Op-Ed Commentary

 

 

VenEconomy:
Plowing the sea (or an exercise in futility)?

The Sow Oil Plan looks to be set to becoming a dream that will stay out of reach, at least as far as the refining plans are concerned.

At a big ceremony on August 17, 2005, President Hugo Chávez presented a series of PDVSA’s strategic plans to be implemented in two stages, the first between 2005 and 2012 and the second between 2012 and 2030.

The first stage consists of six focal points, one of which is Refining, classified by the state-owned oil company as the spearhead of its Strategic Plan.

What is apparently sought with this focal point is to enhance the capacity for refining heavy and extra-heavy crudes by building three new refineries: Cabruta (with capacity for processing 400,000 barrels a day of extra-heavy crude), Batalla de Santa Inés (50,000 barrels a day), and Caripito (50,000 barrels a day for the production of asphalt). With these new refineries and by upgrading and expanding two existing ones, El Palito and Puerto La Cruz, they expect to increase PDVSA’s processing capacity on Venezuelan soil by 700,000 barrels a day.

This week, a report by José Suarez Núñez published in El Nacional said that Mashide Sekikawa, a representative of Japan Gasolina Co., the strategic advisor for PDVSA’s Refining Plan, was not “optimistic” over the construction of the Cabruta, Batalla de Santa Inés, and Caripito refineries. Sekikawa thinks it will be difficult for these refineries to go into operation at the same time as the El Palito and Puerto La Cruz refineries, which, in his view, are viable.

Sekikawa’s opinion is based, among other things, on the fact that there is a race worldwide to build refineries, with the Middle East and Africa leading the field.

He warns that the Cabruta, Batalla de Santa Inés, and Caripito projects will run into problems, as it will be necessary to import thousands of workers, given that they are located in isolated places with no neighboring ports. He claims that the magnitude of the reactors required by the projects will put up costs even more owing to the increase in the price of steel, apart from the fact that there will be delays in deliveries, since there are only five factories that can produce these reactors, and that there will be problems in transporting them as there is only one Dutch vessel to bring them. Apart from all that, there are other limitations, such as the high cost of transporting the special kind of crane needed from the Middle East or Africa and the scarcity of craftsmen that need to be hired for the projects.

If things continue this way, the President will find it hard going to keep the promise he made on the day the Sow Oil Plan was launched, when he proclaimed, “We have not plowed the sea, here is this fatherland, saved, rebuilt and in operation in an irreversible process for ever and ever…”

VenEconomy is a Venezuela's leading specialized publisher in the economic and financial area. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld not necessarily share these views.

Editor's Note: This commentary was originally published by VenEconomy, on 11/01/2006. Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld 11/02/06

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