Posts Tagged ‘PDVSA’


OPEC Reaching Comfortable Middle Age, Turns 50 Tomorrow With Oil at $75

OPEC Turns 50 Years Old
A ceremony for the new OPEC headquarters in Austria on March 17, 2010. Photographer: Vladimir Weiss/Bloomberg

The Organization of Petroleum Exporting Countries turns 50 years old tomorrow, having survived a tumultuous history of wars, embargoes and in-fighting. The world’s oldest and largest energy producer group is now enjoying prices close to the $75 a barrel level that its largest member Saudi Arabia considers “ideal.”
OPEC’s Timeline:
Sept. 14, 1960: The organization was born in Baghdad. The five founding members — Iran, Iraq, Kuwait, Saudi Arabia and Venezuela — created the group during a five-day meeting in the Iraqi capital, dedicated to “the coordination and unification of the petroleum policies of Member Countries and the determination of the best means of safeguarding their interests.”
Sept. 1, 1965: The group moved its headquarters from Geneva to Vienna, where its secretariat is now based. Between 1961 and 1971 the following six countries join: Qatar, Indonesia, Libya, the United Arab Emirates, Algeria and Nigeria.
October, 1973: The six-month Arab oil embargo pitted OPEC’s Arab members against the U.S. and Israel in a politically-motivated suspension of exports that pushed prices above $12 a barrel. The Paris-based International Energy Agency was created in 1974 by consumer nations, in response to the oil price shock. Ecuador and Gabon join OPEC in 1973 and 1975, respectively, only to leave the group later.
Dec. 20, 1975: Ilich Ramirez Sanchez, known as Carlos the Jackal, took more than 60 hostages during a raid on OPEC’s Vienna headquarters to protest against treatment of Palestinians by Israel.
October, 1978: Protests and strikes in OPEC member Iran against ruling Shah Reza Pahlavi, deposed the following year in a revolution, cut the country’s oil production within three months to a 27-year low.
Sept. 23, 1980: Iraq invaded Iran in the first war between OPEC members. During the eight-year conflict, with its attacks on oil-tankers in the Persian Gulf, group production plunged to a 20-year low.
October, 1981: OPEC members agreed to maintain oil prices within a range of $32 to $38 a barrel.
August, 1985: Saudi Arabia abandoned the system of “posting” oil prices to one in favor of letting the retail value of refined products such as gasoline determine the cost of crude.
1986: OPEC members switched to a new pricing system in which futures contracts traded on exchanges in New York and London effectively determined the cost of oil shipments.
Aug. 2, 1990: Iraq’s invasion of Kuwait marked the second war among OPEC members. Repelled the following year by a U.S.-led coalition, withdrawing Iraqi troops set fire to Kuwait’s oil wells.
Nov. 29, 1997: At a meeting in Jakarta, OPEC raised production quotas for the first time in four years as the Asian financial crisis unfolds, sending prices as low as $10 the following December. Analysts often refer to the event as “the Ghost of Jakarta.”
June 24, 1998: OPEC was assisted by non-members including Mexico, Russia and Norway in cutting production as demand collapsed, helping revive prices. The coordinated action followed initial talks between Saudi Arabia, Venezuela and Mexico.
March 19, 2003: Aircraft and missile attacks on Iraq begin, followed by a U.S. and U.K. troop invasion that subsequently topples Saddam Hussein’s government in Baghdad.
Jan. 1, 2007: Angola joined OPEC, its first new member since the 1970s. In November, Ecuador re-joined the organization following a 15-year absence.
Sept. 10, 2008: Indonesia exited the oil group after becoming a net importer, leaving the total number of members at 12.
Dec. 18, 2008: OPEC announced the largest production cut in its history as the financial crisis sent prices plunging from a record $147.27 a barrel in July, 2008, to near $30 by the year- end. Oil prices then climb 78 percent during 2009.
Sept. 14, 2010: In happy middle age, OPEC turns 50, with oil prices near $75 a barrel and above $70 a barrel for all but two weeks of this year.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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Exprinter Sells $626 Million of Notes Linked to Venezuela Debt
Bloomberg
September 03, 2010, 10:09 AM EDT
Sept. 3 (Bloomberg) — Exprinter International Bank NV in the Netherlands Antilles sold $626 million of structured notes linked to Venezuelan bonds, perceived by investors as the riskiest debt in the world.
The notes, issued in six parts, are tied to the performance of Venezuela government debt including bonds of state-owned oil company Petroleos de Venezuela, according to data compiled by Bloomberg. The biggest portion is a $271 million issue of 20- year notes issued at 66.5 percent of face value yielding 14.5 percent. That compares with 15.2 percent on the underlying government bonds.
Credit-linked notes pay interest based on the price of the entities they reference and are usually bought by investors who aren’t able to trade the underlying securities because of regulations, cost or other reasons. Exprinter, based on the Caribbean island of Curacao, issued nine structured notes linked to Venezuela this year, Bloomberg data show.
Robin Powers, a U.S.-based lawyer at Rimon Law representing Exprinter, said the bank declined to comment on the deals.
The cost of insuring Venezuelan debt for 10 years with credit-default swaps jumped 17 percent this year to 1,120 basis points, the highest in the world ahead of Greece and Argentina. The contracts indicate a 78.4 percent probability of default on 10-year Venezuelan debt, according to data provider CMA.
Credit-default swaps are used to bet on or hedge against a borrower’s ability to repay debt. An increase indicates deterioration in the perception of credit quality. A basis point on a contract protecting $10 million of debt is equivalent to $1,000 a year.
Venezuela is rated BB- by Standard & Poor’s, three levels below investment grade, and two steps lower at B2 by Moody’s Investors Service.
The country’s economy shrank for a fifth quarter in the three months to June 30, making it the only Latin American country still in recession. Gross domestic product shrank 1.9 percent in the second quarter, and 3.5 percent in the first half.
–Editors: Andrew Reierson, Paul Armstrong
To contact the reporter on this story: Sarfraz Thind in London at Sthind3@bloomberg.net
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net

