Patrick CrowThe government of Hugo Chávez continues to grapple with a very difficult problem: restructuring Petroleos de Venezuela SA at a time when world oil prices are under pressure.
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Venezuelan Energy and Mines Minister Alí Rodríguez raised eyebrows recently when he said Pdvsa would have to sell $1 billion of bonds immediately to cover $900 million needed to pay its suppliers. The bonds would be guaranteed with revenue from oil sales.
Rodríguez explained that Pdvsa has suffered from low oil prices and a Venezuelan recession.
That prompted Pdvsa Pres. Roberto Mandini to issue a statement that didn't contradict Rodríguez but did assure the financial community that the state-owned oil company is sound and solvent.
He did not provide any data, but they should be released during Pdvsa's annual meeting Mar. 29. There also should be word about a reduction in Pdvsa's work force.
New budget
Investment cutbacks also are being planned.While attending the Organization of Petroleum Exporting Countries' ministerial meeting last week in Vienna (see story, p. 18), Rodríguez said Pdvsa would sharply lower its investment spending.
The newspaper El Universal predicted Pdvsa would announce at the annual meeting that 1999 capital spendingvestments would be cut to $3.97 billion.
Rodríguez said the reductions were forced by low oil prices and Venezuela's participation in OPEC efforts to reverse the downward spiral in world oil prices.
He explained that the average price for Venezuelan oil was $7.35/bbl in February, down $2/bbl from the level estimated in the 1999 budget. Already this year, Pdvsa has twice cut its 1999 operating budget due to weak oil prices.
Also, during his election campaign last year, Venezuelan President Hugo Ch vez had pledged to slash Pdvsa's spending. Pdvsa earlier had embarked on a $65 billion investment program to nearly double production capacity to 6.2 million b/d by 2006.
Production cuts
Pdvsa faces leaner oil sales in 1999.Last year, Venezuela agreed to cut production by 650,000 b/d in a pact with Mexico and Saudi Arabia to stabilize world oil prices.
It has achieved about 525,000 b/d of that and is producing 2.845 million b/d.
Under the latest OPEC accord, it would meet the rest of its obligation, dropping another 125,000 b/d to 2.720 million b/d.
Rodríguez said the production cuts would come from both Pdvsa and private oil companies, despite the protests of those foreign oil companies that have invested money to help Venezuela meet its capacity goals.
He said private producers would take relatively small cuts, and they would be compensated with extended lease terms.
Separately, following a visit by Iranian Foreign Minister Kamal Kharazi, Venezuelan officials said the two nations (OPEC's second and third largest producers, respectively) would consider swapping customers.
Under the plan, Iran would supply Venezuela's European customers, while Venezuela would supply Iran's Western Hemisphere customers. More talks are planned.
Venezuela has long advocated such arrangements to cut transportation costs and increase return on crude sales.
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