it. At the time, Reuters reported that the repairs would delay the delivery of 5 million barrels of crude, destined for Rosneft, which, according to the news outlet, could put a strain on relations between the Russian company and PDVSA, which have a money-for-oil agreement. This is only the latest in PDVSA’s troubles with its oil exports.

Besides a steady decline in production, Venezuela’s state-run oil company earlier this year ran into problems with its storage capacity and export terminals in the Caribbean as U.S.-based ConocoPhillips took an aggressive approach to enforcing a court ruling that awarded it US$2 billion in compensation for the forced nationalization of two projects in Venezuela. The company this summer seized several of PDVSA’s assets on Caribbean islands, which made it difficult for the Venezuelan state company to meet its export obligations. Having few options, PDVSA eventually caved, settling with Conoco.

Dock repairs are further complicating matters. PDVSA is supposed to deliver to Rosneft some 4 million bpd of crude under the latest bilateral agreement signed this April. On top of that, it normally exports crude for U.S. Valero Energy and Chevron from the same dock, the South dock of the Jose port, which is responsible for processing processes as much as 70 percent of the country’s crude oil exports.

Not to anyone’s surprise, the delay in resuming shipments is largely a result of insufficient funds, partially thanks to U.S. sanctions, which have essentially closed nearly completely the door to foreign funding. China, not bound by these restrictions, recently agreed to a US$5-billion lifeline for the Venezuelan government and its oil industry, but these billions will take time to become available. Given the multitude of problems that PDVSA is having, it would be a tough job to allocate these funds so that there is enough for everything.

Caracas is still not giving up. Just this week the government announced the official launch of the petro on international markets in hopes of offsetting the effects of U.S. sanctions by using this oil-and gold-backed cryptocurrency. President Nicolas Maduro said at the launch that the petro would be legal tender for everything in Venezuela, including as a substitute for the dollar.

“All Venezuelans will have access to the Petro and through it to make international purchases,” Maduro said.

Venezuela also plans to boost its oil exports to China as part of plans to transform its economy and get back on its feet. To this end, it will work with Chinese oil companies to improve production. Maduro said in July that PDVSA would boost oil production by 1 million bpd from June levels by the end of the year, although he admitted that this goal would be difficult to achieve. Venezuela pumped 1.45 million bpd in August, and the year-to-date average stands at 1.544 million bpd. This is a far cry from the figure from five years ago, when its daily average was 2.9 million bpd. It’s a matter of a short time to see if the petro and Chinese money will be enough to reverse the decline in production and exports.

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Venezuelan Oil Port Repairs Delayed, Crude Exports Fall: Sources

(Reuters, Marianna Parraga, 2.Oct.2018) — Repairs to a dock at Venezuela’s main oil export port will take at least another month to complete following a tanker collision more than a month ago, further restraining the OPEC member nation’s crude exports, according to sources and shipping data.

A minor incident in late August forced state-run oil company PDVSA to shut the Jose port’s South dock, one of three used to ship heavy and upgraded oil to customers including Russia’s Rosneft and U.S.-based Chevron Corp, and to receive diluents needed for the exports.

Jose port typically handles about 70 percent of Venezuela’s total crude exports, which in September declined 14 percent compared with the previous month to 1.105 million barrels per day (bpd), according to Refinitiv Eikon data.

Oil exports are the financial backbone of Venezuela’s economy, which is struggling to overcome hyperinflation, a long-standing recession and scarcity of basic goods.

PDVSA had estimated the berth would reopen by the end of September, but needed parts have not been obtained as PDVSA continues facing problems to pay foreign providers due to financial sanctions imposed by the United States, sources close to its operations said.

PDVSA’s crews completed the removal of the damaged fences last week, but replacements have not arrived in the country.

“The fences were bought, but funds to pay the provider were retained due to the U.S. sanctions. A new deal to buy them through a third party will take at least another month,” one of the people familiar with the matter said.

PDVSA was not immediately available for comment.

U.S. President Donald Trump’s administration last year imposed financial sanctions on Venezuela and PDVSA, affecting their ability to make transfers in dollars and complete payments through the U.S. banking system.

PDVSA has neither resumed shipments from most of its Caribbean terminals, which remain frozen after U.S. producer ConocoPhillips’ legal actions earlier this year to satisfy a $2 billion arbitration award, according to the data.

Conoco and PDVSA in August struck a payment agreement, but the Venezuelan oil firm has yet to complete a $500 million installment due by the end of November to unlock its Caribbean operations.

Venezuela’s crude output fell again in August to 1.448 million bpd according to official figures, putting its annual average at 1.544 million bpd, the lowest in over six decades.

Economic measures recently announced by President Nicolas Maduro’s government, including a steep salary increase, have fallen short for Venezuela to regain access to sufficient foreign credit and reverse the downturn.

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Petrobras Cuts Gasoline Refinery Price After Pump Record

(Reuters, 24.Sep.2018) — Brazil’s state-owned oil company Petroleo Brasileiro SA said on Monday that it would cut the average price of gasoline at its refineries by 0.59 percent after pump prices hit record levels in the country last week.

Petrobras, as the company is known, said the price reduction to 2.2381 reais ($0.5476) per liter will go into effect on Tuesday.

That’s a decline from the previous fixing of 2.2514 reais per liter, the highest refinery price since Petrobras began nearly daily price adjustments last year.

Gasoline prices at the pump hit an average price of 4.652 reais per liter last week, a record when not accounting for inflation, according to a survey conducted by industry regulator ANP.

Petrobras’ move to cut its refinery rate is at odds with global oil prices, which rose more than 3 percent on Monday to four-year highs after Saudi Arabia and Russia said they would not immediately act to increase production, despite appeals from U.S. President Donald Trump.

Earlier this month, Petrobras unveiled a program that would allow it to hedge against gasoline price moves, allowing it to reduce volatility in refinery fuel prices.

The mechanism will permit Petrobras to maintain prices at a set level for up to 15 days without incurring losses, reducing the frequency of adjustments, according to the company.

Petrobras shares fell 0.74 percent by late afternoon trading on Monday to 19.99 reais. ($1 = 4.0868 reais) (Reporting by Roberto Samora Writing by Jake Spring; Editing by Sandra Maler)

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Methane Fears Cloud Argentina’s Shale Oil And Gas Future

(Financial Times, Benedict Mander, 23.Sep.2018) — Green energy groups say huge shale oil and gas reserve is leaking greenhouse gases.

Jorge Daniel Taillant used a $100,000 infrared camera this year to investigate whether oil and gas installations in Vaca Muerta were leaking toxic gases. The grainy black-and-white thermal images that the ecology activist took confirmed what he suspected.

Although invisible to the naked eye, gases were detected seeping into the atmosphere from every one of the sites he visited. Particularly significant was methane, a potent greenhouse gas.

“Methane is leaking everywhere,” says Mr Taillant, executive director of the Center for Human Rights and Environment, a non-governmental organisation founded in Argentina and now based in the US. He says at least 5 per cent of Vaca Muerta gas produced is lost, often leaked intentionally when pressure needs to be released.

“There is a history of abuse as no one is controlling the sector,” says Mr Taillant. “And that’s not going to change any time soon — there is no credible environmental authority.”

Argentina’s ambitions to develop Vaca Muerta are ringing alarm bells among environmentalists, since it is considered to be one of the few remaining significant but mostly undeveloped energy reserves left on the planet.

As such, some experts say the development of Vaca Muerta and other comparable resources in Venezuela and Russia could jeopardise the UN 2016 Paris Agreement on climate change.

“If Argentina is to fully develop Vaca Muerta, it would blow a hole in the carbon budget,” argues Guy Edwards, co-director of Brown University’s climate and development lab in the US.

“It is one of the key reserves that, according to climate science, should stay underground if there is a chance of achieving the Paris goals,” he adds.

Most recognise it is unrealistic to expect Argentina to leave Vaca Muerta untouched. Its development is considered a national priority across the political spectrum, given its potential as an engine for economic growth. Javier Iguacel, the energy secretary, ridiculed the idea that Argentina might simply stop exploiting its hydrocarbons. “ Norway is not going to stop producing oil, and nor are we,” he says.

Argentina’s energy-related emissions are projected to increase 45 per cent between 2010 and 2030, according to the Berlin-based non-profit institute Climate Analytics, largely because of Vaca Muerta. Few expect Buenos Aires to meet its commitment to the Paris Agreement. Like every other country, its goals were not very ambitious to begin with, says Mr Edwards.

Instead, activists are pushing to mitigate the problems that can be controlled, with methane being “far and above the biggest issue from a climate perspective”, says Jonathan Banks, senior policy adviser at the Clean Air Task Force, a green energy advocate.

Although carbon dioxide stays in the atmosphere for as long as 1,000 years, methane begins to disappear after 20, during which time it is more than 80 times more potent than carbon dioxide in warming the climate, Mr Banks says.

Fortunately, he adds, methane is also one of the easiest and cheapest climate problems to deal with. That is why many countries and regions such as Canada, Mexico and California have focused on methane emissions when finding ways to meet Paris targets.

“Good maintenance, better equipment and installations, and just good practices can dramatically reduce emissions from these developments,” Mr Banks adds. “As far as climate change goes, it’s cheap stuff. It’s not a nuclear power plant, it’s tightening bolts.”

A study by the International Energy Agency found it is possible to reduce global methane emissions from the oil and gas industry by up to half at no net cost. That would be equivalent to shutting down every coal plant active in China today, the report says.

Yet even if Argentina succeeds in reducing methane emissions, there is the broader question of whether developing Vaca Muerta makes strategic sense, given how environmental concerns and technological advances are shaking up the energy sector.

The Inter-American Development Bank recently highlighted the danger of “stranded assets”, given that renewable energy is becoming increasingly competitive, warning that countries could be stuck with fossil fuel infrastructure that may become obsolete faster than expected. Others, such as Brown University’s Mr Edwards, say backing fossil fuels risks curtailing interest in renewable energy.

Argentina’s plan is to supply its own market with renewable energy and the gas from Vaca Muerta, which officials say is cleaner than other options. This is despite concerns from environmental lobbyists that leaking methane could be just as bad as the pollution from coal-fired power stations. If Argentina manages to fulfil its goal of becoming a net exporter of gas, this could even help China rely less on its dirty coal-fired power stations, indirectly aiding the environment, Mr Iguacel says.

“What’s the timeframe?” Mr Edwards asks. “If most countries are on some kind of path to decarbonising their energy sectors, do you really want to be pumping billions into an industry that is looking like it is on the way out in the coming decades?”

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OPEC’s Decade of Turmoil Leaves Cartel Seeking a New Way Forward

(Bloomberg, Christopher Sell, 20.Sep.2018) — A global recession, both $140 and $30 oil, the U.S. shale revolution, a market-share war, and output cuts. OPEC’s 60-year history has rarely confronted a more challenging period than the past decade.

Now, instead of enjoying the higher prices resulting from 18 months of joint production cuts with a coalition of other major producers, the cartel faces new problems. A tweet-happy American president is ramping up geopolitical risk, renewed sanctions are hammering Iran’s exports, Venezuelan production is tanking as its economy collapses, and a political attack from Washington in the form of the NOPEC bill.

The alliance of exporters, spearheaded by Saudi Arabia and Russia, meets on Sunday in Algeria to consider its response to these challenges, while also taking the next steps to cement their alliance into 2019 and beyond. The Organization of Petroleum Exporting Countries response to crises over the past decade offer clues to the path it might take forward.

Global Crisis

Ten years ago, a banking crisis triggered a global economic downturn and a crash in oil prices as demand was obliterated. After peaking at a record $147.50 a barrel in July 2008, Brent crude fell as low $36.20 by year-end. Facing catastrophe, OPEC members put aside internal squabbles and agreed production cuts that were historic in their speed and scale — output fell 16 percent in just eight months. It worked, and prices began to recover in 2009 even as the world was mired in recession. After Chinese consumption came roaring back in 2010, the group was able to open its taps again as the cost of crude surged back toward $100.

Shale Boom

From 2011 onward, OPEC enjoyed years of riches and relative stability as oil traded near $100 a barrel, but a threat was emerging. A new generation of wildcatters from North Dakota to Texas was deploying innovative fracking technology to tap previously inaccessible shale oil deposits. OPEC was blind to the danger at first, then downplayed the risk even as some members raised the alarm — reasoning that shale was an expensive business and the cartel simply had to bide its time. By mid-2014, U.S. production had jumped more than 50 percent, crude prices were teetering on the brink and it was clear this new industry was reshaping the global market as OPEC stood by and watched.

