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Editorial-Opinion

 

 

Oliver L Campbell: The reason behind
PDVSA's arm twisting

 

When legislation was enacted that made it obligatory for PDVSA to hold a minimum of 60% in the Orinoco Belt joint ventures, it seemed a good nationalistic measure. Unfortunately, it was not thought through and PDVSA has had problems contributing its 60% for lack of funds. Much better would have been to give PDVSA the power to decide what proportion to take in each joint venture but that is now too late.

This same cash shortage has meant PDVSA has paid no dividends to its partners since 2010. They are not pleased with this and the Oil Minister has recently rubbed salt in the wound by declaring that dividends will not be repatriated unless the companies meet established production targets. Whether this arm twisting will have any effect remains to be seen. The large companies have plenty of clout and may not take this lying down. They work hard to produce profits and, if they are not allowed to repatriate them, their parent companies may do more than complain.

Why does a large company like PDVSA have cash problems? The table below gives the answer. It shows PDVSA has contributed large sums for social development--in the five years it amounts to some $72 billion. This explains why PDVSA has not met its commitment to contribute its equity in the joint ventures, and also why it has not spent enough on capital expenditure.

Petróleos de Venezuela S.A.

Social Development Contribution
(Figures in millions of US$)

 

2012

2011

2010

2009

2008

Income before royalties, social development and income tax

 

 

46,144

 

 

53,826

 

 

25,424

 

 

24,361

 

 

50,739

Royalties*

17,730

17,671

11,218

12,884

23,462

Social development*

17,336

30,079

6,923

3,514

14,733

Income before income tax

11,078

6,076

7,283

7,963

12.544

Venezuelan income tax*

6,841

1,493

4,081

3,465

3,131

Net income

4,237

4,583

3,202

4,498

9,413

Less minority interests

(1,537

(1,856)

(855)

(1,474)

(1,962)

Net income belonging to shareholder*

 

2,700

 

2,727

 

2,347

 

3,024

 

7,451

National take*

44,607

51,970

27,341

22,887

48,777

 

Average export price

$103.42

$100.11

$72.18

$57,01

$86.49

During the five years, the national take has amounted to some $195 billion. The figure for 2013 should be some $40 to $45 billion assuming the average price of crude remains around $100 per barrel. But the salient point is that a contribution of $17 billion for social development is not enough for the government's requirements, and they urgently need to bring production up to the quota level and then surpass it--hence the arm twisting.


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Oliver L Campbell MBA, DipM, FCCA, ACMA, CGMA, MCIM was born in 1931 in El Callao, Venezuela where his father worked in the gold mining industry. He spent the WWII years in England, then in 1953 returned to Venezuela and worked with Compañía Shell de Venezuela (CSV). He spent 15 years in the oilfields and ended up as Company Financial Controller. Upon nationalisation of the oil industry, he went to Petróleos de Venezuela (PDVSA) as its Head of Finance. In 1982 he returned to England and was the Finance Manager of the British National Oil Corporation prior to its privatisation. He then worked as an oil consultant and retired in 2002 after fifty years in the oil industry. Petroleumworld does not necessarily share these views.

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Petroleumworld News 07/01/2013

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