Petroleos de Venezuela SA is expected to see a shift in corporate focus as it tries to carve out a larger niche in the refined products market and develop its ample natural gas reserves.
Venezuelan Energy and Mines Minister Alí Rodríguez told a congressional hearing in Caracas late last month that the government of President Hugo Chávez is looking for investments in all areas of the downstream sector.
"We want oil to account for...the lion's share of exports and products the balance," he said.
Downstream pushA Pdvsa official told OGJ that Rodríguez has already accepted a proposal from Pdvsa that would allow a private partner to invest in and take an equity stake in the 134,000 b/d Puerto de la Cruz refinery. The refinery, located on Venezuela's eastern Caribbean coast, is a major producer of unleaded gasoline.
"Products fetch a higher price and will help diversify the industry," the official said.
Pdvsa operates the Western Hemisphere's largest refining system. It currently processes about 1.3 million b/d of crude oil domestically and about 2 million b/d (gross) in its foreign offshore holdings, which include refineries in Curacao and in the U.S. and Europe. "Our vast oil reserves will allow us to export more value-added products," Rodríguez said.
He said that Pdvsa will step up exploration activities in the search for light and medium gravity crudes, which are more cost-effective to refine. Pdvsa, for its part, is expected to give a more detailed plan for upstream-related investments at an upcoming shareholders meeting in June.
Rodríguez also said the Energy and Mines Ministry is analyzing alterations in the country's tax structure to spur both domestic and foreign investments in Venezuela's downstream sector. Nascent plans entail trimming income taxes.
Gas initiativeVenezuela's embryonic natural gas industry will experience the greatest shift in focus, said Rodríguez. Pdvsa plans on its own to increase spending in the natural gas sector for both export and domestic use, while the government also wants to open the sector to private investment.
Venezuela's natural gas reserves are estimated at 146 tcf, most of that associated with oil production.
The bulk of gas production is reinjected to aid in oil recovery.
Pdvsa's gas programs include gas-targeted exploration licensing, liquefied natural gas exports, pipeline construction, and privatization of gas-related assets. The company says it could attract billions of dollars in gas-related investments over a 5-year period once the government's gas initiative takes place.
The Energy and Mines Ministry is already hard at work-lobbying in Congress to have passed draft legislation that would act as a framework for the gas sector.
Rodríguez said that his ministry had almost completed the gas law and that it would be submitted to Congress soon. The law aims to create the rules for the gas sector and the conditions for opening it up to private investment.
The draft legislation, however is part of a larger-and, indeed, more controversial-enabling law that seeks to give the executive branch special powers in regards to economic measures.
'Dumping' debunkedRecently, the Independent Petroleum Association of America voted to support a petition to investigate alleged dumping of crude oil on the U.S. market by Venezuela, Mexico, Iraq, and Kuwait. That petition is expected to be filed with the U.S. International Trade Commission this week (OGJ, May 17, 1999, p. 35).
Rodríguez told Lower House lawmakers the dumping claims were "absurd."
He said Venezuela is trying to impede U.S. oil producers' attempts to impose anti-dumping penalties on it, using all diplomatic and commercial channels available. "We are taking all the steps necessary to put a stop to this action which, if it goes ahead, could cause some (supply) disruptions," he said.
"We are producing 2.72 million b/d, and we are not exporting more crude," the minister said, alluding to Venezuela's most recent commitment to cut 120,000 b/d as part of an agreement by the Organization of Petroleum Exporting Countries.
The U.S. is by far Venezuela's biggest customer, with imports of 1.4 million b/d of crude, in addition to imports of about 300,000 b/d of refined products. The anti-dumping probe could increase the cost of importing Venezuelan crude oil to the U.S., Rodríguez said. Rodríguez also said that Venezuela wants to expand plans with fellow OPEC member Iran for a crude oil market swap. "The original idea was with Tehran, but we want to expand it to other OPEC members, such as Algeria."
The crude oil market swap would allow Pdvsa to cuts its transportation costs sharply.
Pdvsa-Petrobras tie-upRodríguez also spoke to plans by Pdvsa and Brazil's state-owned petroleum giant Petroleo Brasileiro SA to study the possibility of either buying a refinery or leasing one to supply northeastern Brazil.
As for this proposed Petroamerica joint venture between Pdvsa and Petrobras, Rodríguez said that work groups are still evaluating the project's feasibility. But, he added, it could begin to shape by the end of the year.
Rodríguez noted that the joint venture would give the Venezuelan petroleum industry a new market to place projected increased gas production and value-added products such as gasoline and diesel fuel.
Venezuelan Energy and Mines Minister Alí Rodríguez
U.S. independent producers' claims that Venezuela is dumping its oil on U.S. markets are absurd. Venezuela is trying to impede U.S. oil producers' attempts to impose anti-dumping penalties on it, using all diplomatic and commercial channels available. We are taking all the steps necessary to put a stop to this action which, if it goes ahead, could cause some (supply) disruptions...and increase the cost of importing Venezuelan crude oil into the U.S.
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