Price War

By late 2014, there was a global oil glut, prices were collapsing and U.S. shale was showing no sign of slowing. Pressure increased on OPEC to respond as it had done in 2008 and cut output, but Saudi Arabia had a different plan. Driven by a combination of hubris and grievance — the kingdom thought it could easily vanquish high-cost shale and was sick of shouldering the burden of stabilizing prices alone — energy minister Ali Al-Naimi rejected requests from fellow members and opened the taps in a war for market share. At first it seemed to work — the price slump worsened and put immense financial pressure on OPEC, but also triggered a collapse in U.S. drilling and forced producers to close the taps.

Alliance with Russia

By mid-2016, Al-Naimi’s gambit looked like a failure. Crude still languished near $40 a barrel, putting some OPEC members on the brink of economic collapse. However, U.S. production was rising again after drillers made huge cost cuts and bloated crude stockpiles threatened to depress prices for years to come. A new Saudi minister, Khalid Al-Falih, was appointed and set about engineering a historic agreement including major producers from outside the group. By late 2016, he had secured the cooperation of 10 other nations, most importantly Russia, who agreed to remove 1.8 million barrels a day of supply from the market. Thanks to this deal, crude has staged a spectacular recovery from its bruising slump. In April, OPEC and its allies concluded they had achieved their goal of re-balancing the market and even higher prices beckoned.

U-Turn

If only it was that simple. OPEC’s moment of celebration faded fast as U.S. President Donald Trump threw a spanner in the oil market. Accusations on Twitter that the cartel was artificially inflating prices were followed by his renewal of sanctions on Iran’s exports and additional penalties that worsened the decline of Venezuela. Within a month, Saudi Arabia and Russia were signaling their intention to roll back the cuts, and in June they successfully pressured the rest of the group to agree. After 18 months of fairly harmonious supply restraint, some OPEC members were hastily reopening the taps, while others howled in protest from the sidelines.

What Next?

Where does OPEC turn now? Lessons from the group’s history point eastwards, toward a permanent partnership with Russia, said Harry Tchilinguirian, head of commodity strategy at BNP Paribas SA. It’s the most effective counterbalance to the shale revolution, which continues to reshape the market, he said.

“U.S. shale oil will be reaching the Atlantic Basin, and Asian markets alike, more regularly and in greater volumes as pipeline connections to the Gulf Coast and oil terminals are built or expanded,” Tchilinguirian said. This competitive challenge, along with demand dynamics that accompany the transition to cleaner energy, give OPEC an incentive to establish a permanent relationship with Russia and a growing number of non-members, he said.

Whether such an alliance would actually prove effective at managing the market in the long term is another matter, said Bob McNally, president of Rapidan Energy Group.

“The jury remains out as to whether this new Saudi-Russia led entity will succeed longer term at preventing future booms and busts or, like a number of other temporary ad-hoc cartels since oil’s earliest days, it will succumb to greed and indiscipline,” McNally said.

To contact the reporter on this story: Christopher Sell in London at csell1@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rakteem Katakey

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IEA Warns of Higher Oil Prices as Iran and Venezuela Losses Deepen

(Bloomberg, Grant Smith. 13.Sep.2018) — The International Energy Agency warned that oil prices could break out above $80 a barrel unless other producers act to offset deepening supply losses in Iran and Venezuela.

Iranian crude exports have fallen significantly before U.S. sanctions even take effect, the IEA said in a monthly report. The Middle Eastern nation will face further pressure in coming months and the economic crisis in Venezuela is pushing output there to the lowest in decades. It’s uncertain whether Saudi Arabia and other producers will fill any shortfall, or how far they’re able to, the agency said.

“Things are tightening up,” said the Paris-based IEA, which advises most major economies on energy policy. “If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise” unless there are offsetting production increases elsewhere, it said.

Oil climbed to a three-month high above $80 a barrel in London on Wednesday as fears of a supply crunch eclipsed concern about the risks to demand such as the U.S.-China trade dispute. While the Organization of Petroleum Exporting Countries and allies including Russia pledged to boost supply, the IEA said it remains to be seen how much will be delivered.

Saudi Arabia lifted output by 70,000 barrels a day to 10.42 million last month, but that remains “some distance from the 11 million barrels a day level that Saudi officials initially suggested was on the way,” the IEA said.

While the agency warned that “there is a risk to the 2019 outlook” for demand from challenges in emerging markets such as currency depreciation and trade disputes, it kept forecasts for consumption unchanged.

In the meantime, supply risks dominate. Oil inventories in developed economies are already below-average and will decline further in the fourth quarter, the IEA predicted.

Venezuela, which is pumping at just half the rate it managed in early 2016, could see its output slump another 19 percent to 1 million barrels a day this year as infrastructure deteriorates and workers flee, the agency predicted.

Iranian production has already fallen to the lowest since July 2016, at 3.63 million barrels a day, as buyers retreat ahead of U.S. sanctions that come into force on Nov. 4.

Although Russia, Saudi Arabia and other Gulf members of OPEC promised to bolster production by about 1 million barrels a day, the IEA remained cautious on whether the full amount would be delivered. It’s unclear how quickly OPEC’s spare capacity, which stands at about 2.7 million barrels a day, can be activated, it said.

“We are entering a very crucial period for the oil market,” which could push prices out of the $70-to-$80 a barrel range seen in the past few months, the IEA said.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rachel Graham.

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Tanker Backlog Builds Again in Venezuela

(Reuters, Marianna Parraga, 6.Sep.2018) — Crude exports by Venezuela’s PDVSA have slowed after a tanker collision at its main port last month disrupted operations, adding to a backlog of vessels waiting to load, according to shipping sources and Reuters data.

Oil is the financial lifeline for the embattled socialist government of President Nicolas Maduro, but his cash-strapped administration has failed to invest enough in the industry to prevent its decline. Venezuela has sought to increase exports after asset seizures and declining output earlier this year raised the prospect of temporary suspension of contracts.

PDVSA has not said how long it will take to repair damage from the collision and resume normal loading and discharging operations. The company did not immediately reply to a request for comment.

Last week, PDVSA offered loadings at an alternative port to crude customers whose shipments were affected by the collision, but only a few have accepted so far, the sources said. That alternative, the Puerto la Cruz terminal, is limited to loading 500,000 barrels of crude per tanker, far less than the 2 million barrels PDVSA’s main port of Jose can handle.

Large tankers including three Suezmaxes and seven Very Large Crude Carriers (VLCCs) are lined up off Jose waiting to load at the available docks and monobuoys systems.

The vessel backlog around PDVSA’s ports has been increasing since late August, following the collision. As of Sept. 6, more than 20 tankers were waiting to load 26 million barrels of Venezuelan crude, according to Reuters Trade Flows and vessel tracking data.

PDVSA’s crude exports rose in July to 1.39 million barrels per day (bpd), the most since November, but last month they slipped almost 8 percent to 1.29 million bpd on Jose port’s partial operations, falling oil output and Caribbean terminal seizure attempts by creditors including U.S. producer ConocoPhillips, according to the Reuters data.

One of PDVSA’s main customers, Russia’s state-run Rosneft, loaded a 925,000-barrel cargo of diluted crude oil (DCO) during the weekend at one of Jose’s monobuoys after being diverted from the South dock, still closed because of the collision.

Rosneft-chartered Nordic Moon set sail to Malta on Sunday after waiting to load in Venezuela since early August. But the Russian company still has other four vessels waiting to load up to 6 million barrels of heavy crude at Jose, according to the data.

Jose’s South dock, which suffered damage from the collision last month, is mainly used for shipping Orinoco Belt crude and discharging imported naphtha used to dilute the country’s extra heavy oil and make it exportable.

Reporting by Marianna Parraga; Editing by Steve Orlofsky

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The Latest Episode in the Crystallex-Venezuela Saga

(Mining.com, Valentina Ruiz Leotaud, 29.Aug.2018) — State-owned Petróleos de Venezuela SA or PDVSA announced on Twitter that it filed an appeal requesting that a Delaware court vacate a decision made public on August 23 granting Canadian miner Crystallex the right to seize its U.S. assets.

In its statement, the oil company said it had filed a petition on Friday, August 24, 2018, to the 3rd U.S. Circuit Court of Appeals. The petition is to direct the Delaware District Court to acknowledge it had been “divested of jurisdiction with respect to PDVSA and its property.”

The petition refers to a decision made on August 9, 2018, by U.S. District Judge Leonard Stark in the eastern U.S. state. Stark approved a request by Crystallex to attach shares in PDV Holdings, a U.S. subsidiary of PDVSA that indirectly controls refiner Citgo.

Citgo owns three refineries in Louisiana, Texas and Illinois, as well as other assets that have been valued between $8 billion and $10 billion.

With this move, Crystallex is aiming at collecting a $1.4-billion-award in compensation following a decade-long dispute over Venezuela’s 2008 nationalization of its gold mine in the southern Bolívar state. The amount is comprised of $1.2 billion plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.

If PDVSA’s appeal does not proceed, the Nicolás Maduro government could be forced to comply to Crystallex’s demands.

The Canadian firm has accused the Nicolás Maduro government of performing “fraudulent transfers” to avoid paying what it owes. Among those transactions, Crystallex has cited the payment of dividends from PDV Holding to PDVSA for $2.2 billion and the issuance of 49.9% of Citgo’s shares to secure a $1.5 billion loan granted by Russian giant Rosneft in 2016.

A lawsuit introduced by the miner against such asset transfers by Citgo was initially dismissed in January 2018, but the Toronto-based company requested a new hearing.

Nevertheless, PDVSA’s lawyers have argued that Crystallex cannot seize the holding company’s shares because it doesn’t have proper grounds for suing in the U.S. and because it couldn’t show the unit was the Venezuelan company’s “alter ego.”

In November 2017, Crystallex and Venezuela agreed to settle the dispute before Ontario Superior Court Justice Glenn Hainey. However, the deal did not resolve the fight over the $1.2 billion award because the cash-strapped South American country did not honour its payments.

With files from Reuters, Bloomberg, El Universal.

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Trinidad Imports 40% of Oil from Russia

(Energy Analytics Institute, Ian Silverman, 27.Aug.2018) —Trinidad and Tobago is relying on Russia as its main source of imported crude oil.

Between January and June 2018, the small twin-island country imported over 15 million barrels of crude oil from the [Petrotrin] refinery. Of that, 40% of the crude oil imports came from Russia, 29% from Colombia, 22% from Gabon, 8% from Canada and 1% from Barbados, announced Trinidad and Tobago’s Energy Chamber in a twitter post.

Caribbean Economist Marla Dukharan commented on the situation in the following twitter post.

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Renaissance Oil Advancing at Amatitlán block in Mexico

(Renaissance, 27.Aug.2018) — Renaissance Oil Corp. announced that in the second quarter of 2018 it saw continued oil field development with its partner LUKOIL, at the Amatitlán block in Veracruz, Mexico.

During the quarter, six additional wells were drilled intersecting the shallow Tertiary aged Chicontepec formations. To date sixteen Chicontepec wells, of a seventeen well program, have been drilled with the drilling of a seventeenth well now underway.Eleven of the new wells have undergone completion operations and been brought onto production with further completions expected to be concluded in the coming weeks. Renaissance has also completed workovers and repair operations on eight wells of the scheduled workover program.

Renaissance produced 1,656 boe/d at the Mundo Nuevo, Topén and Malva blocks (the Chiapas Blocks). The rising prices for crude and natural gas continued into the second quarter of 2018 resulting in a record high quarterly revenue of $7 million. The company is currently contracting drilling services and awaiting rig certification to initiate the Chiapas development program. This drilling program of four new wells and a series of workovers to existing wells, is expected to increase the company’s production base in Mexico.

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Rosneft May Challenge Crystallex Claim To Citgo Shares

(Oilprice.com, Irina Slav, 23.Aug.2018) — Rosneft has asked a U.S. federal court to establish “a robust appraisal and sale process” of Citgo shares following Canadian miner Crystallex’ win at court against the parent company of Citgo, PDVSA, Argus Media reports citing documents submitted by Rosneft to court.

“Such a course of action is particularly appropriate under the circumstances given the multitude of parties and interests potentially affected by a sale of PdVH,” the documents said.

