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Editorial Commentary
Gustavo Coronel: If Rafael Ramirez says it…..
is most probably baloney
Minister of Energy and Petroleum and President of Petroleos de Venezuela, Rafael Ramirez, has just said (El Universal, November 6, 2007 and petroleumworld.com, November 7, 2007) that:
1. PDVSA will invest more than $10 billion in 2008;
2. PDVSA invested $10 billion in 2007, 67% more than in 2006;
3. PDVSA will be producing 5.8 million barrels per day in 2012;
4. PDVSA exports about 2.9 million barrels of oil per day.
I doubt these numbers and would like to see the details that prove they are right.
For example:
• Can we see the breakdown of the 2008 proposed investments? In what areas will investment take place, how many wells will be drilled, how many refineries, ships, oil and gas lines will be built?
• In the same manner, the Venezuelan public has the right to be informed about the details of the $10 billion investment the Minister claims PDVSA made in 2007. As a former petroleum manager I am familiar with the problems faced by any organization when trying to invest in any one year almost 70% more than in the preceding year, as Ramirez says has been the case in PDVSA. Such an abrupt increase is extremely hard to manage, no matter how efficient a company is. And we know that PDVSA is far from being efficient. Just looking at the sad spectacle of the Exploration and Production Director, Mr. Luis Vierma, in the National Assembly gives observers a good idea of the extent of mismanagement, corruption and ineptitude that prevail in the company. How many wells were drilled, how many drilling rigs were added, how were the bids analyzed and contracting made, what new refining assets were added, how were the materials obtained for this huge new investment? Could we know?
• Ramirez claims that PDVSA will be producing 5.8 million barrels per day in 2012.
This is twice as much as today when PDVSA produces no more than 2.6 million barrels per day. This means that PDVSA will have to add more than half a million barrels per day of production capacity per year for the next five years. I say that, under the conditions prevailing in PDVSA today and what can be foreseen for the medium term, this claim is fraudulent. To overcome the natural decline of production and, at the same time, add more than half a million barrels per day of new production capacity is impossible for a company that we all know is extremely disorganized and corrupt. This could be possible under a different environment, with the help of multiple contracts with technically and financially sound companies but Hugo Chavez has made sure that this will not be the case. ExxonMobil and ConocoPhillips are gone and the companies that have chosen to remain will think very hard about investing any further capital in a country where the rules of the game depend on how Mr. Chavez feels any given Sunday.
• How can Venezuela export almost 3 million barrels of oil per day, as Mr. Ramirez claims, if it only produces 2.6 mmbd and consumes almost 800,000 barrels per day domestically? In order to do this Venezuela should be producing about 3. 7 million barrels of oil per day. Who can believe this is the case? I can’t. In fact, I think that Mr. Ramirez does not appear to know how much Venezuelan production really is. I doubt that anyone in PDVSA really knows. How many active wells are there? How many drilling rigs are active? Is there an independent company that validates Venezuelan production? In the old days there was a well-organized body of production monitoring in the Ministry of the sector. I wonder what the situation is now.
• Venezuela exports no more than 1.3-1.4 million barrels to the U.S. and sends Castro about 100,000 barrels per day almost for free. If, as Ramirez says, Venezuela exports 2.9 million barrels per day, where are the other 1.5 million barrels per day going? Who can tell us?
These are some of the questions I would have posed to Mr. Ramirez in a debate, had he accepted it. I challenged him to a debate on PDVSA about two months ago but he did not even care to answer, although I am a Venezuelan citizen in good standing and my professional and academic credentials are probably much better than his. Any former petroleum manager would have similar and many more questions about the disastrous manner in which PDVSA is being managed.
The problem with the people in political control of the nation is that they do not know what public service means. They are slaves of an ideology and only have eyes and ears for the strongman, the one who pays their salaries and bonuses.
They believe they are not accountable to the nation and that they don’t have to be transparent and honest as managers. They are wrong, of course, and some day they will pay for their crimes and their ineptitude.
Gustavo Coronel is a 28 years oil industry veteran, a member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), author of several books. At the present Coronel is Petroleumworld associate editor and advisor on the opinion and editorial content of the site. All Coronel's articles can be read at its blog lasarmasdecoronel. Petroleumworld not necessarily share these views.
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Petroleumworld News 11/09/07
Copyright© 2007 Gustavo Coronel. All rights reserved.
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