Maureen Lorenzetti
Washington Editor
NEW YORK, May 20 -- Top executives from state-owned Petroleos de Venezuela SA (PDVSA) came to New York Wednesday looking to reassure nervous US investors that the company takes its role as a key short-haul supplier to US markets very seriously.
"The US is definitely the main destination of our oil production," PDVSA President Alí Rodríguez Araque said to the Venezuelan American Association at a lunch at the Harvard Club in New York. "The US is the biggest consumer of oil in the Western Hemisphere and Venezuela is the biggest and most reliable producer of oil. We are very close and very interdependent neighbors. So we need to work permanently to strengthen our energy partnership."
To that end, Rodríguez said that the country plans to increase crude production capacity from 3.6 million b/d to more than 5 million b/d by 2009. The company will invest $27 billion; another $10 billion will be solicited from foreign investors.
PDVSA officials say they have largely recovered from a crippling 2-month strike that ended in February 2003. PDVSA's own oil production averages around 2.6 million b/d, with foreign investor concessions adding another 500,000 b/d for a total of 3.1 million b/d, they said. But analysts predict the company needs to court a lot more interest from multinationals than it is now getting to aggressively expand those numbers.
OPEC role
The country's production quota with the Organization of Petroleum Exporting Countries is now 2.7 million b/d. Rodríguez, like many others within the organization, including Saudi Arabia, have blamed the US's recent high gasoline prices on factors largely outside of OPEC's control.
He cited concerns about terrorism and market speculation as reasons contributing to higher crude prices. And in addition to those higher feedstock costs, US refiners have limited capacity and tight environmental rules to follow which help drive up gasoline prices, he suggested.
But unlike his Saudi counterpart, Rodríguez did not offer to build new refineries in the US to help alleviate refinery constraints. PDVSA, through its US-based Citgo Petroleum Corp. downstream division, is the US's third largest refiner.
Rodríguez said in an interview with OGJ following his remarks that while building a refinery in the US "was not impossible," such an action faced formidable challenges. Even if it made good business sense, local opposition to new construction is a huge obstacle, he indicated.
In March, Citgo announced plans to expand distillation capacity at its Lake Charles, La., refinery by 105,000 b/d—the largest plant expansion at a US refinery in perhaps decades.
In addition to that expansion, Rodríguez suggested that a likely scenario for Citgo would be to expand another one of its US plants, although he declined to say when or if that would happen anytime in the near future.
Political forces
The company road show follows a new round of tension between Washington and Caracas; Venezuela President Hugo Chavez has so far successfully resisted efforts from opponents to hold a referendum. But he still blames the US for his ongoing political woes, and stepped up his anti-American rhetoric in recent weeks as the US prepares to appoint a new Venezuelan ambassador in Caracas.
US President George W. Bush's nominee for the post, William Brownfield, now the US Ambassador to Chile, told a US Senate committee that the international community needs to be more involved in the referendum question to avoid future strikes.
Ending Venezuela's political crisis is an important goal for the administration.
Some US policymakers worry that further civil unrest could trigger another round of strikes or a slowdown that could again cut back US crude and product imports at a vulnerable time for both motorists and politicians.
There even is a concern by some in the administration that Chavez, emboldened by higher crude prices, may actually carry out past veiled threats to curtail cargos to the US if he feels the Bush administration is interfering too much with the referendum issue.
Other industry observers say Chavez is simply taking advantage of the US's pending presidential elections to antagonize the Bush administration.
Contact Maureen Lorenzetti at [email protected].