Crystallex was ruled the winner in a long-running case against Venezuela, which it has sued over the forced nationalization of its assets by the Hugo Chavez government. A U.S. federal judge last week awarded the miner the right to approach Venezuela’s U.S. oil unit, Citgo, to seek its compensation of US$1.4 billion.

Yet the Russian state company has priority rights over 49.9 percent in Citgo. PDVSA used the stake as collateral for a US$1.5-billion loan provided by Rosneft in 2016. The move at the time sparked a lot of negative comments in the United States, with some legislators worried that Rosneft could at some point take control over the U.S. company. The rest of the Citgo stock has been pledged as collateral to a PDVSA bond issue that matures in two years, Argus Media notes.

Now Crystallex wants to take control over the refiner, which operates a refinery network with a daily capacity of 750,000 bpd, and then sell the stock on to another investor or investors to get its US$1.4 billion. The sum was awarded to the Canadian miner as compensation for the forced nationalization of its operations in Venezuela by the Hugo Chavez government.

At the time, the Associated Press noted that the ruling by Chief Judge Leonard P. Stark is unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.

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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.

***

PDVSA Cut Debt to Rosneft $400 Mln in Q2

(Neftegaz.RU, 10.Aug.2018) – According to Platts, Venezuela’s state oil and gas company PDVSA cut its debt to Russia’s top crude producer Rosneft by $400 million in the 2nd quarter to $3.6 billion as of the end of June, Rosneft’s 2nd-quarter results presentation showed this week.

Rosneft agreed prepayment deals for crude and products deliveries with Venezuela between 2014 and 2016, the last of which is due to expire at the end of 2020. The company gave Venezuela a total of $6.5 billion in pre-payments, a Rosneft official said earlier this year.

Venezuela’s debt to the Russian major thus shrank by $1 billion in the 6 months since the end-2017 figure, according to the presentation.

Rosneft reported in May that Venezuela had paid off $600 million of debt in the Q1. The Russian company also said it reduced crude purchases from the Latin American country in the first 3 months of the year.

With the Venezuelan economy moving downhill and its oil industry crumbling in recent years, PDVSA told customers earlier this year it was not able to fully meet its supply requirements. Due to provide Rosneft with 222,000 b/d of diluted crude oil, or DCO, PDVSA only had 116,000 b/d available in June, a PDVSA source said earlier.

With economic hardship, Russia and Rosneft have provided extensive economic support to Venezuela and PDVSA in recent years. Late last year, Russia’s finance ministry agreed to refinance Venezuela’s $3.15 billion loan, extending the payment period to 2026 and introducing more favorable conditions on servicing the loan.

Rosneft also has stakes in upstream projects in Venezuela, including 5 oil projects: Petromonagas, Petrovictoria, Petroperija, Boqueron and Petromiranda, which together account for around 4% of Venezuela’s overall production, according to the Russian company.

Crude reserves at the projects are estimated at over 20.5 billion mt. Late last year, Rosneft also agreed to develop 2 offshore gas licenses in the country.

***

PdV, Joint Ventures Miss Oil Targets

(Argus, 9.Aug.2018) – Venezuela’s state-owned PdV and its joint ventures fell short of officially targeted crude production by more than 125,000 b/d in July, according to an internal PdV upstream report obtained by Argus.

The steepest shortfalls were registered in the Orinoco heavy oil belt — long touted by the Opec country as the driver of ambitious growth plans — and PdV’s western division around Lake Maracaibo.

The monthly report indicates that July production averaged 1,526,600 b/d, compared with a target of 1,651,700 b/d, with operations by PdV and its joint ventures both explicitly missing their targets.

The report data does not include annual or monthly comparisons. Venezuela’s official June production, according to Opec’s latest Monthly Oil Market Report, was 1.531mn b/d. The average of secondary sources, including Argus, was 1.340mn b/d.

PdV officials tell Argus that the production data in the monthly internal report are systematically inflated, mainly by the company’s eastern and western divisions. “They play with the storage tanks and what they report is not reality,” one senior executive says. Actual July national production was around 1.25mn b/d, the officials say.

Despite its shortcomings, the report sheds light on field-by-field and divisional performance trends, acknowledging that neither PdV nor its joint ventures with foreign companies has been able to check Venezuela’s precipitous decline in output. Among the factors fueling the trend are scant maintenance, reservoir mismanagement, skilled labor flight and a lack of critical naphtha and light crude for transport and blending.

The Orinoco oil belt produced 843,200 b/d of crude in July, compared with a targeted 908,200 b/d, the report indicates. Of the belt’s four producing blocks, Carabobo accounted for 375,000 b/d, 23,500 b/d short of its target. PetroMonagas, a PdV joint venture with Russia’s state-controlled Rosneft, accounted for 119,700 b/d or 32pc of the block’s total reported output. That’s followed by Sinovensa, a PdV joint venture with China’s state-owned CNPC, with 91,800 b/d or 24pc.

In the Orinoco’s Junin block, July output averaged 191,800 b/d, off target by 16,500 b/d. The top producer with 71,600 b/d was PetroCedeno, in which France´s Total and Norway´s Equinor are PdV´s minority partners. The joint venture´s production missed its target by 12,200 b/d, well in excess of any other project in the block, the report indicates. PetroCedeno has an official capacity in excess of 200,000 b/d.

Other Junin block projects, including PetroMiranda with Rosneft and PetroJunin with Italy´s Eni, also missed their July goals. PetroUrica and PetroMacareo, PdV nominal joint ventures with CNPC and PetroVietnam, respectively, showed zero real and targeted output.

In the Ayacucho block, PdV´s PetroPiar joint venture with Chevron produced 123,300 b/d, off target by 12,400 b/d, the report says. The project has official capacity of 190,000 b/d.

In PdV´s eastern division, which hosts the legacy Furrial complex, July production averaged 326,300 b/d, just 9,500 b/d short of its target.

The western division, in contrast, produced 319,200 b/d, missing its target by 44,600 b/d. The shortfall came mainly from shallow-water operations in Lake Maracaibo and on its eastern coast.

The report indicates that 1,191 wells stopped producing in July, accounting for 333,200 b/d of lost output. The western division accounted for more than two-thirds of the number of deactivated wells, but the Orinoco accounted for some 80pc of the lost output, reflecting its higher well productivity.

The western division also accounted for 70pc of 1,114 well reactivations in July. These added a total of 183,300 b/d of production, mostly from the Orinoco.

PdV is reactivating the western division wells on its own and with small contractors, unrelated to the company’s vaunted plan to reactivate more than 23,000 wells nationwide, a PdV official says.

***

Venezuela Is Oil Market’s Bizarro World

(S&P Global Platts, Nastassia Astrasheuskaya, 7.Aug.2018) – Venezuela’s state oil and gas company PDVSA cut its debt to Russia’s top crude producer Rosneft by $400 million in the second quarter to $3.6 billion as of the end of June, Rosneft’s second-quarter results presentation showed Tuesday.

Rosneft agreed prepayment deals for crude and products deliveries with Venezuela between 2014 and 2016, the last of which is due to expire at the end of 2020. The company gave Venezuela a total of $6.5 billion in pre-payments, a Rosneft official said earlier this year.

Venezuela’s debt to the Russian major thus shrank by $1 billion in the six months since the end-2017 figure, according to the presentation.

Rosneft reported in May that Venezuela had paid off $600 million of debt in the first quarter. The Russian company also said it reduced crude purchases from the Latin American country in the first three months of the year.

With the Venezuelan economy moving downhill and its oil industry crumbling in recent years, PDVSA told customers earlier this year it was not able to fully meet its supply requirements. Due to provide Rosneft with 222,000 b/d of diluted crude oil, or DCO, PDVSA only had 116,000 b/d available in June, a PDVSA source said earlier.

In the face of crushing debt, crumbling infrastructure, worker unrest, hyperinflation and US sanctions, Venezuelan oil output dropped by 670,000 b/d in a year to 1.24 million b/d in July, according to S&P Global Platts OPEC survey. This is the lowest level in the 30-year history of the Platts OPEC survey, except a debilitating worker strike in late 2002 and early 2003.

With economic hardship, Russia and Rosneft have provided extensive economic support to Venezuela and PDVSA in recent years.

Late last year, Russia’s finance ministry agreed to refinance Venezuela’s $3.15 billion loan, extending the payment period to 2026 and introducing more favorable conditions on servicing the loan.

Rosneft also has stakes in upstream projects in Venezuela, including five oil projects: Petromonagas, Petrovictoria, Petroperija, Boqueron and Petromiranda, which together account for around 4% of Venezuela’s overall production, according to the Russian company.

Crude reserves at the projects are estimated at over 20.5 billion mt. Late last year, Rosneft also agreed to develop two offshore gas licenses in the country.

***

The Weirdest Oil Lawsuit Of 2018

(OilPrice.com, Viktor Katona, 6.Aug.2018) – Rosneft has been rocking the Russian oil sector for quite some time already – first it acquired several domestic assets, in some cases bordering on hostile takeover, then it took on a couple of international commitments in Iraqi Kurdistan and Venezuela and secured hefty tax concessions. This has led to a sense of satiation, fortified by CEO Igor Sechin opining recently that the oil giant will focus on organic growth from now on. In a somewhat dubious manifestation of Rosneft’s new policy, it is now suing its partners in the Sakhalin-I project for an unprecedented 89 billion roubles ($1.4 billion). The reason, coded with great deliberation in legal gobbledygook, seems remarkably humdrum at first sight, yet there is more to it.

Rosneft claims that the Sakhalin-I shareholders have gained 81.7 billion roubles by means of unjust enrichment, whilst another 7.3 billion roubles are to be paid back as interest gained having used third party funds between 2015 and 2018. The basis of the unjust enrichment claim is Rosneft’s allegation that the exploitation of Sakhalin-I has led to oil crossing over from its Northern Chayvo field to the consortium’s Chayvo deposits. Oil migration is a regular feature of any upstream specialist’s life and so far there were only few examples of taking similar issues to court, especially to such a noteworthy sum required. Further complicating matters, two Rosneft subsidiaries, Rosneft-Astra and Sakhalinmorneftegaz-Shelf, are also present in the Sakhalin-I shareholder structure (20 percent) and Rosneft is claiming money from them, too (17.5 billion roubles in total).

Before we start looking at the political underpinning of Rosneft’s claim, it would be expedient to compare the two projects as they are incomparable in size, importance and scale. Sakhalin-I consists of three oil fields that were deemed commercially attractive in 2000 – Chayvo, Odoptu and Arkutun-Dagi – production at which has started in 2005. The three field’s reserves boast an aggregate of 310 million tons of oil and 485 BCm of natural gas (17 TCf), making it Russia’s biggest project in the Pacific Ocean. By comparison, the Northern Tip of the Chayvo field (also called Chayvo North Dome) contains a “mere” 15 million tons of oil and 13 BCm of gas. It also started production significantly later than Sakhalin-I, with the first producing well of the presumed five having been drilled in September 2014.

What the two projects do have in common, however, is their relatively swift peaking out – Sakhalin-I peaked in 2007, roughly one and a half year after production started (11.2 mtpa or 225 kbpd) and has failed to regain that level ever since, even though two additional fields were brought online in 2010 and 2015 – Odoptu and Arkutun-Dagi, respectively. Currently the Sakhalin-I oil output stands at So did the Northern Tip of the Chayvo field – having reached a 50 kbpd peak in 2016, it fell by some 60 percent in the past two years since. From Rosneft’s standpoint, this is mostly due to oil migrating from the northern dome to the southern and central parts of the field.

With the abovementioned facts in mind, one gets a clear picture of why Sakhalin-I is more important from a federal point of view – moreover, interestingly enough, it is the last project on Russian soil to be operated by a foreign company (ExxonMobil, holding the largest stake of 30 percent). Rosneft is demanding payment of 26.7 billion roubles from both ExxonMobil and the Japanese consortium SODECO (consisting of Marubeni, Japan Petroleum Exploration, ITOCHU, INPEX and JOGMEC), whilst the Indian ONGC Videsh should pay 17.8 billion roubles and its subsidiaries 17.5 billion roubles. The amounts in question are indubitably far-fetched – even though oil migration has been an issue for Rosneft for several years already, the required sum is equivalent to 18-19 million barrels of oil under current circumstances, almost a quarter of Sakhalin-I’s total annual production and 17-18 percent of Northern Chayvo’s reserves.

