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Gustavo Coronel : Russia-PDVSA's
PetroMiranda JV bound to failure

The PetroMiranda, PDVSA-Russia Joint Venture in the Orinoco area: bound for failure.

In April of this year the Chavez controlled National Assembly ratified the agreement between a Russian consortium and PDVSA to develop the so-called Junin-6 block in the Orinoco area. The Russian consortium is made up of Rosneft, Gazprom, Lukoil, Surgutneftegas and TNK-BP, each company having a 20 percent share.

According to Rafael Ramirez, this is just a portion of a larger development in which $120 billion will be invested during the next seven years, to generate 3 million barrels per day.

If the Russian consortium is a representative example of the quality of the operators coming into the area, these expectations by Ramirez, an expert at talking always in future terms, belong to the realm of fantasy. This PetroMiranda agreement is particularly fragile due to the composition of the Russian consortium. In particular TNK-BP is not doing well. Net profits of this company dropped 52 percent in 2008. The company almost disintegrated during that year, due to a feud between the Russian and British partners. The Russians even sued the British CEO, Robert Dudley, “for mismanagement and discrimination against Russian personnel”. The recent misfortunes of BP in the Gulf of Mexico will do nothing to improve the stability of this company, since BP is the partner that possesses the technology for upgrading heavy oils such as those produced in the Orinoco area. Other members of the consortium have little or no experience with this type of operation.

Capital requirements will be another major headache. Some $20 billion will be required during the next few years and PDVSA does not have their share of this money, some $12 billion. The Russian partners are not particularly strong financially since Gazprom, the largest partner, is not doing very well. In 2009 its income was 62 percent lower than in the preceding year. Almost half of the shares of Gazprom are in the hands of the government and the Russian Prime Minister is also the chairman of the company. There is no doubt that Gazprom is a state controlled company that represents political interests of the Russian government. What this means is that Venezuela is handing over a portion of the Orinoco region to the russian state, rather than to a commercial enterprise. When disagreements occur, as they will inevitably occur, given the high handed, abusive business style of Chavez, it will be the Russian bear on the other side of the fence, not a simple Russian company.

 

 

 

 

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 his articles can be read in Gustavo's blog. Las Armas de Coronel . Mr. Fyfe's paper has been quoted with his authorization. Petroleumworld does not necessarily share these views.

Editor's Note: All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld,

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Petroleumworld News 06/21/2010

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