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PDVSA: more fantasies

By Veneconomy

24.08.05 | When the new PDVSA strategy plan, presented late last week, is put under a microscope, what seemed absurd before now becomes totally fanciful. It is not just a matter of excluding the most experienced and qualified companies, or of setting a target that is practically impossible to achieve, namely increasing the production of PDVSA on its own to 4,019,000 b/d in just six years; on closer examination the estimated amounts for investment make no sense at all.

Between 1991 and 1997, a PDVSA that was far more qualified, both technically and professionally, invested $31.8 billion in exploration and production in order to raise output by 915,000 b/d, in other words an investment of $34,750 per b/d of additional capacity. The Bolivarian government’s goal is to increase production by 2.3 million b/d, more than twice the increase achieved in 1991-97. Using prices from that period, that would mean an investment of $79.9 billion. From this standpoint, the $56 billion provided for in the recently announced “strategy plan” seem too little – far far too little.

Yet that is not all. According to the plan, the $56 billion will also be stretched to cover the investment in gas, the Orinoco Oil Belt, refineries, tankers, the planting of 100,000 hectares of sugar and yucca (as raw material for an ethanol plant) as well as other items that could cost approximately $45-50 billion. If this is actually the case, there would be a shortfall of some $69-74 billion in funding. And then, the strategy plan makes no mention whatsoever of the $12 billion for the national petrochemical plan.

The greatest cause for concern has to do with the technical and managerial capabilities of the “new” PDVSA. Two and half years ago, 20,000 of the most highly skilled experts, managers and professionals in the industry were fired, leaving the company in the hands of people with little experience whose only merit was commitment to the Bolivarian revolution. If they have been unable to draw up a sensible plan, with realistic targets, what is to be expected of them when it comes to implementation? …above all when plans are to do it all without any of the world’s leading companies, such as Shell or Exxon.

And, last but not least, in VenEconomy’s opinion, the odds against the Bolivarian government’s having access to international loans under favorable terms seem very slim with partners such as the Russians, the Iranians and the Indians. What a different story it would be with the endorsement of Shell or Exxon.

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