Herein lies the main tenet of the claim – it is less to establish truth and compensate for real losses, rather to exert pressure on shareholders. Rosneft’s ultimate goal is unclear as the Russian state has so far refrained from any sanctions against oil majors operating in the country, be it in an operator or non-operator status, and any deterioration would be deemed inopportune now that the post-World Cup period has brought in a semblance of a thaw. It is clear, however, that the once very powerful Rosneft-Exxon Mobil link is getting weaker following the departure of Rex Tillerson (whose good personal relationship with Igor Sechin helped to forge effective deals) – even though Exxon’s recent abandonment of upstream ventures with Rosneft did not allegedly close the door for any future cooperation, the contours of anything similar happening in the future are increasingly dim.

More than ten years ago, Gazprom has managed to push out then-operator Shell out of the Sakhalin-II venture, using environmental violations as a pretext. Although environmental breaches have been brought up once again this month – a significant herring die off off the Sakhalin coast aroused suspicion that it might have been caused by oil production – it is highly unlikely that Rosneft would follow the same path. Rumours are circulating that the state-owned oil giant is seeking an out-of-court settlement and does not want to take the issue all the way through the Paris arbitration, from the point of view of placating fears about another takeover it would be politic to state that Rosneft does not intend to reshuffle the ownership structure. Yet so far, Rosneft has been highly reluctant to show its cards.

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Chuquisaca Signs Multi Billion Oil Deal

(Energy Analytics Institute, Ian Silverman, 28.Jul.2018) – The agreement, signed between the Bolivian government and authorities from the department of Chuquisaca provides for initiation of work in more than 8 areas.

Announcement of the planned investments came after meetings between the government, and authorities and representatives from different sectors of this southern region. The signed agreement pretends to “leave behind moments of conflict of past months,” reported the daily newspaper El Diario.

Per the agreement, the department of Chuquisaca will benefit from investments to be destined for exploration and promotion of the hydrocarbon sector.

Between 2018-2021, an amount of $1.290 billion will be destined to several hydrocarbon deposits in the region. The remaining investment will come from an agreement reached last month in Moscow with Gazprom, during an official visit by Bolivia’s President Evo Morales, and in which the Russian company announced plans to allocate 1.224 billion euros to a hydrocarbon field in Chuquisaca.

Recent Conflict

In May, the department of Chuquisaca was virtually paralyzed for two weeks as main avenues and roads that connect the capital with the rest of the country — including access to its airport — were blocked.

The conflict stemmed from a decision by the government that said an important natural gas deposit was located in the Santa Cruz region instead of Chuquisaca, as originally thought.

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PetroVictoria Producing 10,000 b/d

(Energy Analytics Institute, Ian Silverman, 5.Jul.2018) – The heavy oil project is currently producing 10,000 barrels per day, according to PDVSA.

PetroVictoria, is a joint venture comprised of Venezuela’s PDVSA and Russia’s Rosneft to develop heavy oil reserves in Venezuela as part of the Carabobo-2/4 project.

In May 2013, Rosneft and Venezuelan Corporacion Venezolana del Petroleo (CVP), a subsidiary of Caracas-based PDVSA, signed an agreement to establish the PetroVictoria joint venture. PDVSA holds a 60% interest in the venture, while Rosneft holds the remaining 40%

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PDVSA Installs Two Heavy Oil Desalters

Heavy oil desalters. Source: PDVSA

(Energy Analytics Institute, Ian Silverman, 5.Jul.2018) – The land transfer of two from Bolívar to Anzoátegui states, for oil crude desalination has successfully been completed.

The main function of both desalination plants is the subtraction of water and salt contained in heavy oil crude.

The two mega-structures were constructed with local Venezuelan talent in VHICOA workshops, a joint venture of the subsidiary PDVSA Industrial, with aim to boost productive capabilities, announced Petróleos de Venezuela, S.A. in an official statement.

The two identical containers, weighing 149 tons and spanning 25 meters long and 6.5 meters high, where built in a period of time of 11 months. The containers aim to guarantee processing of 52,000 barrels per day (b/d) of crude oil, in addition to the current production of the Petromonagas Operational Center (COPEM), presently estimated at 130,000 b/d, according to PDVSA.

Both desalters were certified by inspectors from the American Society of the Mechanical Engineers (ASME). Inspectors from Colombia, Mexico, Brazil and the USA certified the work on the structures, which have 22 millimeters thick steel sheet joints with a capability to withstand very high pressures and temperatures.

The VHICOA teams will be an important part of the PetroMonagas (PDVSA/Rosneft) Early Production Facility Center. The project, with has a registered process report of 65 percent, is located in the Carabobo Division of the Hugo Chávez Orinoco Oil Belt, also known as the Faja, and includes the participation of oil field service giant Schlumberger.

The oil crude processing modular center will be added to COPEM, once Schlumberger, the main contractor, ends the Engineering, Procurement and Construction (EPC), in February 2019. PDVSA aims to leverage early production from PetroVictoria, a joint venture comprised of PDVSA and Rosneft, which is currently producing 10,000 b/d.

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Venezuela’s Declining Crude Exports Squeeze India’s Refiners

(Reuters, Marianna Parraga, 3.Jul.2018) – Venezuela’s crude shipments to India, its third largest export market, fell 21 percent in the first half of the year, according to internal documents from state-run PDVSA, adding to supply troubles for Indian refiners as they are increasingly pressed to diversify oil imports.

Venezuela’s production decline to a 30-year low and export woes stemming from mismanagement, lack of investment and payment delays are affecting almost all of the OPEC-nation’s customers.

But the impact on India is notable and comes as its refiners are now preparing for a “drastic reduction to zero” of oil imports from U.S.-sanctioned Iran.

Last week, PDVSA officials met with executives from India’s Reliance Industries and Russia’s Rosneft, which owns a majority stake in India-based Nayara Energy, to discuss trade issues, the state-run company said.

The talks focused on how to remedy export delays, according to a person familiar with the matter.

Venezuela sent almost 280,000 barrels per day (bpd) of heavy crude to India in the first half of the year, a 21 percent drop versus the 355,500 bpd shipped in the same period of 2017, according to PDVSA trade documents.

The decline is the second steepest after the United States, which has suffered a drop of about 30 percent in crude imports from Venezuela this year, the documents seen by Reuters show.

If crude supplies from Iran and Venezuela, two of India’s top five oil suppliers, cannot be secured in coming months, some of the nation’s refiners would have to rely almost entirely on sourcing the heavy barrels they need from Iraq, according to analysts.

“Indian refiners are very worried about supply from Iran, but also from Venezuela,” said Robert Campbell from consultancy Energy Aspects.

Saudi Arabia is expected to boost supply to India in the short term, but those barrels would not match the quality of the missing Venezuelan crude, he added. “The lack of heavy barrels is not a problem only in the Atlantic Basin but in Asia as well,” he added.

PDVSA and Nayara did not reply to requests for comment. India’s Reliance declined to comment.

India is the world’s fourth largest refiner after the United States, China and Russia. While Chinese and Russian firms resell a large portion of the Venezuelan crude and fuel they receive to monetize oil-for-loan agreements, Indian refiners need the barrels they get through crude supply contracts with PDVSA.

FEWER BARRELS FOR EVERYBODY

Venezuela’s crude output is declining faster than expected amid insufficient investment, attempts to seize its overseas assets over payment disputes and skilled workers leaving its oil industry due to low salaries and an extended corruption probe within PDVSA.

The country’s oil production averaged 1.58 million bpd in the first five months of 2018, according to figures reported to OPEC, its lowest annual level since 1985. The fall, which is putting pressure on global supply and contributing to growing oil prices, has also taken a toll on exports.

PDVSA last month requested customers not send tankers to its main port of Jose to alleviate congestion. But vessels have continued arriving mainly for Chinese, Indian and U.S. clients, according to Thomson Reuters vessel tracking data.

The tanker bottleneck has worsened since May, when ConocoPhillips started legal actions to seize PDVSA’s assets to satisfy a $2-billion arbitration award, blocking the state-run firm from using its Caribbean terminals.

In June, PDVSA shipped to India 268,300 bpd after servicing some vessels that had waited for up to a month to load. The Venezuelan firm plans to deliver some 240,000 bpd in July, according to Reuters and PDVSA data.

The unstable crude supply from Venezuela to India in recent months has mainly benefited Iraq, India’s largest crude source, and United Arab Emirates, which in May replaced Venezuela as India’s fourth biggest crude supplier.

Reporting by Marianna Parraga in Houston, additional reporting by Promit Mukherjee in Mumbai; Editing by Tom Brown and Marguerita Choy

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Petrozamora Incorporates Steam Generators in Zulia

(Energy Analytics Institute, Piero Stewart, 3.Jul.2018) – PDVSA Petrozamora, a joint venture comprised of PDVSA and Russia’s Gazprom, completed recovery and incorporation of two steam generators.

The generators, Simón Bolívar 24 (SB-24) and Simón Bolívar 40 (SB-40), are located in located in the state Zulia at the Lagunillas Field in an area denominated location U74, reported PDVSA in an official statement.

The actions by CVP form part of a plan to recover lost production, and includes reincorporating eleven (11) boilers designed to improve the artificial lift processes at the Bachaquero and Lagunillas fields, both of which are operated by the joint venture.

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Gazprom to Invest $1.2 Bln in Bolivia

(Energy Analytics Institute, Aaron Simonsky, 28.Jun.2018) – Gazprom confirmed it will invest $1.22 billion in the Bolivian petroleum sector.

The Russian company’s investments will be destined towards exploration activities at the Vitiacua field located in the department of Chuquisaca. Gazprom didn’t rule out financing rehabilitation projects for older Bolivian fields, reported the daily newspaper La Razon.

The announcement came during a ceremony in the presence of Bolivia’s President Evo Morales with Gazprom and the Russian fertilizer company Acron. Other meetings in Moscow included the presence of numerous authorities from the government of Russian President Vladimir Putin.

Bolivia and Russia also discussed deals related to geological cooperation on issues related to groundwater, the daily reported.

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PDVSA, Rosneft Officials Discuss Projects

(Energy Analytics Institute, Piero Stewart, 28.Jun.2018) – Officials from both oil companies held meetings in Caracas to discuss partnerships.

PDVSA President Manuel Quevedo, who also serves as Venezuela’s Oil Minister, conducted a meeting with Rosneft Vice President Didier Casimiro to discuss joint projects between the Venezuelan and Russian companies, respectively, and consider new opportunities to strengthen strategic relationships, announced PDVSA in an official statement.

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Venezuela’s Petropiar Upgrader Begins Restart

(Reuters, 26.Jun.2018) – Venezuela’s PDVSA and Chevron have begun to restart their 210,000-barrel-per-day (bpd) Petropiar heavy crude upgrader after a nearly month-long, repair-related shutdown and a fire, according to the state-run company and two sources close to the facility.

Venezuela’s crude upgraders, which can convert near 700,000 bpd of extra-heavy crude from the country’s Orinoco Belt into exportable grades, have been mostly out of service in recent weeks while PDVSA focused on easing a tanker backlog that has delayed exports.

The country’s oil production fell to 1.39 million bpd in May, according to secondary sources cited by OPEC, the lowest level since the 1950s. Oil is Venezuela’s main export and the decline has only served to deepen an already severe economic crisis.

Workers attempted to restart Petropiar earlier in June, but quality issues that were ultimately solved delayed the process, one of the sources said. The restart typically takes several days to be completed while the upgrader’s performance is evaluated.

A fire early on Tuesday at one of the upgrader’s furnaces left one worker injured, but had no material impact on operations, PDVSA said in a statement.

“The event was immediately controlled,” the company said in the statement, adding that crude production and upgrading were not directly affected by the fire.

If Petropiar fully restarts in the coming days, the neighboring 190,000-bpd Petrocedeno facility would be the only upgrader completely shut for maintenance while the 160,000-bpd Petro San Felix complex works intermittently, according to the sources.

But the 150,000-bpd Petromonagas, operated by PDVSA and Russia’s Rosneft, is expected to be out of service later this month due to a planned major maintenance project.

Reduced crude upgrading means PDVSA and its partners in the Orinoco Belt, the country’s largest producing region, have to mix Diluted Crude Oil (DCO) for export, but the volume of the replacement grade is typically lower.

That could help to ease a bottleneck of tankers waiting to transport oil exports. As of June 26, there were more than 75 tankers anchored off Venezuelan ports waiting to load some 24 million barrels of crude and refined products, according to Thomson Reuters vessel tracking data, near flat from earlier this month.

