The oil and gas industry will not be surprised to learn that resurgent nationalism is killing Venezuela. That view is increasingly evident to all but a few observers—most of them named Chavez.
In case anyone does need a reminder, though, a former Venezuelan minister of mines and energy underlined problems facing the Latin American country due to its misguided policies.
“I believe that the government’s level of spending, combined with this entire process of nationalizing businesses, is placing Venezuela in a difficult situation from the financial point of view,” said Humberto Calderon.
Calderon, who also is a former president of state-owned Petroleos de Venezuela SA (PDVSA), told Mexico’s Notimex news agency that the recovery in international crude prices could be offset in Venezuela by declining production after the recent expropriation of 76 petroleum companies.
The former minister said these companies had been involved in activities like gas and steam injection in oil fields or in operating oil platforms—operations that he described as “extremely complex and that require a high degree of specialization.”
Huge debt
The nationalizations, Calderon said, were done “because the Venezuelan government did not want to pay the huge debt” it owed to these companies—a debt that analysts place at $10-13 billion.
Calderon’s remarks contradicted statements by Venezuela’s President Hugo Chavez, who earlier said the rise in oil prices would enable his country to cope with the global financial crisis without any major difficulties.
But Calderon estimated that Venezuela’s financial difficulties are far from over, as the state has unpaid debts along with a high level of spending due to Chavez’s nationalization policies.
“I simply cannot understand the government’s motivations for nationalizing companies,” Calderon said, adding, “Last year, Electricidad de Caracas had losses for the first time in its history, and Orinoco Steel is bankrupt, as are other metalworking companies.”
Hara-kiri?
Calderon, a geologist, said what is so serious about this situation is that Venezuela’s government will now have to use part of its resources to keep these companies afloat, something that he described as “economic hara-kiri.”
His reference to Japanese-style suicide was timely as investors in the Asian nation are increasingly concerned about the nationalization in Venezuela, and they have good cause for concern, according to a report by the Nikkei Business Daily (NBD).
When Venezuelan Chavez visited Japan in April, the paper noted, he signed a comprehensive accord with Tokyo over the development of natural resources.
But the next month, according to NBD, Chavez did a U-turn by announcing the nationalization of a plant for steel raw materials that was 70%-owned by Japanese firms.
Meanwhile, Venezuela’s national assembly is now reading a proposed law to put all petrochemical activity under state control, which could affect Japan’s Mitsui & Co.
