What are we
to make of PDVSA’s announcement yesterday that
Venezuela and Iran will invest US$ 4 billion in the
Orinoco oil
belt? Let’s see, we are talking
about Iran, a country with a dysfunctional oil industry,
where production has been in decline for years due to the lack of investment
and Venezuela, a country which has invested little in
maintaining its own oil production in the last three
years. In fact,
save for some details, the two countries have followed very similar paths
which
are likely to lead to the same results long term. In Iran, declining oil
production, combined with declining refining capacity and increased gasoline
consumption have led to shortages and now rationing. This is in due in part
to
the fact that increasingly oil income has been spent in pet projects of the
leadership, including direct assistance projects. In that country, foreign
oil
companies have actually been invited back to run oil fields as a way of
sustaining investment in oil production. This is not
too different that the path set by Hugo Chavez in
Venezuela. PDVSA has been spending increasing
amounts in social projects, at the expense of investment in sustaining oil
production and refining capacity. The results are lower oil production at a
time of increased local consumption much like
Iran. Gasoline consumption is up to 770
barrels a day, thanks to subsidized gasoline prices as well as car prices,
which
are imported at the officinal exchange rate. In fact, numbers from the last
report by PDVSA of its financials (Once again we have yet to see the 2006
financials) suggest that Venezuela, much like
Iran is also importing gasoline. But then,
there is the question of technology. Heavy crude upgrader technology has so
far
been in the domain of a few oil multinationals. Neither
Iran nor Venezuela own such a technology and people
question whether PDVSA can even handle some of the heavy crude projects of
the Orinoco oil
belt that it recently took
over. While the Cerro Negro project seems to be manageable, experts believe
that PDVSA will have a hard time running the Petrozuata facility, leaving
aside
issues such as how PDVSA will compensate the owners of the technology for
its
use. Thus, PDVSA
seems to have chosen a partner that contributes little to the project beyond
the common fundamentalist ideology and their common enemies.
In the end,
this will probably ending up being another announcement like the Amazon
pipeline, which is full of fluff but lacks any consistency and not much
really
will come from it. Another empty announcement to satisfy the autocrat's
megalomania and wishful thinking. In criollo there is a saying: “Se juntaron dos
mochos para rascarse”, which can be loosely translated as “Two amputees got
together to scratch each other”. In the case of the Venezuela-Iran
project of the Orinoco oil belt, this is what
seems to be happening, but one wonders whether they even have the most basic
scratching capability.
10:51:42 AM 
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