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OPEC’s Vienna Meeting: The Challenge of Failing NOCs

(The Council on Foreign Relations, Amy Myers Jaffe, 19.Jun.2018) – As energy ministers from major oil producing countries gather in Vienna this week to discuss the stability of global oil markets, the variables that will dictate outcomes have rapidly shifted. Pre-meeting narratives that previously focused on the appropriate level of external private investment—either too much, in the case of U.S. shale producers, or too little, in the case of private sector international oil companies—look woefully inadequate to explain current oil market conditions. Instead, how to deal with the accelerating political and institutional breakdown of several national oil companies across multiple continents now stands out as a pressing structural challenge for the Organization of Petroleum Exporting Countries (OPEC) and U.S. policymakers alike. I highlighted this problem vis a vis Venezuela last March. Stated intentions to replace lost barrels from Venezuela and potentially Iran has brought acrimony back into the OPEC fray. U.S. plans to sanction Iran’s oil exports are the most recent publicly visible geopolitical irritant, but the history has shown that eliminating the endogenous geopolitical swings in the oil cycle takes more intervention and planning capability than even the most well intended partnerships can master, much less nation states whose relations have been punctuated by direct military threats or proxy wars. Talk of a sustained Saudi-Russian alliance that would be effective in eliminating the factors that could cause gyrations in oil prices seem overstated.

All of OPEC’s fourteen members have flagship national oil companies (NOCs), that is, state-controlled entities that oversee their nation’s energy industry. Other important oil producing countries such as Brazil, Mexico, and Russia also have NOCs that dominate their oil and gas sectors. Many of these national firms are facing structural budgetary, corruption, or other internal political challenges, including attacks on facilities by local rebel groups, criminal gangs, terrorists, cyber hackers, and/or armed combatants in ongoing military conflicts.

As a result of these ongoing NOC difficulties, supplies from several OPEC countries, Venezuela, Libya, Iraq, Iran, Nigeria, and Angola have been volatile in recent years. In particular, the collapse of Venezuela’s oil industry and a slide in deep water oil production from Angola have been more instrumental to the market success of OPEC’s agreement with Russia and other non-OPEC oil producers than the producer group’s “planned” cuts in reducing excess inventories by almost 200 million barrels since early 2017 and pushing Brent oil prices up from about $55 to $75 a barrel. Cornerstone Macro noted in a recent report that oil stocks in industrialized countries experienced a counter seasonal decline of three million barrels in April, as compared to the more customary twenty million buildup on the heels of reduced global supplies and more robust than expected U.S. and global economic growth.

While Saudi Arabia, Kuwait, the United Arab Emirates, and Russia did make promised output reductions to help tighten oil supply over the course of 2017, unintended production declines continue to be more material. Not only did oil output declines from Venezuela, Algeria, Angola, Ecuador, and Gabon amount to losses of close to one million barrels a day since early 2017, according to Citibank, markets have come to expect accidental supply disruptions from conflict prone oil regions in Libya and Nigeria. That reality prompted one prominent energy columnist to conclude that OPEC has become “an increasingly unreliable supplier of an essential commodity.”

Whatever the outcome of the OPEC-non-OPEC Vienna group’s deliberations this week, it could turn out to be only a temporary fix to this more structural NOC problem than generally understood. Right now, OPEC spare productive capacity is highly limited. Saudi Arabia and Russia together would probably have difficulty adding much more than 1.5 million barrels a day to markets through the end of the year. Ongoing problems in Libya and Venezuela, combined with renewed sanctions on Iran, could possibly take more than that off the market. And what if a new supply problem emerges? Saudi Arabia and Russia are discussing longer run cooperation. What would that look like in a world where uncertainty plagues many national oil companies around the world, including, perhaps, their own firms?

Does budget-constrained Saudi Arabia agree to divert billions in tandem with Russian firms to expand additional oil fields’ productive capacity down the road to capture future market share that could be available as NOCs in other countries continue to fail? If Saudi and Russia make capacity expansion pushes, what becomes of OPEC as a coherent organization? Will the Vienna group need to shrink in number? Conversely, if Saudi Arabia and Russia choose to make only a quick stop-gap measure just to keep markets from overheating in the next few months and don’t invest in new capacity, will they sacrifice future revenues to private oil and gas investors who can bring on capacity more quickly if NOC capacity continues to falter?

The 2014-2015 price collapse has proven that a year or two of low prices won’t be sufficient to knock out growth in U.S. tight oil. That means restarting a price war in the short run isn’t an ideal option for OPEC, especially if those flooding the market do not appear to be able to survive the prolonged revenue drop that would make a price war option an effective threat. And my guess is that low oil prices also aren’t likely to be sufficient to knock out capital investment by the major international oil companies (IOCs). Those companies have started to pivot their strategies to direct their capital spending to activities that will be more productive than those pursued over the last decade when booking new large reserves was the priority. Rather, companies are focused on spending programs that can bring higher production more quickly, such as directing capital spending to shorter cycle field extensions and satellite field developments that can bring first oil into the market rapidly within one to three years (as opposed to mega-projects that took near a decade to develop). Companies are also developing new techniques to reduce the cycle time and costs on challenging green field projects.

Moreover, innovation in the private oil and gas sector is increasingly de-risking the landscape for future oil and gas investment for private investors. As technology improves, companies are going to be able to squeeze more barrels out of all kinds of existing known in place source rock, not just oil and gas from shale formations. The most recent example is the Austin Chalk where U.S. companies are rushing to test new drilling techniques to positive results.

There’s an additional rub. Saudi and Russian efforts could have trouble influencing intermediate oil demand trends. Even if the Vienna group takes production increase decisions this week that staves off any economically crippling oil price shock that could have sent oil demand into a tailspin, caution signs are already emerging that oil prices even at $70 a barrel are creating some economic headwinds. Markets are already nervous about trade wars. Reports are emerging that high fuel prices are hindering economies within the Euro zone and elsewhere. Rising fuel prices are visibly creating economic and political problems in India and other developing economies. And the United States needs strong demand growth elsewhere to manage its own economic issues. In the case of an unexpected global economic slowdown, OPEC supply disruptions could take a back seat again to “lower for longer” story lines about failing oil demand (potentially in the midst of rising U.S. production in 2019), which could make any discussion of a more permanent, workable Saudi-Russia oil alliance even harder to envision.
***

Oil Prices Expected to Rise

(FinancialBuzz.com, 19.Jun.2018) – Despite the recent downturn in oil prices, Goldman Sachs remains optimistic.

According to Reuters, Goldman Sachs forecast a tighter oil market for a longer duration due to strong demand growth and the probability that rising supply disruptions could counter any increase in OPEC production.

“Our updated global supply-demand balance continues to point to further declines in inventories and higher oil prices in 2H18,” the bank said. Goldman also repeated its Brent price forecast for a peak of $82.50 per barrel throughout the summer and a year-end approximation of $75.

The avalanche of political and economic developments around the world that influence oil prices are making it difficult to determine what the relationship between demand and supply will be. Goldman Sachs explained in the report that they expect OPEC and Russia production to increase by 1 million barrels per day by the end of 2018 and by another half a million barrels per day in the first half of 2019. While a production increase would decrease oil prices, the supply numbers are expected to be offset by increased political and economic disruptions in Venezuela and Iran.

***

Gazprom Reiterates Interest in Bolivia

Luis Poma and Vitaly Markelov at signing ceremony. Source: Gazprom

(Energy Analytics Institute, Jared Yamin, 16.Jun.2018) – Russian oil giant Gazprom remains attracted to the hydrocarbon opportunity set in Bolivia in South America.

A working meeting between Gazprom Management Committee Chairman Alexey Miller and Bolivia’s President Evo Morales was held at Gazprom’s office in Moscow where various agreements were signed with the aim to expand cooperation between Gazprom and Bolivia in the petroleum sector.

Land-locked Bolivia is the third-largest hydrocarbon producer in South America, extracting over 20 billion cubic meters of natural gas per year. Bolivia’s gas production is initially destined for the domestic market, while excess gas supply is exported primarily to Argentina and Brazil.

Miller expressed appreciation for the ongoing implementation of joint projects in Bolivia and discussed the opportunities to increase output at Bolivia’s Incahuasi natural gas field. The Russian official placed emphasis on joint plans for geological exploration in the promising Vitiacua oil and gas block, reported Gazprom in an official statement on its website.

A summary of the signed agreements follows:

Gazprom Management Committee Deputy Chairman Vitaly Markelov and Yacimientos Petroliferos Fiscales Bolivianos (YPFB) Vice President for Contract Management and Supervision Luis Poma signed a strategic cooperation agreement that envisions joint efforts in a wide range of areas including but not limited to the following: geological exploration, gas production and hydrocarbon transportation across Bolivia, development of the national gas and oil transportation infrastructure and NGV market, exchange of experience and personnel training, and sci-tech collaboration.

Gazprom EP International B.V. Managing Director Andrey Fick and Luis Poma also signed a term sheet related to the contract for exploration and production in the Vitiacua oil and gas block that will allow the companies to start drafting the main design documentation.

Finally, Bolivia’s Hydrocarbons and Energy Minister Luis Alberto Sanchez and Alexey Tyupanov, the CEO of EXIAR — the Russian Agency for Export Credit and Investment Insurance, which was established in late 2011, becoming Russia’s first export credit agency — signed an agreement to secure financing for supplies of gas-fueled machinery and equipment produced by Russian manufacturers.

GAZPROM IN BOLIVIA

In Bolivia, Gazprom International B.V., a company that participates in hydrocarbon prospecting, exploration and development projects outside Russia, represents Gazprom’s interests in projects in the country.

Gazprom in partnership with France’s Total S.A. (operator, WI 50%), Tecpetrol S.A. (WI 20%), and YPFB (WI 10%) develops the promising Ipati and Aquio oil- and gas-bearing blocks, within which the Incahuasi field is located. Gazprom (WI 50%) and Total (WI 50%) also implement a hydrocarbon exploration project in the Azero block.

In 2016, Gazprom, Bolivia’s Ministry of Hydrocarbons and Energy, and YPFB established the means for implementing Bolivia-based projects for hydrocarbon exploration, production, and transportation, and updated the general scheme for development of the country’s gas industry through 2040. Gazprom and YPFB also cooperate in personnel training and retraining.

Finally, in 2016, Gazprom and YPFB signed an agreement to explore the promising La Ceiba, Vitiacua and Madidi blocks. The La Ceiba and Vitiacua blocks are situated in the Chaco oil- and gas-bearing basin in the southern part of Bolivia (Tarija and Chuquisaca departments).

***

Bolivia, Russia Consolidate Energy Partnership

(Efe, 13.Jun.2018) – Bolivia’s President Evo Morales met with his Russian counterpart, Vladimir Putin, as part of a two-day visit to Moscow aimed at consolidating the countries’ bilateral energy partnership.

While receiving Morales at the Kremlin, Putin expressed Moscow’s willingness to expand its cooperation with the South American country in the hydrocarbons area.

“Gazprom (the state-owned Russian natural gas producer) is working at two (Bolivian) fields where it extracts 2.5 billion cubic meters of gas. It’s now studying expanding production, which could be doubled,” Putin said at the start of talks with Morales.

A consortium in which the Bolivian unit of French oil major Total is the operator with a 50 percent stake, Gazprom and Bolivia’s TecPetrol each have a 20 percent interest and a unit of Bolivian state energy company YPFB has a 10 percent stake participates in exploration projects at the Aquio and Ipati gas and oil blocks, where the Incahuasi gas and condensate field is being developed.

Gazprom and Total also are carrying out an exploration project at the Azero block, which like Aquio and Ipati is located in southern Bolivia.

Putin also noted that Rosatom, Russia’s federal agency on atomic energy, was developing a nuclear research center in Bolivia.

“So I’m very pleased to confirm that our relations are growing, and today we’ll issue a joint declaration documenting all areas of our interaction,” he added.

For his part, Morales underscored the countries’ shared values, particularly in terms of “respect for nature, for Mother Earth.”

Bolivia’s president expressed his country’s interest in cooperating with the Eurasian Economic Union, which is made up of the post-Soviet states of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.

