By Juan Carlos Sosa Azpúrua | PETROLEOYV.COM
04.07.05 | PETROCARIBE makes a demented mockery of the Venezuelan petroleum industry's image. This South American country insists upon developing a peculiar kind of business that consists of moving away from its normal markets; weakening its own production capacity; turning vital assets such as CITGO into sculpture studio models for artists to sculpt a bad reputation; writing its contractual obligations in invisible ink; using its ankle to kick aside companies that produce more than a million B/D in Venezuela; speculating irresponsibly in a market where if an Arab coughs West Texas Intermediate goes up by a dollar and, if that were not enough, publicly proposing the development of nuclear reactors and the massive purchase of bicycles into a country that, including the contents of the Orinoco Oil Belt, has the highest volume of petroleum reserves on the planet.
Faced with this, it is fitting to put things in context a bit. The world demand is for a little over 84 million barrels per day and by the end of the year it will have a demand higher than 86 million B/D. The U.S. GDP will maintain its growth rate of 3% and China will do its own thing by exceeding 8%. This economic pulse will be felt in the world's veins, favoring India, all of Europe and the Far East, especially Japan and Southeast Asia.
Presently, OPEC produces a little over 30 million B/D and Venezuela hardly even reaches 2.5 million. New investment opportunities have opened up in Nigeria, Namibia, Ivory Coast, Morocco, Sahara, Senegal, Guinea-Bissau, Liberia and Ghana. A new pipeline has just been dedicated that will allow more than a million barrels per day to be transported from the Caspian Sea to the Mediterranean. Canada is drawing ever so much interest in its bituminous sands and Saudi Arabia has embarked on a $50 billion investment plan, indicating important activities in the Abu Hadriyah, Fadhili, Khursaniyah (AFK) and Khurais that will increase its production to 12.5 million B/D within about three years. The Chinese (CNOOC) are offering $18.5 billion for UNOCAL, a company coveted by Chevron and with basic operations in the U.S. and Asia. For its part, the U.S. Senate has just passed new legislation that seeks to reduce its dependence on oil by developing new sources of energy.
Among measures being considered are fiscal incentives in the amount of $18 billion for the development of renewable or sustainable sources of energy and tax reductions on the purchase of more energy efficient machinery, such as hybrid vehicles. Policies have been established that will reduce oil consumption by one million barrels daily by the year 2025.
Likewise, a few days ago a consortium made up of European Union, the United States, South Korea, France and Japan will build a new type of nuclear reactor that will reproduce the way in which the sun produces energy; it will be like making a star on earth. From this they expect to obtain non-polluting and inexhaustible energy. The thermonuclear reactor is based upon nuclear fusion, the generation of energy like that produced by stars such as the sun, but without noxiously affecting the Environment, a problem that existing nuclear plants have.
We are able to summarize the scenario based on these facts:
1) World economic growth will continue and ever more oil is needed.
2) Producing countries such as Saudi Arabia are increasing their potential and becoming more trustworthy.
3) New oil areas are opening up and competition for investing there is increasing.
4) Oil companies are purchasing assets for tapping these opportunities and are tightening their circles of influence in order to protect their captive markets.
5) Legislative and technological advances aim to replace, during this century, petroleum as the primary energy source.
Having understood the context, it is obvious that Venezuela has an energy role to fulfill and quickly.
Its priorities ought to be:
1) Strengthening its presence in the U.S., a country that imports more than 12 million B/D and consumes 21 million B/D: In order to accomplish this, there ought to be: a) Signing of bilateral agreements between the Governments of both nations that would make Venezuela the primary supplier for the aforementioned market, the largest in the world; b) Increasing the volume of crude being refined on U.S. territory; c) Covering the U.S. map with the CITGO logo; d) Pressing for the acquisition of new refineries and storage capacity.
2) Increasing the volume of extraction in Western Venezuela.
3) Intensifying the development of the Orinoco Oil Belt through new strategic contracts.
4) Optimizing the operation of existing refineries.
5) Professionalizing PDVSA and thereby facilitating its technical and financial operations.
6) Reforming the hydrocarbons law so as to attract more investments and guarantee respect for existing contracts in order to allow the long term success of present investments and in order to encourage new projects.
7) Maintaining a presence in Europe and expanding into Asia and Africa with assets that would allow triangulation agreements tied into its power over the market with the U.S. and
8) Developing business in Brazil, Argentina, Chile and Colombia with PDV and with CITGO in Mexico, Puerto Rico and Canada. These are just a few of the matters that ought to take up the Venezuelan government’s time.
The matter of PETROCARIBE is fundamentally worrisome because it makes it evident that the priorities are not being taken into account.
There is a political schizophrenia that splits the country apart when faced with two realities. The first reality is the world described above; the other consists of the hallucination of a government that invests the time and resources of an entire nation in promoting a political model that shoots the first reality straight in the heart, thus killing Venezuela’s energy potential.
Financing an oil invoice for over 17 and even 25 years that will never be paid, providing free shipping and investing millions of dollars in shipping, storage and distribution infrastructure for countries that do not pay and that do not represent necessary alliances for Venezuela’s economic and social growth, does not appear to be sane.
One can understand that Caribbean countries, poor as they are, require help and incentives. But the Venezuelan government’s responsibility is to defend its country's interests as its sole priority and this priority begins with developing and defending its energy potential. If one wants to help Caribbean countries, there are more effective ways to do so that do not compromise Venezuela’s energy future.
PETROCARIBE is part of the hallucination that is dragging Venezuela to the brink of madness. Venezuela’s energy future dangles from a pathologic hook.
Using oil as a building crane, the Venezuelan Government is constructing a gigantic building. That is where, together with the poorest countries on the planet, the government intends for Venezuelans to live. From the barred window of one’s room, one will be able to view the modern world, but it will be only from that window.
Translation by W.K.
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