CARACAS, Thursday September 06, 2012 | Update

Two different approaches of Venezuela's oil industry

Presidential candidates Chávez y Capriles Radonski agree on the strategic valuation of the Orinoco Oil Belt. Chávez insists that state-run oil company Petróleos de Venezuela (Pdvsa) must follow political guidelines. The private sector will support Pdvsa in some activities

Presidential candidates Hugo Chávez and Henrique Capriles Radonski agree on considering the Orinoco Oil Belt the springboard for the country’s economic development (File photo)
Thursday September 06, 2012  11:15 AM
Venezuela will remain as an oil country in the next decade.  With 297 billion barrels of recoverable oil in the Venezuelan subsoil (the largest crude oil reserves in the world) and a current extraction volume of three million barrels per day, Venezuela is meant to exploit oil for 270 years (without taking into account the strategic value of oil faced with clean energies).  After almost 100 years of oil production, crude oil is still the main Venezuelan export product and it provides 94 percent of the country's currencies.

The government platforms of presidential hopefuls Hugo Chávez and Henrique Capriles Radonski agree on considering the Orinoco Oil Belt the springboard for the country's economic development.

Nonetheless, the next government is to overcome great challenges.  Currently, state-run oil company Petróleos de Venezuela (Pdvsa) is carrying out the Oil Sowing Plan.  With an investment of USD 226 billion, this plan projects that for 2018 Pdvsa will have a production of 5.8 million barrels per day (bpd), a refining installed capacity of 4.1 million bpd and a crude and by products export volume of 4.8 million bpd.  As for natural gas, Pdvsa is expecting to extract 11.83 billion cubic feet per day and produce 296,000 bpd of natural gas liquids.

Currently, Venezuela's oil industry is also involved in other areas, such as social missions, food production, mining, and house building.  It also funds Guayana basic industries, which have experienced losses.  Despite criticism of the heavy financial and operating burden over the oil industry shoulders, President Hugo Chávez aims at the consolidation of these aids because, from his point of view, Pdvsa revenues should "benefit the people."
Pdvsa's level of indebtedness also causes concern, since it amounts to USD 35 billion after a vertiginous increase of its financial commitments since year 2007.

Pdvsa is the cornerstone of the Chavezism economic and political project.  After the 2002 2003 general strike and under the administration of Rafael Ramírez, Minister of Petroleum and Mining and President of Pdvsa, a statist and political vision has been consolidated within the state-run oil holding.  Public sector participation has been allowed, but in stringent conditions.

On the other hand, the government platform of the opposition Unified Democratic Panel (MUD) candidate Henrique Capriles Radonski focuses on two key elements: further investment in Pdvsa in order to increase the production capacity, and reduction of the Executive Office discretional ability to allocate oil revenues, which hampers regional decentralization.

The MUD government platform notes: "in the past few years, economic instability has increased given an arbitrary and unclear use of the growing oil revenues."  An example of this blurred management is the Chinese fund.  Few explanations have been offered regarding the management of this billionaire fund in foreign currency.  Leaked reports from the senior government reveal the harmful effects of this fund on Pdvsa's finances.

The MUD government platform highlights as a major priority "to increase the crude production capacity in the country, to use natural gas reserves in a productive way, to reconsider the design of refining complexes, and to foster the field of petrochemicals."  Another priority for the MUD is to "restructure Pdvsa as part of the hydrocarbons industry, to increase private participation in the oil industry and establish a regulatory body independent from the Executive Office," against the backdrop of a revision of the institutional framework for the development of the hydrocarbons industry.

Translated by Andreína Trujillo
The end of a cycle

Hundreds of thousands of demonstrators took to the streets of Brazil on March 13 to demand the ouster of embattled President Dilma Rousseff, carrying banners expressing anger at bribery scandals and economic woes. A banner read "We don't want a new Venezuela in Brazil."

fotter Estampas
fotter Estampas