Exprinter Sells $626 Million of Notes Linked to Venezuela Debt – BusinessWeek

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Venezuela’s oil exports down 16% in second quarter

Aug 25, 2010

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Aug. 25 — Venezuela’s oil exports dropped 16% in this year’s second quarter, largely due to increased use of domestic fuels for electric power, according to a quarterly report by the central bank.

The report showed the country’s gross domestic product down by 1.9%, led by a 2% drop in oil sector GDP.

“The behavior of this activity in the quarter is mainly due to lower crude output, which was offset by the growth in refined products to satisfy higher demand in the internal market related to the use of thermoelectric plants for energy generation,” the bank said.

The bank’s report coincided with the latest statistics from the Organization of Petroleum Exporting Countries, which said oil exports brought Venezuela revenue of around $54.2 billion in 2009, down nearly 40% from $89.1 billion in 2008.

OPEC blamed the fall in international oil prices across global markets for the country’s drop in revenue, with Venezuela’s basket price for 2009 averaging $57.08/bbl, down from $86.49/bbl in 2008.

However, Venezuela’s export revenues could decline as the country plans to take advantage of its hefty reserves of oil and gas to increase its use of thermoelectric power over hydropower during the next 5 years.

Venezuela now relies on hydropower for 80% of its electricity supply, while thermoelectric plants only supply 20%. Caracas wants to bring that ratio to 50-50 by 2015, according to official media.

Electricity shortage
The Agencia Venezolana de Noticias (AVN) reported the balance is needed as Venezuela faced shortages of electricity earlier this year due to a drought that reduced the power generation at main hydropower plants.

AVN last week reported water levels at the country’s main hydroelectric dam, Guri, are 3.04 m below optimum levels. The Guri plant supplies 70% of Venezuela’s electricity, but a drought brought water levels so low that the government was forced to introduce rationing across the country.