Morales on Thursday will visit Gazprom’s headquarters, where he is expected to sign several agreements locking in roughly $1 billion in Russian investment in Bolivia’s hydrocarbons sector.
***

North America’s Energy Future on Trial in Mexico

(Brookings, Carlos Pascual, David G. Victor, and Rafael Fernandez de Castro, 5.Jun.2018) – On July 1, Mexicans head to the polls to select their next president. While it has become fashionable to wall Mexican matters away from American politics, in reality the Mexican election could transform the North American community. At the epicenter of that future is a quiet, steady effort to reform Mexico’s energy markets and roll back the monopolies of Mexico’s state-owned energy companies. These reforms have already triggered contracts that could yield $200 billion in investments in the coming years.

Editor’s Note:

The Mexican election could transform the North American community, write Carlos Pascual, David G. Victor and Rafael Fernandez de Castro Medina. At the epicenter of that future is a quiet, steady effort to reform Mexico’s energy markets and roll back the monopolies of Mexico’s state-owned energy companies. This piece originally appeared in the Houston Chronicle.

Until now, nobody has really known what Mexican voters think about all this change, but the answers matter because the contending candidates for the presidency have outlined starkly different visions for the future. In April, we ran—in tandem with the Brookings Institution, the University of California at San Diego, the global consultancy IHS Markit and a leading Mexican newspaper, El Financiero—the the first systematic poll of Mexican voter attitudes. What we found is disturbing and important as North Americans watch the upcoming elections.

On the surface, the picture is positive. Most strikingly, a modest majority of the public supports continuing the energy reforms (48 percent, versus 37 percent opposed) even if they feel they are not producing good results (61 percent versus 27 percent), or that they were not necessary (47 percent versus 41 percent). Mexicans feel that returning to the past isn’t a solution. For decades, Mexicans saw Pemex, whose nationalization in 1938 is still a national holiday, as the country’s crown jewel. Those days are gone. In our poll, Mexicans opined that Pemex has not acted to the benefit of the country (61 percent versus 30 percent). Mexico is at a crossroads—none of the old models works, but none of the new models are yet formed.

Digging deeper into the polling reveals disturbing insights. Mexicans, like Americans, actually know very little about the problems and opportunities in the energy sector. Sixty-three percent believed that Mexico’s oil production either increased or stayed the same in the 10 years prior to the constitutional changes in 2013. In reality, Mexico’s oil production peaked in 2004 at 3.5 million barrels per day, and by 2013 a persisting lack of investment had driven production down to 2.4 million barrels per day. It is not surprising that Mexicans are confused about the solutions—most don’t realize that production had collapsed.

Almost everything that is important in the energy sector takes a long time to bear fruit—that’s because investment cycles are long, and longer still when investors aren’t sure whether new policies will hold. It takes 3 to 5 years for investment to translate into production and, optimistically, two years before that to pass the laws and regulations needed to execute a bid round. Thus, when Mexico changed its constitution in 2013 to open oil production to outside investors, it was going to take at least 5 to 7 years before oil production might increase. By that standard, the reforms are exactly on schedule: Today, more than 100 fields have been awarded for investment, there have been significant initial commercial finds and production is set to rise around 2020. No country in the world has managed such a complete transformation of its energy sector faster than Mexico.

For the public, reforms may still seem like unfulfilled promises. North of the border, these results really matter because it is American companies—with American jobs and investors—that are perhaps best poised to benefit from Mexico’s continued opening.

As much as Mexico has evolved as a competitive global economy, accumulating an impressive number of free trade agreements that open the country to international commerce and investment, the public fears that private investment in oil would not benefit the Mexican people (51 percent versus 34 percent). Mexicans are also suspicious of depending on foreigners. Almost two-thirds of the respondents believed that it is a significant risk for Mexico to import more than 50 percent of its gasoline and natural gas from the United States. That’s bad news for Americans who have become the number one exporter of natural gas and refined oil products like gasoline.

Just as Mexicans are becoming impatient to see tangible benefits from reform, many other oil producers are in intense competition to attract private investors—from Saudi Arabia to Russia and Brazil. Traditionally, big oil producers could afford to be inefficient because the money kept sloshing in. Those days are gone, and the whole world’s oil industry is in an arms race to reform and get better.

For the last two years, the United States has been making loud noises about cutting off Mexico. Now it is Mexico’s turn, and the big losers could be American companies that want to do business south of the border. Fixing this problem won’t be easy, but it starts with talking openly—with the public, not just elites—about how reform actually works. And why openness and competition are good news all around.

***

PetroChina, Rosneft Leave Venezuela Refining Projects

(Kallanish Energy, 28.Mar.2018) – Chinese and Russian state oil companies PetroChina and Rosneft will not pay the costs of repairing and modernizing Venezuela’s Cardón and Amuay refineries for PDVSA, according to union sources.

Ivan Freites, senior official of the Venezuelan Unions Federation of Oil Workers, told local newspaper El Nacional the foreign partners decided after lengthy negotiations with PDVSA the projected $10 billion cost was too high.

Under proposed lease agreements, the firms would solely cover the costs of upgrading both refineries and use each for 10 years. After that period, the refineries, still owned by the Venezuela government, would be returned to PDVSA, Kallanish Energy learns.

“That agreement did not prosper because these refineries are in a deplorable state and they realized that the investments they had to make are extremely high,” said Freites.

Rosneft would manage the Amuay refinery — which has the capacity to process roughly 640,000 barrels per day (BPD) of crude — and PetroChina would take over the Cardón refinery – which can process 305,000 BPD.

Located in Falcón state, they are both part of the Paraguaná refining complex, which has a capacity of roughly 940,000 BPD, including the Bajo Grande refinery.

Freites said that without foreign investment, Venezuela is likely to shut three of its major refineries in coming weeks, as a shortage of crude and lack of personnel will add further pressure and prevent the facilities from operating.

The refineries pending “indefinite closure” are Cardon, El Palito (140,000 BPD) and Puerto La Cruz (190,000 BPD), the union leader said. Together, they account for nearly half of PDVSA’s 1.3 MMBPD of domestic refining capacity.

Currently, only four refineries are said to be operating in Venezuela, at roughly 30% of their combined nominal capacity – reportedly at about 390,000 BPD.

None of the companies responded to request for comments.
***

Venezuela Tries To Pay Russian Debt With Cryptocurrency

(Tsvetana Paraskova, OilPrice.com, 28.Mar.2018) – If crisis-hit Venezuela was hoping to pay off its US$3.15-billion debt to Russia with its new cryptocurrency, those hopes have been shattered as the Russian Finance Ministry announces that it won’t be accepting digital coin.

Venezuela will not be paying any part of its debt to Russia with its cryptocurrency, the head of the Russian Finance Ministry’s state debt department, Konstantin Vyshkovsky, has said.

In November last year, Russia threw a life-line to Venezuela after the two countries signed a deal to restructure US$3.15 billion worth of Venezuelan debt owed to Moscow. Under the terms of the deal, Venezuela will be repaying the debt over the next ten years, of which the first six years include “minimal payments”.

The following month, Venezuelan President Nicolas Maduro announced that his country would be issuing an oil-backed cryptocurrency, which it did, in February this year.

Maduro’s propaganda machine is touting the digital coin as a ‘ground-breaking’ first-ever national crypto currency, the El Petro–backed by 5 billion barrels of oil reserves in Venezuela’s Orinoco Belt.

But most observers see this crypto issuance as a desperate attempt to skirt U.S. financial sanctions.

Earlier this month, U.S. President Donald Trump banned U.S. purchases, transactions, and dealings of any digital coin or token issued for or by the government of Venezuela.

Last week, Time magazine reported that Russia secretly helped Venezuela in creating the Petro, with the purpose of undermining the power of U.S. sanctions, the magazine reported, citing sources familiar with the effort.

Russia slammed the Time report as “fake news”, with Deputy Director of the Information and Press Department of the Russian Foreign Ministry, Artyom Kozhin, saying that Russia and Venezuela had never worked together on the development of the Venezuelan cryptocurrency.

Russia and China are the last holdouts that still finance Venezuela, which is digging deeper into the downward spiral of economic crisis, hyperinflation, and crumbling oil production. However, China is reportedly thinking of cutting off Venezuela from new loans. This would leave Russia as the only financial supporter of the Maduro regime, and if all it’s got is a crypto coin that no one really believes in to pay off debt, loans are likely to be plentiful.
***

Venezuela Holds World’s 8th Largest Gas Reserves

(Energy Analytics Institute, Piero Stewart, 11.Mar.2017) – Venezuela, the country with the world’s largest crude oil reserves, also continues to hold the world’s eighth largest accumulation of natural gas reserves (see table below), according to BP’s Statistical Review of World Energy.

Top Ten Holders of Natural Gas Reserves Worldwide

Rank —- Country ———————- Natural Gas Reserves (Tcf)

1 ——— Iran ————————– 1,201.4

2 ——— Russia ———————– 1,139.6

3 ——— Qatar ———————— 866.2

4 ——— Turkmenistan ————– 617.3

5 ——— USA ————————- 368.7

6 ——— Saudi Arabia ————— 294.0

7 ——— United Arab Emirates —- 215.1

8 ——— Venezuela * ————— 198.4

9 ——— Nigeria ——————— 180.5

10 ——- Algeria ———————- 159.1

Source: BP

Note: PDVSA reported that Venezuela’s natural gas reserves were 201.349 trillion cubic feet (Tcf) at year-end 2015, the last time the company reported annual auditing operational data. Of this total, 64.916 Tcf corresponded to associated gas in the Hugo Chávez Heavy Oil Belt, and 36.452 Tcf corresponded to associated gas related to extra heavy oil in Venezuela’s Eastern Basin, according to PDVSA data.

***

PDVSA, Rosneft Hold Conference on EHCO

(PDVSA, 23.Feb.2017) – PDVSA and the Russian company Rosneft held a technical conference on strategy, innovation and technology for a sustainable future, February 22-23, 2017 at PDVSA Intevep’s headquarters in Los Teques, Miranda state.

The event brought together 150 PDVSA and Rosneft specialists from various fields to strengthen cooperation, exchange and technological integration between the People’s Power Ministry of Petroleum, PDVSA, Intevep, joint ventures and Rosneft.

At the opening event, President of PDVSA Intevep Omar Uzcátegui spoke about the potential of this PDVSA subsidiary for the development of technologies and providing specialized technical assistance services. He also spoke about the participation of PDVSA Intevep in the Hydrocarbons Economic Driver to facilitate the massification and implementation of its technologies.

Technical Director of Rosneft in Venezuela Kim Gobert, spoke about the importance of the Hugo Chávez Orinoco Oil Belt, the worl’s largest proven hydrocarbon reserve base. He said that it was necessary to make progress in the strengthening of relations between the two companies to accelerate research projects on the development of heavy and extra heavy crude oil.

The conference brought together specialists from PDVSA and Rosneft, who spoke on diluent management, enhanced hydrocarbon recovery technologies for heavy and extra heavy crude, infrastructure and transportation of crude oil, electricity demand in oil and gas areas, gas management and handling, innovative technological solutions in oil and gas areas including offshore, and a new vision in the improvement and management of solids, effluents and gases.

There are technical round tables for the discussion of four priority issues, such as: integrated gas management, reservoir development and enhanced hydrocarbon recovery, crude oil upgrading and diluent management, and infrastructure and transportation.

The conference aimed to boost the development of PDVSA and Rosneft joint ventures, such as Petromonagas, Petromiranda and Petrovictoria in the Hugo Chávez Orinoco Oil Belt for extra heavy crude oil, and Petroperija and Boquerón in traditional areas.

***

Venezuela, Algeria Officials Discuss Bilateral Coop

(PDVSA, 13.Feb.2017) – Venezuela’s Foreign Minister Delcy Rodríguez and Oil Minister Nelson Martínez visited the People’s Democratic Republic of Algeria to continue working visits to member a and non-member countries of the OPEC.

The officials discussed bilateral cooperation issues during their meeting with Algerian Foreign Minister Ramtane Lamamra, and Energy Minister Noureddine Bouterfa.

Algeria is a member of the Joint OPEC-Non OPEC Ministerial Monitoring Committee that oversees compliance with the production adjustment agreement of 24 oil producing countries.

The ministerial tour has included OPEC countries such as Iran, Iraq, Qatar, Kuwait, Saudi Arabia and Algeria, and not OPEC, such as Russia and Oman, following instructions by Venezuela’s President Nicolás Maduro, to continue with the Bolivarian Peace Diplomacy and strengthen relations with strategic partners in energy matters.

The initial OPEC decision to freeze production between 32.5 and 33 million barrels per day (MMb/d), with individual country quotas, was taken in Algeria. Venezuela made the proposal for non OPEC countries to join in the agreement.

