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Energy Tribune : Venezuela dreams
of 5.8 million barrel of oil days

 

It was just a year ago that Venezuela’s energy minister, Rafael Ramírez, pledged that his country would be getting billions of new investment dollars from China and that oil production “by 2012 will be at 5.8 million barrels per day.”

But now in the wake of the Orinoco project nationalizations, it’s clear that PDVSA will be lucky to even hold production steady at less than half the 2012 target levels. The problems: PDVSA lacks funding for exploration and production, and it faces a shortage of qualified personnel. Executives and engineers who supported the 2002 strike and the attempted coup against Venezuela’s president Hugo Chávez are blacklisted from PDVSA, and others have opted for jobs in the higher-paying private sector. The personnel problems extend down to the drilling rig. In July, news reports surfaced that some operators of the 46 newly nationalized rigs were reluctant to join PDVSA. The company denied reports of strikes at the rigs, but admitted to labor “difficulties.” Then there are the problems with getting foreign companies to supply the rigs themselves, which as PDVSA’s Luis Vierma explained to the National Assembly, will cut the country’s rig count by nearly 40 percent to just 120 rigs. This decline would be a major setback for any country but is particularly daunting for Venezuela, where oil production drops roughly 25 percent per year unless new wells are developed.

Add to that the loss of three major investors – Exxon Mobil, ConocoPhillips, and PetroCanada, all of whom chose to pull out of Venezuela rather than accept PDVSA’s terms to continue Orinoco operations under state-dominated joint ventures – and it’s increasingly clear that Chávez’s Bolivarian revolution could face a cash crunch very soon. Indeed, although PDVSA was able to raise money this year, thanks to a multi-billion-dollar bond issue, the company cannot continue to rely on debt. As Standard & Poor’s put it in a March report: “PDVSA’s financial performance will weaken during the next couple of years because of higher debt leverage.”

 

 

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Editor's note: This commentary was originally published by EnergyTribune, on 08/16/2007. Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld News 08/17/07

Copyright© 2007 Energy Tribune. All rights reserved.


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