According to AVN, Venezuela aims to install 15,000 Mw of new electricity capacity over the next 5 years, of which 12,000 Mw would be generated by thermoelectric plants, while 3,000 Mw would come from new hydropower plants.

But that plan could create problems of its own. While more thermoelectric power could insulate Venezuela from electricity shortages due to drought, the use of more oil and gas could substantially reduce the country’s exports, its main source of foreign exchange.

In fact, Venezuela depends on oil for more than 90% of its export income, and a continued drop in revenues could affect its ability to meet spending and debt obligations.

PDVSA continues drilling
Meanwhile, Venezuela’s state-owned Petroleos de Venezuela SA this week said it began drilling in the Jusepin oil field with one of the rigs seized from Tulsa-based Helmerich & Payne Inc. earlier this year (OGJ Newsletter, July 12, 2010).

According to Venezuela’s Oil Minister Rafael Ramirez, who also serves as president of PDVSA, costs at the project have fallen more than 50% to $20,000/day from $43,000/day when H&P ran it. PDVSA said the well drilled by the nationalized rig should produce 2,000 b/d of oil.

Contact Eric Watkins at hippalus@yahoo.com

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Oil & Gas Journal Topic and Resource Categories:Venezuela's oil exports down 16% in second quarter – Oil & Gas Journal

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How Chávez tries to hide the truth about his government
Washington Post Editorial
Friday, August 13, 2010; A18

ONE OF the principal goals of Venezuelan President Hugo Chávez’s foreign policy is preventing governments or international organizations from telling the truth about him. Over the past couple of years, captured documents and other evidence have established beyond any reasonable doubt that Mr. Chávez’s regime has provided haven and material support to the FARC movement in neighboring Colombia — a group that is known for massacres of civilians, hostage taking and drug trafficking, and that has been designated as a terrorist organization by the U.S. State Department and the European Union. That places Mr. Chávez in violation of U.N. Security Council resolutions and, at least in theory, exposes him to U.S. and international sanctions.
Luckily for Mr. Chávez, the Obama administration and other Security Council members have shown little interest in recognizing what, in terms of state sponsorship of terrorism, amounts to a smoking gun. But discussion and debate about the evidence — such as Colombia’s recent presentation to a meeting of the Organization of American States — makes this ostrich act difficult to continue. So Mr. Chávez has dedicated himself to bullying and intimidating those who dare to speak publicly about what everyone in the Western Hemisphere knows to be true.
His most conspicuous recent target was former Colombian president Álvaro Uribe, who ordered the report to the OAS shortly before leaving office. Mr. Chávez’s response to the maps, photographs, videos and other documentary evidence laid out by Colombia’s ambassador was to immediately break diplomatic relations and to threaten war. When Mr. Uribe’s successor, Juan Manuel Santos, signaled that he was ready to address the FARC problem through private discussions, the Venezuelan caudillo instantly reversed himself. On Tuesday he traveled to Colombia to meet Mr. Santos and agreed to restore relations.
Mr. Chávez also focused his attention on Larry Leon Palmer, the veteran diplomat nominated by the Obama administration as its next ambassador to Venezuela. Some Republicans question whether the United States should retain ambassadorial relations with Mr. Chávez’s government, and the nominee received a searching set of “questions for the record” from the Senate Foreign Relations Committee’s senior GOP member, Richard G. Lugar (Ind.).
To his credit and that of the State Department, Mr. Palmer answered truthfully. He said that he was “keenly aware of the clear ties between members of the Venezuelan government and Colombian guerrillas.” He said that he was “concerned” that two individuals designated as international drug traffickers by the Treasury Department “are high-ranking officials of the Venezuelan government.” He reported “growing Cuban-Venezuelan cooperation in the fields of intelligence services and the military” and “morale and equipment problems” in the Venezuelan army.
Mr. Chávez once again was quick to respond. On his weekly television show on Sunday, he announced that Mr. Palmer would not be allowed to take up his post in Caracas because “he has disqualified himself by breaking all the rules of diplomacy, by prejudging us.” He said that the Obama administration would have to “look for another candidate.” The State Department responded that it was sticking with Mr. Palmer. It should. If ignoring the facts about Mr. Chávez is a requirement for sending an ambassador to Caracas, then it would be better not to have one.

