Venezuela Oil Revenues Up, Though Problems Continue

| Feb. 10, 2012 | Caracas, Venezuela

Published by Minyanville

As the country’s opposition gear up for primaries on Sunday, hoping to put an end to President Hugo Chávez’s 13 year tenure, they will no doubt be slightly concerned with state oil company’s 2011 profits as the maverick socialist ploughs the cash into social programs that he hopes will buy votes for October’s presidential election.

State oil company Petróleos de Venezuela (or PDVSA) saw revenues up 35% in 2011, compared to the previous year, thanks in large part to high oil prices, currently hovering around $110.

Revenue was up to just under $128 billion, though much is owed to suppliers and a total of $10.3 billion was issued as bonds last year—on top of the $7 billion issued by the state. The company had $35 million of outstanding debt by the end of 2011, 40% up on the previous year.

“We've got an investment plan worth $236 billion for the 2013 to 2015 period,” Oil Minister Rafael Ramírez said in defense. “No one pays for an investment plan with proceeds ... One has to ask for loans, and that's what we're doing.”

“When a company like Petrobras (PBR) takes on new debt, everyone is happy,” Ramírez said, referring to Brazil’s state-run oil company. “But they criticize us when we do. We get loans because our company is strong.”

The Minister, who also heads PDVSA, told state television that the company’s reserves increased 14.7% over the year to $174 billion. Ramírez added that PDVSA produces 3 million barrels per day and expects this to rise to 4 million by 2014.

So far in 2012, Venezuela’s oil barrel has averaged $108.09, compared to last year’s average of $101.06 per barrel—40.4% up on 2010. This rose even further this week to $108.39, thanks to a cold snap in Europe and continued tension in the Middle East, according to Venezuelan authorities.

The rule of thumb for Venezuela is that it can continue to meet debt obligations as well as domestic spending as long as the barrel is at more than $85.

According to the US Energy Information Administration, Venezuela’s oil exports to the US—its biggest customer despite all the rhetoric—are at a nine-year low. Last November, the US imported just 764,000 barrels per day of Venezuelan crude and gasoline, resembling figures from February 2003 of 613,000 barrels per day.

“It's a marked change from the nearly 1.5 million barrels a day that Venezuela sent to the US market in 1999, when Chávez took office,” writes Ian James of Associated Press. “The United States remains the top market for Venezuelan oil, but Chávez has been diversifying his country's clientele by selling more to China and to allies in Latin America and the Caribbean.”

According to Ramírez, Venezuela exports 460,000 barrels per day to China and this is set to increase to one million by 2015. Benedict Mander of the Financial Times has trouble believing the figures, however. “If [Chávez’s] forecasts for what Venezuela will be exporting to China in three years from now are as suspect as his predictions for the 39% jump in production in the Orinoco Belt by the end of the year, from 1.15 million barrels per day to 1.6 million barrels per day, then they should be taken with a pinch of salt,” he writes.

The oil firm has had one major setback this week. It failed to secure a $10 billion loan from Brazil’s state-development bank needed to fund a 40% stake in a Brazilian refinery.

PDVSA failed to give the bank sufficient guarantees, according to Reuters, and the two are still in talks. “We are waiting to see where this goes,” Sergio Gabrielli, Petrobras’ Chief Executive, told journalists in Rio de Janeiro. “There are deadlines and processes, but it doesn’t matter. The process goes on.”

The Abreu e Lima refinery, near Recife in Brazil’s north-east, is years behind schedule, costing more than three times its original budget. It was originally a gesture of solidarity between Chávez and former Brazilian President Luis Inácio Lula da Silva. Now it's a strain on relations between the two countries which have gone down widely different political paths.


In other news, Venezuela’s consumer price index was up 1.5% in January from the previous month, pushing the annual figure to 26%, down from the December figure of 27.6%.