http://www.vheadline.com/readnews.asp?id=46522
Published: Wednesday, October 26, 2005
Bylined to: Oil Wars
OILWARS: The open
book that is Petroleos de Venezuela (PDVSA)
Oilwars Blogspot writes: In the ongoing propaganda war against President
Chavez one of the opposition claims is that somehow Venezuela’s state oil company PDVSA is not
forthcoming with information. 
This is completely
false.
PDVSA through its web-site and
information bulletins published in newspapers provides more information
to its owners, the Venezuelan people, than ever before.
As an example below is a copy of the
information bulletin published today by PDVSA in Venezuela’s largest
newspaper, Ultimas Noticias ... the topic was the changing of the
operating conventions (more on that later).
http://i6.photobucket.com/albums/y218/oilwars/i1_24N500I1.jpg
http://i6.photobucket.com/albums/y218/oilwars/i1_25N500I1.jpg
These bulletins, which are generally published
two or three times a week have covered every conceivable topic related
to PDVSA -- from its financial performance to its production, from its
overseas operations to its labor force, from its recovery from the “oil
strike” to its participation in various social programs.
And of course we just recently saw that the
some of the information published in these bulletins, namely its
production numbers, was
true all along
while the lower numbers given by the Venezuelan opposition turned out
to be erroneous. It is this supply of timely, revealing, in depth, and
ACCURATE information that makes PDVSA an open book for the people of
Venezuela.
Now what exactly
are “operating conventions”?
They are special agreements that the Venezuelan
governments prior to Chavez negotiated with foreign firms to come in
and operate older oil fields that Venezuela supposedly didn’t have the
technology to operate. In exchange for operating these fields these
companies would be reimbursed by Venezuela (PDVSA) for all their costs
and were subject to very low tax rates on their earnings. Currently
these “operating conventions” account for 499,000 barrels of daily
production out of Venezuela’s total of over 3 million barrels.
Now if you turn over oil fields to
private companies and tell them “don’t worry, well pay you whatever its
costs to get the oil out of the ground” what do you think will happen?
You guessed it ... costs will be inflated and
vastly overstated. For example, it costs PDVSA about $4 per barrel for
its own in-house production. How much do the private companies say
their costs are ... $18.17 per barrel.
Now the fields operate by those
companies are more challenging and so it is natural that their costs
will be higher ... but $18 is way out of line.
Just to show how out of line it is the extra
heavy crude of the Orinoco Belt costs about $9 to produce and that oil
is much harder to extract and has to be upgraded at special refineries.
So the $18.17 is clearly inflated and is just a way for these companies
to fleece PDVSA. And PDVSA has had no choice under the contracts
negotiated by the previous governments but to pay that outlandish rate.
- This year PDVSA has to pay out $4 billion to
these companies so if even a third of this cost is overcharging
Venezuela is losing well over a $1 billion per year.
Clearly this was
something crying out for change.
Now here comes a little irony ... in December
2002 the old PDVSA management, the same one by and large that
negotiated these outrageous deals, went on “strike” to try and oust
Chavez. They failed and were all fired for their refusal to work.
So now that they are out and a new and more
nationalistic management is in place (the government often refers
to this as the “true nationalization of PDVSA”)
PDVSA finally had its chance to change this. The main part of this
change, besides other tweaking like imposing higher tax rates and
aggressively collecting past taxes, is to force these companies to
become joint ventures with majority PDVSA ownership. By PDVSA having
ownership over these operations it gets to control them and their
costs.
- There will no longer be a way for a private
management to pad costs and rob Venezuela of money.
Now of course, there has been a lot of bitching
and moaning about this from the usual suspects living in eastern
Caracas not to mention the foreign companies themselves which are loath
to see such a good deal disappear.
But what can we say, all good
things must come to an end.
In any event about 22 of the 30+ companies
involved in these operations have already signed on to these changes.
And what about those who don’t companies who don’t want to accept these
changes.
Well, those dead enders (as Rumsfeld
would say)
will simply have their entire operations expropriated by PDVSA and that
will be that. So I suspect they’ll manage to work something out.
So as can be seen not only is PDVSA more open
and transparent it also is for the first time almost since its
inception truly operating in Venezuela’s best interest.
It is amazing what can be
accomplished when you finally have leadership that is forceful in doing
what is best for the country.
The days of the
vendepatrias are gone, hopefully for good...