How Chávez tries to hide the truth about his government


A lake of leaks reflects problems that stretch to the Orinoco

As the world watched BP battle with the devastating effects of the oil spill in the Gulf of Mexico, another problem with leaking crude nearby has managed to escape much attention.

Venezuela’s state oil company, Petróleos de Venezuela (PDVSA), has been trying to play down a chronic problem of leakages from thousands of miles of pipelines that criss-cross Lake Maracaibo, a large brackish lake connected to the Caribbean.

Critics argue that the extensive oil slicks that have appeared on the lake in recent months are a direct result of PDVSA’s negligence since the expropriation last year of 76 oil service companies that worked on the lake. Mismanagement, a problem that has tainted the economic performance of President Hugo Chávez’s government as a whole, has had a disastrous impact on Venezuela’s oil output over the last few years and is likely to hobble production for years to come.

The US Energy Information Administration estimates that Venezuela’s crude oil production averaged 2.2m barrels a day in 2009, about 190,000 b/d lower than in 2008 and down from 3.2m b/d in 1997, before Mr Chávez came to power.

PDVSA, which disputes those numbers, has made a concerted drive to attract foreign investment into the oil-rich Orinoco Belt in order to boost production. In February it signed contracts with foreign oil companies for projects that could add 2.1m b/d to output and bring some $80bn (£51bn, €61bn) in investment from Chinese and Russian companies as well as majors such as Italy’s ENI, Chevron of the US and Spain’s Repsol.

Although this represented a vote of confidence in Venezuela just three years after a wave of nationalisations in the Orinoco, experts estimate that it could take at least three or four years for sagging output to recover. Efficient co-ordination of the projects, technical requirements and capital commitments are all barriers.

One of the pitfalls is whether PDVSA, which is keeping a 60 per cent stake in the projects, allows its minority partners a fair degree of operational control. Given its own patchy management record, experts argue that PDVSA must allow partners to become more integral players in its joint ventures. PDVSA’s partners are not involved in the sale of their output, for which PDVSA instead compensates them at the end of each year. Companies privately complain that PDVSA is not paying them enough to cover running costs and reinvest in expanding production.

With oil revenues providing about half of government expenditure, Mr Chávez may still face several lean years ahead.

FT.com

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venezuela in the news this week… we’ll see what comes of it…

this is the latest one from the Financial Times.
(Note: Highlights in bold and italics, MasterBlog)

Venezuela: Bolivarian bravado

By John Paul Rathbone and Benedict Mander

Published: August 5 2010 23:20 | Last updated: August 5 2010 23:20

Hugo Chávez

The giant Pepsi globe that once loomed above Plaza Venezuela in the traffic-clogged heart of Caracas had long been a landmark of the South American capital’s skyline. Now it is gone, dismantled piece by piece in June.

Much like the demolition of a statue of Christopher Columbus in the same square six years earlier, its removal was a crude symbol of President Hugo Chávez’s self-appointed role as the region’s anti-US, anti-capitalist and anti-imperialist standard-bearer.

It was also a reminder of faded hopes that relations would improve either with the US under President Barack Obama, following the mutual antagonism of the George W. Bush era; or with America’s closest ally in the region, neighbouring Colombia. If anything, Mr Chávez has raised the volume of his nationalist-Marxist rhetoric as his problems have grown both at home and abroad.

In July, when Colombian leaders again accused Venezuela of sheltering Marxist guerrillas intent on destabilising their country, and were confident enough of their case to present it to the Organization of American States, Mr Chávez promptly called it an act of US-inspired “aggression” and broke off relations with Bogotá. Havana, which receives subsidised Venezuelan oil in return for medical services, lent Caracas rhetorical support: “We strive for peace and harmony,” said President Raúl Castro. “But … let no one have the least doubt on which side Cuba will stand.’’

