Even with higher oil prices, Pdvsa's debt is up 40%

Venezuelan oil prices hiked in 2011. Nevertheless, this does not mean much higher oil revenues due to the performance of oil exports.

The numbers in the balance of payments provided by the Central Bank of Venezuela (BCV) reveal that with oil prices at USD 101.04, oil revenues amounted to USD 89.9 billion, with the volume of exports being of 2.51 million barrels per day, as reported by state-run oil holding Petróleos de Venezuela (Pdvsa) as of June 30, 2011.

Nonetheless, a comparison of these numbers with the results of the balance of payments in 2008 found that while oil prices heightened 17% and exports recoiled at 13%, Venezuela's oil revenues varied as little as 0.4% in 2008-2011.

Four fiscal years ago, oil revenues hit USD 89.03 billion, with exports at 2.89 million barrels (based on the Pdvsa's report through December 31, 2008) and oil basket prices at USD 86.49 on average.

The reasons

Fewer exports are partly due to a production cut agreed by the Organization of Petroleum Exporting Countries (OPEC), involving an 8.5% variation from 3.26 million barrels per day (bpd) in 2008, to 2.98 million bpd as of June 30, 2011.

Another explanation for the performance of Pdvsa's cash flow is the trade and political relations of the state-owned oil company turned into a tool of the foreign policy of President Hugo Chávez's Administration. This has meant sales of crude oil in exchange for future payment (under agreements, such as those reached with Cuba or Petrocaribe), or the delivery of oil barrels to China as payment for the loans granted to the Venezuelan State.

Such loans, managed through the Chinese Fund, have implied a total financial engineering for Pdvsa due to their impact on the corporate finances.

A memorandum account from the Executive Office prepared on April 2011 explained that the financial facility of the Chinese Fund in 2011 had "a high financial impact on Pdvsa." In the face of it, the oil holding requested the Venezuelan president access to USD 1.3 billion deposited in the Venezuelan Economic and Social Development Bank (Bandes) and accounting for the proceeds of shipments to China. Such funds were used to cover "the contributions on account of royalties and taxes as well as production and refining costs of the shipped volumes of crude oil."

For the different tranches of the loans undertaken with China, Pdvsa nowadays ships 430,000 bpd of crude oil and byproducts to the Asian country. The situation grew harder for Pdvsa in January 2010, when the Executive Office ordered it, besides paying the loans with crude oil, to give royalties to the Treasury for such barrels, even in the absence of any income on that matter.

As regards the agreements with Cuba or Petrocaribe, Venezuela supplies crude oil and byproducts. A portion of the invoice is paid within 90 days and another portion is funded up to 25 years.

Ending 2011, Pdvsa reported that USD 14.3 billion has been traded under Petrocaribe since 2005 thanks to the sales of crude oil and byproducts in preferential conditions. Similar terms are handled with regard to the shipments of crude oil ranging from 70,000 to 100,000 bpd.

Nevertheless, the BCV reported that through the third quarter of 2011, the foreign debt on this account spiked to USD 6.79 billion.

Furthermore, Venezuelan oil exports have moved back faster than oil drilling. This mirrors an expanding domestic market of fuel and byproducts with significantly subsidized prices frozen for more than a decade. It is also part of the troubles with oil income.

Because of such commitments related to sales and the government growing requirements concerning social welfare programs, the oil company has had to seek funding by different means. And while the average price of the oil barrel was over USD 100, the industry's debt shot up 40% to USD 34.8 billion.

Translated by Conchita Delgado