Español








Very usefull links



Petroleumworld
Bookstore



Institutional
links


OPEC



 


Petroleumworld
Business Partners

 


IRAQ OIL THE FORUM


Blogspots
recomended

caracas chronicles

Gustavo Coronel

Iran Watch.org

Venezuela Today

Le Blog des
Energies Nouvelles

 

 

Lagniappe

 

 

Oliver L Campbell :
PDVSA is nowhere near being bankrupt

 

 

Some readers have questioned my assertion that PDVSA is not bankrupt but short of funds. Being bankrupt is being broke, but it has been defined more precisely as something which "occurs when a person or a company can no longer pay its creditors what it owes." Without doubt, PDVSA owes considerable amounts and is a slow payer of its debts, but does anyone seriously think it will fail to pay those debts? In my article, "Accumulated losses of Pemex" I quoted a note to their accounts which states, Pemex has recorded negative earnings in the past several years. However, under the Ley de Concursos Mercantiles (“Commercial Bankruptcy Law of Mexico”) decentralized public entities such as Petróleos Mexicanos and the Subsidiary Entities cannot be subject to a bankruptcy proceeding.

As far as I know, Venezuela does not have such a law but, in practice, I believe the position is the same. State companies have been liquidated in the past, but I can recall no instances where one was declared bankrupt, and t he creditors were paid what they were owed. There is one interesting case--liquidation of the Banco de Desarrollo Agropecuario (Bandagro) led to ongoing lawsuits in the USA. The dispute is regarding the validity of bearer bonds which Bandagro allegedly issued in 1981, but which Venezuela says were forgeries. Experts have testified they were, indeed, forgeries, but the problem is a person in the Ministry of Finance certified several of the notes were valid., The buyer claims he bought the bonds in good faith on the strength of this certification. The saga continues.

An excellent example of how the government does not let a state entity go bankrupt is the Corporación Venezolana de la Guayana (CVG). Their accounts for 2011 show a loss of

Bs 5,276 million and a negative equity of Bs 5,169 million. CVG probably will not make a profit for some years, so the corporation would become bankrupt except that we know the government will continue to keep it afloat

The financial position of PDVSA is quite different--it has made a continuing contribution to the national coffers. This has increased from $11 billion in 2003 to $51 billion in 2011--see the table below. Oil prices have steadily gone up with a slip only in 2009. Prices in 2012 have gone down lately, and the Venezuelan basket for the week ended 6 July was $92.87 per barrel. However, this is still substantially above the average price for 2010. Additional production from the Orinoco Belt should compensate for any fall in prices, so I cannot see the income stream drying up to any significant extent.

National Participation in US$ billion (rounded down) 

Year

Amount

Average Export Price

$ per bbl

2003

11

24.90

2004

19

32.88

2005

31

46.15

2006

40

55.21

2007

45

64.74

2008

48

86.49

2009

22

57.01

2010

27

72.18

2011

51

100.11

I like that old adage, "If you owe the bank $500,000, you have a problem. If you owe the bank $5,000,000, the bank has a problem." A government does not help debtors that cannot pay relatively small sums but, if what the debtors owe is large enough that non payment would harm the public and/or create an economic problem, you can count on the state to bail them out. We saw this with the Venezuelan banking crisis in 1994/1995 when the government rescued half the country's banks which had liquidity problems, and saw the failure of the second largest, the Banco Latino.

A repetition of this occurrence took place in 2008 when many bank failures sparked off the global banking crisis. Developed countries paid staggering amounts to bail out their banks--the UK 's rescue package cost some $850 billion and the USA's at least $700 billion. The point was made these banks were "too big to fail." This is exactly the position with PDVSA which is so large in the economy that there is no way the Venezuelan government would allow it to fail even if oil prices temporarily dropped like a stone, which is extremely unlikely.

PDVSA is short of funds and this arises only because the government has milked it dry by depriving it of cash in order to fund its social programmes. However, a company that provides a government take between $40 and $50 billion a year is nowhere near being bankrupt.

Oliver L Campbell / 09.07.12

 


Follow us and post your comments: in Twitter Facebook

 

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 returned to Venezuela in 1953 and worked with Compañía Shell de Venezuela (CSV) where he became the 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 became 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.

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 endorsem

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.

Use Notice:This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by the originator.

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law.

If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Internet web links to http://www.petroleumworld.com are appreciated

Petroleumworld News 07/12/2012

Follow us in Twitter

And post your comments in our
Facebook site


Petroleumworld welcomes your feedback
and comments, share your thoughts on this article,
your feedback is important to us!

We invite all our readers to share with us their views and
comments about this article, write to editor@petroleumworld.com

Copyright© 1999-2010 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors

Send this story to a friend Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+Windows NT 4.0, '95, '98, ME,
XP, Vista, W7 +/ 800x
600 pixels

 


TOP


Editor:Elio Ohep /
Contact Email: editor@petroleumworld.com

Contact: editor@petroleumworld.com/ phone: Office (58 212) 635 7252,
or Cel (58 412) 996 3730 or (58  412) 952 5301


CopyRight © 1999-2010, Elio Ohep - All Rights Reserved. Legal Information

- CCS Office Tele
phone/Teléfonos Oficina: (58 212) 635 7252

PW in Top 100 Energy Sites


Technorati Profile

Fair use notice of copyrighted material:

Legal Information

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.