Meanwhile, with the country in recession, red-hued government propaganda in multiple media hails Mr Chávez’s “Bolivarian revolution”. The president has taken to expounding how it is “bad to be rich” – though one graffito snipes back from a grimy Caracas wall: “If it’s bad to be rich, it’s worse to be poor.”

All this might otherwise be ignored as the bitter internal politics of a volatile tropical republic were it not for Venezuela’s strategic importance and fears that Mr Chávez might consolidate his grip on power at legislative elections next month.

“Elections are of great importance for Chávez. They give him legitimacy both at home and abroad – they give him an air of respectability,” says Teodoro Petkoff, a garrulous former leftist guerrilla who now edits the Caracas-based newspaper Tal Cual.

A clear victory for Mr Chávez’s United Socialist party of Venezuela at the September 26 polls would be likely to herald further radicalisation of his socialist project, ease the way for his election to a third six-year term in 2012 and thus boost worries elsewhere about regional tensions.

Watching the results most closely will be neighbours in the Andes – a regional tinderbox, given the prevalence of clashing ideologies, well-equipped troops and armed guerrilla and paramilitary groups – and Cuba, as Venezuela’s closest ideological ally.

A further geopolitical consideration stems from Venezuela’s role as transshipment point for what is said to be more than half the cocaine shipped across the Atlantic to Europe every year. The country’s trafficking situation is deteriorating, the UN warns in its latest World Drugs Report.

Also watching the election closely will be those energy importers who ogle the country’s vast crude oil reserves, the largest outside the Middle East. As those reserves are easily accessible and use proved technologies, BP’s deep-water oil spill in the Gulf of Mexico has heightened their strategic value still further. That is as true for the US, which remains Venezuela’s biggest single oil market, as for rising energy users such as China, which recently curried favour as well as securing future oil supplies with a $20bn soft loan to Caracas.

With term limits abolished following a referendum last year, Mr Chávez has frequently expressed a wish to remain in office until 2021 – the 200th anniversary of independence from Spain – to see through his revolution. Yet, after 11 years in power, the extent to which he has succeeded in instilling in voters a mindset compatible with what he calls “21st century socialism” is debatable. (For example, he has condemned a widespread fondness for whiskey and Hummers.)

The government has therefore been working to boost its chances of maintaining in September the two-thirds majority necessary to push legislation through the National Assembly.

Changes to the electoral system this year mean rural areas will return more deputies than before, hindering the metropolitan-based opposition. State-owned media can meanwhile drench the country in pro-government propaganda. (While newspapers such as Mr Petkoff’s are highly critical, private sector broadcasters have been largely cowed into submission.)

Most unsettling of all is the possibility that Mr Chávez’s party might lose the vote yet still maintain effective control. In 2008, for example, the president res­ponded to the election of an opposition candidate as Caracas mayor by inventing a more senior post and ap­pointing a candidate of his choosing.

Another possibility, much discussed in the capital, is that he could rule by decree during the 100 days between the elections and the new deputies taking up their seats, changing irrevocably the legal landscape to his liking. A recent 40 per cent pay rise ensures the army’s loyalty.

“Chávez will not leave power voluntarily,” says Diego Arria, a leading opposition figure and former governor of Caracas. “This is a president whose motto is: ‘fatherland, socialism or death’. When they say death they mean us, not themselves.”

Such drastic outcomes may never come to pass. Despite the recession, crumbling public services, a series of damaging scandals and rampant violent crime, Mr Chávez still commands the support of about two in every five Venezuelans – roughly the same ap­proval rating as Mr Obama in the US.

In large part, this is due to his emotional bond with the poor, who in 2008 made up 28 per cent of the population, according to the UN. “Even with hunger and unemployment, I’m sticking with Chávez,” runs one refrain popular in the capital’s slums.

