Monday, July 18, 2005

Illegal, immoral and unethical, just like the revolution These metropolitan police cars with Chavez' image are illegal, immoral and unethical. Hey! Did I just describe the revolution? Nicolae Ceausescu would have been proud of them! 7:48:13 PM    comment []

Accounts and Tales of the Oil Belt by Saul Guerrero. Saul Guerrero worked at PDVSA for many years and was involved in the development of Orimulsion which the current administration has decided to do away with on the grounds that it is not sufficiently profitable. The basic argument being that it is better to improve the crudes from the Orinoco Oil Belt than to use it for Orimulsion I have written about this topic before here is the view of a true expert as expressed in El Nacional on Friday. Accounts and Tales of the Oil Belt by Saul Guerrero The fool who hearkens not, regards what is profitable as useless. Maxims of Ptah-Hotep, Egypt, ca 2300 before Christ. The Orinoco Oil Belt is a mirror which implacably reveals all of the deficiencies and improvisations of our vision and management to take opportune advantage of its energetic resources. How can we develop that vast potential on time, without depressing prices in the diverse markets and without remaining in the sterile complacency that we are the owners of the greatest hydrocarbons reserve in the planet? The Venezuela of the decade of the 90's created two paths to take advantage of those resources, the strategic associations and to feed the transportation sector and Bitor to launch Orimulsion outside the OPEC quota as a fuel to generate electricity. Beginning in 2003 the present administration of the Ministry of Energy and Mines and PDVSA has wanted to destroy Orimulsion, artificially confronting these two options, ignoring the reality that they complement each other and do not exclude each other. The public disqualification of Orimulsion on the part of the Ministry of Energy/PDVSA and its decision to base the development of the Oil Belt exclusively with more projects of improving the extra heavy crudes is a great fallacy that crumbles itself with only reading with care the numbers and papers of the new PDVSA. On May 21st. of the current year, PDVSA published an ad that textually said; "During the period January-April 2005...the production of the associations of the Orinoco Oil Belt of 617 thousand barrels a day generated dollars that did not come into the country...2 billion 171 million dollars... Since the four projects are costing a total of at least $12 billion dollars, this tells us grosso modo that for each dollar invested in improving extra heavy crudes, one manages, in the year of the highest prices of crude oil , $0.50 in gross annual sales and $0.09 in royalties. What the Ministry of Energy and Oil does not explain is that in including the improved crudes within the OPECD quota one is: a.- displacing 617 thousand barrels of products of the Venezuelan oil basket there price of which is much higher ($45 per barrel) than the average according to PDVSA of the improved crude ($29 per barrel), which brings a reduction in sales of 3 billion dollars a year and b.- the associations only pay 34% in taxes and not the 50% that PDVSA pays, that is, that according to what was published by Vice-Minister Mommer in his paper "The Subversive Oil", the tax office failed to collect at least $10 per barrel, which would add some US$ 2.3 billion in annual taxes that are not collected by the tax system. In total a sacrifice of more than US$ 5.3 billion a year at this moment, which substantially reduces any earnings at the end of the day for the Nation from this production of improved crudes. In contrast, the current Orimulsion contracts (those that they want to eliminate or transfer to Sinovensa in December 2005) average about US$ 20 per barrel of sold bitumen, which implies annual sales of some US$ 400 million for each US$ 400 million module that each new Orimulsion module costs. At these new prices for the sale of Orimulsion in Asia, for each dollar invested one obtains a dollar in annual gross sales and $0.20 in royalties for the nation, double what you have managed to do with a multimillion dollar investment in the strategic associations in its best year of sales. Moreover, when Orimulsion was sold at a price tied to coal and invoiced gross sales of US 200 million (see PDVSA's report to the SEC), for each dollar invested in Orimulsion, one obtained $0.50 in sales, the same level that the four strategic associations have only managed to obtain under the price euphoria of 2005. Contrary to what was argued by the Ministry of Energy and Oil/PDVSA, Orimulsion has always been an excellent option for the profitable and large scale development of the Orinoco oil belt, without incurring in the costly penalty that implies the displacement of the traditional production within the OPEC quota by the improved crudes. The simple calculation above can not escape the current authorities of the Ministry of Energy and Oil/PDVSA. The only and great mystery that still persists is what is the true reason for which they continue to be set on destroying the business of Orimulsion, the endogenous development of greatest technical and commercial success in the history of Venezuela. 6:35:01 PM    comment []