"Issuance of bonds regulates US dollars through Sitme"

Rafael Ramírez, the Venezuelan Minister of Petroleum and Mining and president of Venezuelan state-run oil company Pdvsa, claimed that USD 100 per oil barrel is a "comfortable and fair" price, and added that "Venezuela must maximize profits."

Ramírez underscored that Pdvsa has relied on the international and national banking systems to develop its investment programs, and stated that additional debt issue has not been ruled out.  

-Newly approved Foreign Exchange Agreement No. 20 allows government agencies to use 5% of the money they hold in foreign accounts to purchase bonds. Have such operations been duly coordinated with the Central Bank of Venezuela (BCV)?

-All of our operations, even those involving debt issuance, are coordinated with the BCV. It has been said that we have contracted debt at a high interest rate, but we have not. We are working on the necessary conditions to keep the US dollar under control through the Transaction System for Foreign Currency Denominated Securities (Sitme).

-So further issuance of public debt to continue meeting obligations with BCV is expected?

It is likely to happen. We are constantly working on our financial architecture to meet our investment plan. So, I do not rule out such a possibility.

-Why has financial assistance been requested from BCV while at the same time loans from financial institutions such as Banco de Venezuela and Banco del Tesoro have been requested?

-Why not?

-Considering that the oil barrel is USD 100, there should be no need to resort to banks...

-If we do not resort to national banks, we will resort to foreign banks anyway. We have an investment plan involving USD 11 billion annually, and no one develops a plan of such magnitude by using its cash flow. We resort to foreign banks and intend to tap domestic savings. Pdvsa's bonds are the best investment for local banks, including the Central Bank of Venezuela.

We are working with the Bank Association to take in funds for the development of oil projects. That will be the best business for banks.

-Is there any connection between the purchase of Pdvsa bonds by Uruguayan state oil company Ancap, and Foreign Exchange Agreement No. 20?

-No, talks with Ancap were under way before. Ancap has a debt dating back to 15 years. If they pay their debt at this moment, it would be favorable. We have received in advance USD 820 million in bonds that may be used for our operations. Ancap purchases the bonds and the funds are deposited into the Social and Economic Development Bank (Bandes). Such bonds can be used to pay suppliers; the bonds are in high demand.

-What were Pdvsa's results by the first half of the year?

-The results have not been released yet and I do not know them by heart. However, oil prices play a major role in our performance. We were quite concerned about oil prices early this year. We adopted a firm position at OPEC both in December and in our last meeting, where we noted that oil prices had sharply declined (34%). Consequently, a 30 million bpd output ceiling was commonly agreed. Fortunately, oil prices have rebounded to a level that is comfortable for us, at some USD 100 per barrel. Oil price averages USD 110 so far this year, that is to say USD 5 more than the average price recorded in 2011. If this trend goes on, the industry may achieve similar results as those obtained last year, that is to say contributions of roughly USD 20 billion to the Treasury, and USD 14 billion to the National Development Fund (Fonden), while operating profits at USD 32 billion, which allowed us to make contributions to social development programs.

-Why is it fair USD 100 per oil barrel? Is USD 80 per barrel not high enough?

- OPEC member countries have worked very hard to set a fair value for our natural resources. Oil depletion in any country has a profound economic effect. That was the case in Indonesia; it is also the case in Mexico with the decline of oilfield Cantarell, and in the North Sea. We need fair prices so that we can use oil revenues for the development of our countries.

We understand that oil importing countries are unable to pay USD 140 or USD 200 per barrel. That is why we believe that the USD 100 barrier may be used as the baseline to reach further agreements. We may agree on a USD 90 to USD 110 price band per barrel that may lead to an average of USD 100 per barrel, a fair price.

-When you say USD 100 per barrel is fair, does it mean the economic model depends on Pdvsa? A company that finances housing and social programs...

-The model does not depend on Pdvsa. It depends on oil revenues, instead. Venezuelan economy needs to cash in on oil revenues as much as possible. By means of legal reforms, we have received USD 381 billion since 1999.

-How much oil is sent to China and how much money has been deposited in your collection accounts?

-Allow me to use the opportunity to comment on a political issue. We have been accused by the right-wing presidential candidate of giving oil away. If we did that, we would be breaking the law. None of the agreements the Republic and Pdvsa have entered into provides for oil to be given away. Fair prices are provided for under all supply agreements. During the Oil Opening, oil was given away as it was undervalued. When President Chávez took office, he found out that oil companies ExxonMobil y ConocoPhillips paid just 1% in royalties for operations in the Orinoco Oil Belt. Oil was given away to Exxon as Venezuela did not receive what it should have received in royalties and taxes.

Within the framework of Petrocaribe, oil is sold at the international price, but a mechanism has been agreed to allow small countries such as Dominica whose daily consumption amounts to 1,500 barrels , to pay for oil with goods. Many things are taken into account, from the price of black beans in kilos to the price of a small cow. We check their value because they must match the value of oil shipment. For instance, Uruguay has paid USD 3.2 billion from a total amount of USD 4 billion, and we recently entered into an agreement (with Ancap) for USD 820 million. Why not selling oil to China? It is the world's second largest economy. Everyone wants China as a client. We export 640,000 bpd of oil to China. Together we are going to pump 1 million bpd at the Orinoco Oil Belt. With CNPC we are shipping oil in ships holding 2 million barrels, which lowers transport price. Further, we are building a refinery in China that will be able to process our heavy oil.   

-From the shipments to China, how many barrels are used to repay Chinese financing?

- We feel comfortable with this mechanism. The Chinese fund implies a number of barrels, but considering that oil is sold at market price, fewer barrels are eventually used to make payment to the joint Heavy Fund and Large Volume Fund. Oil price has tripled the oil price baseline agreed. The money, which is kept in China and is a surplus once we receive it, is sent to Venezuela every quarter from Bandes.

Translated by Jhean Cabrera