Gregory Wilpert, editor of pro-Chávez website Venezuelanalysis.com, emphasises that many have benefited from the government-run social programmes. “The process of devolving local governance to communities via the communal councils and other forms of participation also gives many people a real feeling of being a part of the political process,” he adds. Critics say such councils usurp the power of elected municipal governments.

. . .

Either way, to gain a decisive victory, Mr Chávez will need to win over undecided voters – the ni-nis, or neither-nors – who account for about one in three of the electorate, according to polls.

In 2006, when he was re-elected at the peak of both his popularity and the oil price boom, that problem was partly solved by throwing money around. The trouble for “chavistas” today is that there is less to spend. This year, for example, while the rest of the region is expected to grow by 5.2 per cent, Venezuela’s economy is forecast to shrink by 3 per cent, the UN Economic Commission for Latin America estimates. Inflation, meanwhile, is running at about 30 per cent.

Paradoxically, because oil prices are hovering around $80 a barrel, a healthy level historically, government finances are not in perilous shape. Rather, the main cause of the continuing recession is mismanagement – the biggest rock on which Mr Chávez’s revolution has floundered.

PDVSA, the state-owned oil company that is the dynamo of the economy, has been leached to fund social projects with cash that otherwise would have been used for much-needed investment. The non-oil economy has been hobbled too.

Capital flight has been propelled by the nationalisation drive Mr Chávez has launched in a range of sectors, including energy, finance and telecommunications. Attempts to prevent such flight have made matters worse. The rationing of foreign exchange has made importing harder, fuelling scarcity, inflation and a flourishing black market – dollars sell for about four times the cheapest official rate.

The multinationals that once made the country their regional base, attracted by its relative stability and large internal market, have upped sticks. A web of regulations has tightened around those private companies that have remained – most publicly at Polar, the food and beverage company that is an emblem of Venezuelan popular culture, which Mr Chávez has threatened to nationalise against union wishes. Private investment has slumped amid the deteriorating business climate. As for nationalised companies, the state has been unable to pick up the slack.

Since nationalisation in 2008, production in the cement sector has fallen 20 per cent, and in the steel sector by as much as 80 per cent, according to Caracas-based consultancy Ecoanalítica. Most embarrassing of all were the 100,000 tonnes of food found recently rotting in the warehouses of state-run food distribution network PDVAL. Mr Chávez blamed “US-backed fascist oligarchs”.

The opposition has failed to capitalise on such problems. One reason is that much of the electorate remains distrustful following early at­tempts to unseat the president including a botched coup in 2002 and a national strike that paralysed the economy.

. A final factor is that many of its candidates are drawn from two discredited parties, Democratic Action and the Social Christians, which once dominated the country’s politics.

Dissidents from Mr Chávez’s party and former personal allies pose a potential threat. But some of the most prominent opponents have been hounded out of the country or imprisoned. General Raúl Baduel, a former close friend who called the president a “traitor” has been controversially jailed for corruption.

. . .

All this has devalued Mr Chávez’s reputation abroad. He still enjoys occasional celebrity support, from Argentine footballer Diego Maradona and Hollywood film producer Oliver Stone, for example. Oil also ensures Caracas secures the odd multibillion-dollar deal – most notably an arms agreement with Moscow, after the US stopped selling weapons to Venezuela in 2006. Caracas and Havana remain locked in a symbiotic embrace. But the president’s vision retains little credence with the region’s leftwing, and many of the area’s leaders and diplomats are embarrassed by his virulent rhetoric and off-colour jokes.

Mr Chávez has thus failed to bring closer to reality the Latin American union he espouses in evocations of his 19th century independence hero, Simón Bolívar. Sometimes, as when he closed the frontier with Colombia, he has worked against it.

Yet his command of Venezuela – its economy, army and institutions, including the judiciary – has never been stronger. There is therefore every chance that Mr Chávez, whose political style tends towards confrontation rather than negotiation, will endure. ¡Venceremos! – “we will conquer” – as the former tank commander is fond of saying.

venezuela

see related post from the same FT piece:

FT.com / Comment / Analysis – Venezuela: Bolivarian bravado

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