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Editorial / Commentary / Opinion

Gustavo Coronel : The perils of Citgo

CITGO is greatly exposed at this moment. Not only it has had to borrow a considerable amount of money paying interest rates four times higher than normal (11.5 percent) but also the quarrel of parent company PDVSA with U.S. drilling company Helmerich and Payne, H&P, could lead to legal action against Citgo assets in the United States.

PDVSA has moved to expropriate eleven drilling rigs from this company in Venezuela, following a strategy that I consider suicidal. The strategy is as follows: when PDVSA owes contractors money that cannot pay, or does not wish to pay for whatever reason, then it simply expropriates the assets of the company, in order to delay payment indefinitely. This has been the case with companies expropriated in the past and seems to be the case with H&P.
But that was then and this is now. The move by PDVSA finds Venezuela in a weak position vis- a- vis the United States. Venezuela is no longer as important a supplier of oil to the United States as it was only ten years ago.

Currently Venezuelan imports into the United States are barely at the million barrels per day level, a drop of some 300,000 barrels per day since Chavez came into power. More significant is the fact that gasoline exports from Venezuela to the U.S. have practically disappeared. The 2009 report on Petroleos de Venezuela shows that during last year it only exported some 99,000 barrels of gasoline per day. Even assuming that all of these barrels went to the United States, this would represent a drop of some 75 percent as compared to only a few years ago.

In fact, the volumes of Venezuelan oil coming into the U.S. could rather easily be replaced by modest increases of imports from the other top 15 suppliers of oil to this country, mostly from Canada, Saudi Arabia, Angola and Russia. This could be done at minimal disruption of the U.S. market, if Venezuelan aggressive actions against U.S. company assets continue or if Venezuela is designed as a new member of the group of rogue states that support international terrorism.

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 06/30/2010

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