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VenEconomy :Two news items to think on

 

This week, there have been two news items in the press regarding oil that should give Venezuelans food for thought.

The first is an internal matter and bodes no good. Press reports indicate that the gasoline production units are down and the catalytic cracking units are undergoing repairs at three out of the four domestic refineries (Amuay, Cardón, El Palito, and Puerto La Cruz).

The second item of news, which has made international press headlines, has to do with a giant oil discovery at the Tiber Prospect in the Gulf of Mexico, announced by British Petroleum. The new discovery is located 1,259 meters under the sea in the Keathley Canyon 102 block, some 400 km southeast of Houston.

The first point that these two news items highlight is the havoc that ten years of bad policies have wrought in the country’s oil industry, so that the shutdown of these three refineries has left the domestic market with only 50,000 b/d of domestic production, from Puerto La Cruz Refinery, with the rest having to be made up with huge volumes of imports. And that is just the tip of the iceberg represented by the appalling state of deterioration of Chávez’s oil industries in these revolutionary times.

The second, BP’s discovery, shows that the oil world does not stop turning simply because Venezuela imposes retrograde policies of controls and confiscations. The governments and companies of the world, aware that oil will probably continue to be the main source of world energy for the next 30 to 50 years, have been investing in research and exploration technologies that will affect world geopolitical strategy. And while the size and profitability of this find has yet to be determined, this is a warning to Venezuela for it to remember that, while it has sizeable recoverable crude reserves (300 billion barrels), there is still a lot of oil out there just waiting to be discovered.

For those who still doubt it, just ask the Brazilians about the surprise oil find by Petrobras and Repsol-YPF in 2008, the biggest in 30 years: the Carioca field, the third largest in the world with estimated reserves of 33 billion barrels of oil and associated gas.

It is time for the Venezuelan Government to start rectifying its hoarding policy for the oil industry. These new reservoirs on American soil, added to the huge reservoirs in Brazil, a solid country whose economy is not subject to political ups and downs, could eventually wipe out the sizeable comparative advantage of low-risk exploration offered by the huge reserves in the Orinoco Oil Belt.

It is worth bearing in mind that these finds are very good news for the United States, the world’s largest oil consumer, particularly since President Barack Obama has promised to seek secure supplies far from political blackmail and conflict

 

VenEconomy has been a Venezuela's leading specialized publisher on financial, political and economic data since 1982. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was originally published by VeneEconomy on 09/03/2009. Petroleumworld reprint this article in the interest of our readers .

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Petroleumworld News 09/07/03

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