Chavez again threatens to stop oil exports to US

Nov. 13, 2006
Venezuelan President Hugo Chavez has threatened to cut oil sales to the US if it does not recognize the results of Venezuela’s December presidential election or if irregularities mar the vote, or state oil company Petroleos de Venezuela SA (PDVSA) faces “destabilizing” actions.

Venezuelan President Hugo Chavez has threatened to cut oil sales to the US if it does not recognize the results of Venezuela’s December presidential election or if irregularities mar the vote, or state oil company Petroleos de Venezuela SA (PDVSA) faces “destabilizing” actions.

A president will be elected for a 6-year term beginning Jan. 10, 2007, and Chavez is running for re-election.

Chavez repeatedly has said that he wants Venezuela to diversify its customers and reduce its dependence on the US market. The US currently takes about 60% of Venezuela’s 2 million b/d of oil production.

Venezuela sent 178.2 million bbl of crude and petroleum products to the US for the first 4 months of 2006, down from 190.1 million bbl for the same period in 2005.

Halting oil exports to the US today would mean losing 70% of Venezuela’s export market, but one that could be mitigated in the future by increased sales to China and energy-hungry economies in South America. The Venezuelan leader has been buying allies in South America with oil sales at subsidized prices.

China exports increase

PDVSA has been delivering more oil and fuel to India and China, markets up to seven times more distant than the US.

PDVSA also plans to spend as much as $2.2 billion on tankers through 2012 to double its fleet and enable it to send more oil to Asia, Chavez said.

The company wants to buy 42 tankers, including at least 14 supertankers, Chavez said. PDVSA currently has 21 tankers, enabling it to carry 26% of the country’s oil exports, a figure that would be expanded to 45%, said Chavez.

Venezuela plans to spend $56 billion through 2012 to nearly double the country’s oil production capacity to some 5.1 million b/d.

Although Venezuela shipped only 14,000 b/d to China in 2004, exports topped out at 80,000 b/d of oil in 2005. Chavez claims, “By the end of this year, we should be sending 300,000 b/d of oil to China.”

Venezuela has signed new supply agreements with China, India, Jamaica, Haiti, Paraguay, and Bolivia. Because there is a lack of investment in new production, the country’s output is not growing, so supplies to those countries come at the expense of exports to the US.

The top four suppliers of crude oil and fuel to the US, according to Energy Department figures, are Saudi Arabia, Venezuela, Mexico, and Canada.