***

Venezuela’s Martínez meets Omani Counterpart

(PDVSA, 10.Feb.2017) – Venezuela’s Foreign Minister Delcy Rodríguez and the country’s Oil Minister Nelson Martínez traveled to the Sultanate of Oman to meet with Omani Oil Minister Mohammed bin Hamad Al Rumhy, as part of a tour of member and non-member countries of OPEC.

Oman, together with Venezuela, Algeria, Kuwait and Russia make up the Joint OPEC – non OPEC Ministerial Monitoring Committee to monitor compliance with the agreement signed last December by oil producing countries to bring balance to the market.

At this meeting with Minister Rumhy, they assessed compliance with the agreement as good, said Rodríguez.

Producing countries have the historical responsibility to defend oil market stability, Martinez said.

Oman was one of the non OPEC producers that provided ongoing support to the strategy of adjusting production to recover oil prices.

Both countries agreed to strengthen bilateral relations and cooperation mechanisms for mutual benefit, according to a Twitter post by Rodríguez.

As part of the Peace Diplomacy promoted by the President of the Republic Nicolás Maduro, Rodríguez and Martinez delivered a letter to the Sultan of Oman Qaboos bin Said al-Said addressed to him, on the OPEC-non OPEC agreement.

***

Renaissance, Lukoil to Partner in Amatitlán Block

(Renaissance Oil Corp., 11.Jan.2017) – Renaissance Oil Corp. announced that PJSC LUKOIL, one of the world’s largest oil producers, has chosen Renaissance as their partner for the Integrated Exploration and Production Contract for the 230 km2 (56,800 acres) Amatitlán block, near Poza Rica, Veracruz, Mexico.

Highlights

— Renaissance acquires 25% indirect interest in Amatitlán contract for US$1,750,000 — Finalizing options to acquire up to 62.5% — Renaissance will take the lead role in operations — Amatitlan holds 4.2 billion barrels of oil and 3.33 trillion cubic feet of natural gas originally in place in shallower Chicontepec formation1 — Deeper oil-rich Upper Jurassic shales are highly prospective for development

About the Amatitlán Block

The Amatitlán block is located within the Tertiary aged Chicontepec paleochannel formation, in East Central Mexico. The Chicontepec formation, referred to as Aceite Terciario del Golfo in Mexico, covers approximately 3,800 km2 and contains the country’s largest hydrocarbon resource, with certified original oil in place estimated at 59 billion barrels of oil equivalent.

“The Upper Jurassic shale interval is widely considered to be the major carbonate source rock for the oilrich Chicontepec formation but the Upper Jurassic formations have not been commercially developed,” stated Renaissance Chief Geochemist Dan Jarvie. “Renaissance’s analysis indicates the Upper Jurassic interval is an oil-rich, hybrid system in the Amatitlán block and is highly prospective for targeted stacked pay development of this thick unconventional resource.”

“Innovations in drilling and completion techniques have dramatically improved recoveries in tight oil formations and shales throughout the United States and Canada”, said Renaissance Drilling and Completions Advisor Nick Steinsberger. “Our goal is to apply modern oilfield development technologies in Amatitlán to re-establish production in the underdeveloped Chicontepec formation and to commercialize the Upper Jurassic shale formations.”

Discovered in 1962, and still largely undeveloped, the main field Amatitlán has produced over 175,000 bbls of light oil ranging from 34° to 44° API with peak production of 650 bbl/d in 2005. As a result of the lack of recent drilling and development activities on the Amatitlán Block, production has currently declined to negligible volumes. The Comisión Nacional de Hidrocarburos evaluation of resources effective January 1, 20161 estimates Amatitlán contains, in the Chicontepec formation only, 4.2 billion bbls of crude oil and 3.33 trillion cubic feet of natural gas originally in place. Previous exploration wells on the Amatitlán block have shown the presence of oil and natural gas at various depths of drilling throughout the block. The Integrated Exploration and Production Contract for Amatitlán allows for the development of the full stratigraphic column, however, to date oil has been produced only from the Chicontepec formation.

Transaction Overview

Renaissance has entered into a definitive agreement with LUKOIL and Marak Capital S.A. whereby the company will acquire an indirect 25% interest from Marak in Petrolera de Amatitlán S.A.P.I., the contractor of the Integrated Exploration and Production Contract for the Amatitlán block for $1,750,000. Marak currently owns a 50% indirect interest in Petrolera, with the remaining 50% held by LUKOIL.

The company and LUKOIL have agreed that Renaissance will take the lead role in operations for Petrolera for joint development of the Amatitlán block currently held by Pemex-Exploración y Producción. The Integrated Exploration and Production Contract is expected to migrate into a Contract of Exploration and Extraction in Q4 2017 with an improved fiscal regime, pursuant to the constitutional amendments of December 20, 2013 reforming the Mexican Energy Industry. Upon closing of the Transaction, and with the expected migration to a Contract of Exploration and Extraction (“CEE”), the Amatitlán CEE will join the existing portfolio of four CEEs now held by Renaissance.

Renaissance is finalizing separate option agreements whereby Renaissance will have an exclusivity period to increase its participating interest in Petrolera up to 62.5%, by acquiring a further 12.5% from Marak and 25% from LUKOIL, upon migration of the Integrated Exploration and Production Contract to a CEE.

Renaissance expects the closing of the Transaction to occur in late January 2017.

“Renaissance, while playing the lead role in operations, is delighted to be working alongside LUKOIL in order to fully develop this high potential property,” stated Renaissance Chief Executive Officer Craig Steinke. “Amatitlán is a strong strategic fit for Renaissance as the leading independent on-shore oil field operator in Mexico with a solid technical team of global experts in shale resource development.”

***

GeoPark Appoints Dingman to Its Board of Directors

(GeoPark Limited, 4.Jan.2017) – GeoPark Limited announced appointment of Mr. Michael D. Dingman as a new member of the Board of Directors of the company, effective January 1, 2017.

Dingman is a respected and successful international investor, businessman and philanthropist, with more than 50 years of investment experience and an impressive track record of building companies and conglomerates in the U.S. and emerging markets. Dingman currently is Founder, President and CEO of the Shipston Group, an international private investment firm with diverse holdings around the globe.

In addition to a successful career on Wall Street as a partner of Burnham & Company, Dingman has been Chairman and Chief Executive or President of several major US-based industrial corporations, including Wheelabrator-Frye, Signal, AlliedSignal, the Henley Group and Fisher-Scientific. His energy investment experience includes working with the Liedtke family of Pennzoil at Pogo Producing Company and as an early investor of Sidanco, one of Russia’s largest oil companies, where he spearheaded the introduction of best management practices.

Dingman is a former director of Ford Motor Company (21 years), Time and then Time Warner (24 years), the Mellon Bank, Temple Industries, Temple-Inland, Continental Telephone and Teekay Shipping. He is the founder of the Michael D. Dingman Center for Entrepreneurship at the University of Maryland, a center that fosters entrepreneurship and provides mentoring services to emerging growth companies around the world. He is a benefactor and former trustee of the Boston Museum of Fine Arts and the John A. Hartford Foundation.

“I am pleased to be joining GeoPark’s Board of Directors and working with its management to support the Company’s exciting expansion. GeoPark has high quality assets, a strong team, a proven operational track record and a unique platform across Latin America, a region that is poised for outsized energy growth and development,” said Dingman.

***

PDVSA Says It Maintains Full Ownership of Citgo

(Energy Analytics Institute, Ian Silverman, 25.Dec.2016) – PDVSA maintains full ownership and control over its Houston-based subsidiary Citgo Petroleum Corporation.

PDVSA, in an official statement, also downplayed media versions and comments emitted by persons it claims are only interested in generating political instability in Venezuela based on speculation, rumors and biased information in an attempt to discredit the company.

In October, PDVSA used a 50.1 percent interest in Citgo as a guarantee for bond swap operations and the remaining 49.9 percent interest in its U.S.-based refining subsidiary as a guarantee to raise new financing, according to the statement.

Redd Intelligence, on November 30, uncovered a Delaware Uniform Commercial Code (UCC) filing and broke initial news regarding the filing against Citgo parent PDV Holding, Inc. that revealed Venezuela had secretly mortgaged its Citgo refineries in the U.S. to Russia’s state-controlled oil company Rosneft.

***

Maduro Seeks Price Strategy Closure

(Energy Analytics Institute, Piero Stewart, 23.Dec.2016) – Venezuela’s relentless search for a fair oil price continues as President Nicolas Maduro prepares to travel to various oil producing countries to finalize a strategy reached last month to stabilize oil prices, announced the official during his weekly radio and television program En Contacto con Maduro #75.

The US Federal Reserve’s raised interest rates with the objective to impact oil prices, said Maduro “It’s the obsession of Obama against Russia, Iran, Venezuela and OPEC,” he proclaimed.

***

YPFB, Gazprom to Evaluate Potential of 3 Areas

(Energy Analytics Institute, Jared Yamin, 17.Jun.2016) – YPFB and Gazprom signed an agreement for the evaluation of the hydrocarbon potential of three areas reserved for YPFB.

The agreement was signed by YPFB President Guillermo Acha and GP Exploration and Production S.L. legal representative Andrey Stepanovich Fick for the Vitiacua, La Ceiba and Madidi areas, reported the daily newspaper La Razón.

Gazprom, YPFB and Bolivia’s Hydrocarbon and Energy Ministry signed an Action Plan on February 18, 2016 in which the entities agreed to evaluate the hydrocarbon potential of areas reserved for YPFB. Gazprom E&P plans to invest an estimated $370 million to develop the areas in the case a discovery has commercial potential.

Vitiacua is located between Santa Cruz and Chuquisaca departments and covers an extension of 73,875 hectares. La Ceiba has an extension of 47,500 hectares and is located in Tarija department. Both areas are located in what are known as a traditional area. Madidi covers an extension of 690,000 hectares in a non-traditional area in the La Paz department.

***

Executive Profile: YPF New CEO Ricardo Darré

(Energy Analytics Institute, Jared Yamin, 6.Jun.2016) – Ricardo Darré will assume the position of CEO at YPF on July 1, 2016, taking over the helm from the interim CEO.

Darré graduated from the Buenos Aires Technology Institute (ITBA by its Spanish acronym) with a specialization in mechanical and industrial engineering, reported the daily newspaper La Nacion.

After finishing university he worked for Schlumberger in Angola, Zaire in the Neuquén basin.

In 1987, he began work with Total, where he has worked until now. With Total he worked in Tierra del Fuego, France and Thailand in various roles related to offshore exploration.

From 1998, he started to assume roles related to operations in Norway, Russia, the United Kingdom, France and the United States.

Currently, he continues to work as managing director of Exploration and Production with Total in Houston, Texas.

***

Rosneft to Partner with PDVSA in Mariscal Sucre

(Energy Analytics Institute, Piero Stewart, 1.Apr.2016) – Russia’s Rosneft OAO and PDVSA signed an agreement for joint development of production, treatment and the sale of natural gas from the Mariscal Sucre project offshore.

Rosneft and PDVSA will each hold a 50 percent interest in the venture which includes the fields Patao, Mejillones and potentially Rio Caribe, according to the Rosneft statement.

The three fields comprise part of the Mariscal Sucre natural gas project off the eastern coast of Venezuela. Another offshore field, Dragon, is also part of Mariscal Sucre but apparently not covered by the agreement. Activities at the Mariscal Sucre project are just 20 percent complete, announced PDVSA, as the Caracas-based company is known, in a statement on its website.

Rosneft has announced production from the three fields could potentially reach 25 million cubic meters (883 million cubic feet) per day, which could be shipped by pipeline or as liquefied natural gas, also known as LNG.

***

Rosneft Drills Record Well in Venezuela

(Rosneft, 8.Oct.2015) – Rosneft, as part of a PetroMiranda JV including PDVSA and Gazprom Neft, has drilled an unprecedented horizontal well GG1-14 at the Junin-6 block.

The well is unique for the shallow depth, only 1,140 feet or about 347 meters, of the reservoir interval and the length of horizontal section 4,920 ft or 1,500 meters. The total length of the well is 6,059 ft (some 1,847 meters).

The increasing of technological implementation in field development is a top priority for Rosneft’s longterm development strategy in the upstream area, which allows maintaining cost-efficient production at brownfields, and increasing production at greenfields.

This is the first of such wells to be drilled in Venezuela using conventional vertical drilling units. Complex directional work was performed to build up an angle with simultaneous azimuthal turn of well direction in the limited boundaries of the reservoir interval, thus solving the challenging task of strict following of geological targets, which is often a problem on such wells. This result was achieved due to the use of an advanced rotary steerable system (RSS), which had been introduced at the Junin-6 block with the support from Rosneft specialists.

According to the generally accepted system of ERD (Extended Reach Drilling) wells complexity evaluation, the GG1-14 is classified as the most difficult, with a Directional Difficulty Index (DDI) index of 6.63 and an ERD index of 4.44, which is a record for wells in Venezuela today. In order to meet geological objectives and place the well exactly in the reservoir interval, such projects require technologically competent planning and outstanding delivery in terms of construction.

Drilling of such shallow wells opens up new prospects for the development of hydrocarbon reserves in the Venezuelan Orinoco Heavy Oil Belt. According to the geological analysis made by Rosneft and PDVSA, significant oil reserves are located in shallow formations. The company intends to further expand the use of advanced solutions to drill more efficient wells and access significant hydrocarbon reserves.

Currently Rosneft and PDVSA cooperate in the realization of 5 JV in the upstream sphere in Venezuela:

— Project Carabobo-2 (Petrovictoria JV): PDVSA via CVP, WI 60%; Rosneft, WI 40%

— PetroMonagas JV: PDVSA via CVP, WI 83.3%; Rosneftm WI 16.7%

— Project Junin-6 (PetroMiranda JV): PDVSA via CVP, WI 60%; NOC, WI 40% (Rosneft, WI 80% and Gazprom Neft, WI 20%)

— Boqueron JV: PDVSA via CVP, WI 60%; Rosneft, WI 40%

— Petroperija JV: PDVSA via CVP, WI 60%; Rosneft, WI 40%.

Total geological oil resources of these projects are estimated at more than 20.5 bln t.

***

Life in a Venezuelan Oil Camp: Tío Conejo Meets Uncle Sam

(Harvard Review of Latin America, Miguel Tinker Salas, 14.Aug.2015) – I grew up in a Venezuelan oil camp. Ever since I can remember, I have heard both Spanish and English spoken all around me or conveyed through music or films. With my family, I ate traditional Venezuelan arepas, cachapas, carne mechada (shredded beef), fried plantain, and black beans, but invitations to dinners at friends’ houses often meant sampling curry goat, roti and thali, borscht, or U.S.- style barbecues.

In many ways, Caripito, the oil town where I was raised, embodied the changes occurring throughout Venezuela after the discovery of oil. In 1930, the Standard Oil Company of Venezuela built a port facility and began work on a refinery in this town, in the state of Monagas in eastern Venezuela, to process oil from fields in Quiriquire, Jusepin and Temblador. The promise of the oil attracted Venezuelans from throughout the country; many caripiteños (people of Caripito) had roots in the adjacent state of Sucre. In succeeding decades, people from Trinidad, Italy, Lebanon and even a handful of Russian exiles also made their way to Caripito. By 1939, Caripito had a population estimated at about 5,000 people, some 300 of whom were “white Americans.” In Caripito, as in most oil camps, to be white increasingly became synonymous with being a U.S. expatriate. By 1960, the total population had soared to a little over 20,000 people.

At an early age I became acutely aware of how different the oil camp experience was from the rest of Venezuela. After several years of living in the residential enclave, and seeking to avoid the demanding social expectations of the camp, my parents moved to Los Mangos, a neighborhood of Caripito. However, they also recognized the importance of straddling both worlds, and my mother dutifully drove me everyday to the company school and our family selectively participated in many camp activities.

After oil was discovered in 1914, Venezuelan production was concentrated in the interior of the country, where infrastructure and sanitary conditions had improved little since the 19th century. To ensure operations, foreign companies took charge of basic services including electricity, water, sewage, roads, housing, health services, schooling and a commissary. In these rural areas, the companies supplanted the state, and local communities became dependent on foreign enterprises for basic services.

Standard Oil Company of Venezuela (later  Creole Petroleum, a subsidiary of Standard Oil Company of New Jersey), and Shell Oil built residential camps to house their employees. In classic Jim Crow fashion, the companies created distinct areas for foreigners, typically white U.S. employees or “senior staff,” Venezuelan professionals or “junior” staff, and more modest housing for workers. The senior staff clubs included a pool, golf course, tennis and basketball courts, as well as bowling alleys while the workers club typically had a baseball field, a bolas criollas court (bocce), a bar and a dance floor. In spite of this hierarchy, by the 1950s the camps became symbols of U.S.-sponsored “modernity,” with orderly communities, higher salaries and access to a full range of services that sharply contrasted with conditions found in the local Venezuelan settlements.

The camps represented an improvised and largely transitory society made up of residents from different parts of the United States and Venezuela. The camps allowed Venezuelans to interact with people from other regions, races and countries. With few if any roots to the local community, workers were frequently transferred between camps, and the company promoted an esprit de corps among its employees that centered on an all-encompassing corporate culture. Company practices favored hiring family members, thus handing down values such as the “American way of life” from generation to generation.

Yet despite their artificial nature, the camps left an enduring legacy in Venezuelan culture and society. For the generations that worked in the oil industry, the camps reinforced their image as a privileged sector of Venezuelan society. Just as importantly, the camps were sites of cultural and social exchange, with the “American way of life” influencing everything from politics to values. Those employed in the industry expected the Venezuelan state to be the guardian of this distinctive lifestyle.  Many residents retained a collective nostalgia for the experience of the camps, overlooking the racial and social hierarchy that prevailed and the detachment that existed from Venezuelan society.

Caripito was typical of this oil town culture. The same ships that navigated the San Juan River to load oil also brought an array of U.S. fruits and canned products for sale in the camp commissary. I still recall the amazement of eating individually wrapped red Washington apples for the first time, or savoring crisp Mexican tortillas that came in vacuum-sealed metal cans.  Long before McDonalds appeared in Venezuela, the soda fountain at the company club regularly served the “all American meal” consisting of hamburgers, fries, and Coke. The Venezuelan diet quickly incorporated U.S. culinary preferences and tastes.

Like other children in the camps, I went to a bilingual company school that incorporated both the Venezuelan and U.S.-mandated curriculum. To a certain extent, exposure to a bicultural milieu shaped the consciousness and personal sensibilities of people like myself who inhabited the camps or its environs. Beyond simply the ability to speak both languages, the camps conveyed the importance of dealing with difference. This experience, however, was not shared equally, and it usually fell on the Venezuelans to learn English. Besides understanding English, familiarity with U.S. norms and customs proved essential for Venezuelans seeking to advance in the company. Interacting with foreigners became natural, but so did the imposition of a social racial hierarchy reinforced by U.S. expatriates at the top of the social order.

Festivities in oil camps highlighted the extent to which the camps represented self-contained enclaves of U.S. culture in the heart of Venezuela. Seldom if ever questioned, the pervasive influence of the U.S. oil industry made political and cultural ties with the north appear normal.  Celebrations of the 4th of July melded with Venezuelan independence on the 5th of July, becoming shared events that allowed politicians and company officials to make largely perfunctory claims of solidarity.  Expatriates, especially from Texas, saw the occasion as an opportunity to prepare Southwest-style barbecues where local beer flowed freely. Uncle Sam, the benevolent father figure that later morphed into a symbol of U.S. imperialism, mixed freely with Tío Conejo, a shrewd rabbit from a Venezuelan folk tale who regularly outwits his tiger nemesis, Tío Tigre.

Other festivities, however, diverged from Venezuelan traditions for which no parallel activity existed.  During Halloween, children dressed as Mickey Mouse, cowboys, ghosts and witches wandered throughout the senior camp asking for candy from befuddled Venezuelans.  Thanksgiving celebrations by the U.S. expatriate community, which often included public gatherings, and the consumption of frozen turkeys imported from the United States, remained an exclusively foreign activity. Venezuelans outside of the oil industry had no connection to these events. A traditional Christmas in Venezuela had always included building a Nativity scene, but in the oil camps, this practice was slowly displaced by ornament-laden imported pine trees. To add to the festive mood, the oil company typically decorated a nearby oil well or water tower with colored lights in the shape of a Christmas tree, with adjacent loudspeakers playing seasonal melodies.

Shortwave radios allowed expatriates—and some oil camp Venezuelans—to keep track of events in the United States and important news quickly spread. This was long before the Internet or cable television made speedy news a fact of life. I can recall seeing my U.S. teacher at the Cristóbal Mendoza grammar school break down in tears when the school loudspeaker announced the assassination of President John F. Kennedy.

Another way of connecting to U.S. culture was through movies shown at the camp club; Spanish subtitles allowed the Venezuelan audience to follow the action without paying second thought to the overt racism present in many of the U.S. Westerns that stereotyped Mexicans and Native Americans. Many of my U.S. classmates at the camp shared LP records that came with a coonskin cap, plastic musket, and powder horn and recounted the exploits of Davy Crocket starring Fess Parker.
Venezuelans who did not live in the camp or work in oil sought entertainment in the San Luis movie house in La Sabana across from the Creole Petroleum refinery. I straddled both worlds, and loved to watch Mexican cowboy (charros) films or the comedy of Cantinflas and Tin Tan in the old-fashioned movie house that featured a range of seating from common wooden benches to higher-priced chairs. Outside the theater, my friends and I looked forward to savoring corn empanadas de cazón (dried shark), a local favorite in eastern Venezuela, made by an Afro-Venezuelan woman.

The importance of oil to the U.S. economy and military thrust Venezuela into the midst of the Cold War. In 1962, Peace Corp volunteers were assigned to Caripito to teach English in secondary schools and promote U.S. values. In case their efforts failed, Green Beret advisors gathered intelligence and trained the Venezuelan National Guard. In 1962, guerrillas launched an offensive in eastern Venezuela. The U.S. military advisors assigned to Caripito asked my local Scout troop to report on “suspicious activity,” including spent cartridges we might find as we hiked through the rainforest. To assuage discontent, the town’s poor also received sacks of grain from the Alliance for Progress and from Caritas, a Catholic charity. As I accompanied my parents into some of the poorest neighborhoods of Caripito to distribute food packages it became evident that oil had not benefited all sectors of society equally. The camps highlighted the existence of two Venezuelas, one benefiting from oil, and one for which the promise of oil remained elusive.

Oil never fully transformed Venezuela, but rather it created the illusion of modernity in a country where high levels of inequality persisted.  The camps became a tangible symbol of this disparity. Local residents resented the inequities in lifestyle; businesses complained about closed markets; the government worried about divided loyalties; and the left viewed them as part of U.S. exploitation of Venezuela’s labor and resources. During the 1970s, popular protest singer Ali Primera wrote Perdóname Tío Juan (Forgive me Uncle John):

Having successfully created a trained and acculturated labor force imbued with company values, even the oil companies believed the camps had outlived their usefulness. Despite their eventual integration into local communities, the lived experiences of those employed in the industry coalesced with the perspectives of mid dle- and upper-classes that viewed oil as the guarantor of their status. Attempts to recapture the illusory sense of modernity experienced during this period inform many of the political divisions that characterize contemporary Venezuela.

Es que usted no se ha paseado
por un campo petrolero/ usted no ve que se llevan
lo que es de nuestra tierra/
y sólo nos van dejando
miseria y sudor de obrero/
y sólo nos van dejando/
miseria y sudor de obrero.

(You have not visited an oil camp, you do not see that they take what belongs to our land, and all they leave us is misery and the sweat of our worker’s and all they leave us is misery and the sweat of workers.) 

Miguel Tinker Salas is Professor of Latin American History and Chicano/a Latino/a Studies at Pomona College in Claremont, California. He is the author of Venezuela, What Everyone Needs to Know (Oxford University Press, 2015) and The Enduring Legacy: Oil, Culture and Society in Venezuela (Duke University Press, 2009), among other books.

***

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.

***

Venezuelan, Russian Oil Ministers Meet in Moscow

(Energy Analytics Institute, Jared Yamin, 26.Mar.2015) – Venezuela’s Oil Minister Asdrúbal Chávez met with his Russian counterpart Alexander Novak in Moscow.

The officials discussed bilateral projects and evaluate the progress of such developments. This is the fourth meeting between both officials since December 2014, reported the daily newspaper El Universal.

The ministers agreed that both countries should work together to address issues affecting the oil markets and which have pulled down oil prices.

***

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.

***

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.

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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.

***