Everyone knows that Hugo Chavez likes to show off. He loves a red carpet, a bombastic claim, an outrageous promise. He makes announcements daily most of which stay just at that, part of the daily fantasy of Hugo Chavez the egomaniac, the fantasy man that lives off announcing anything. He goes on foreign trips where he signs dozens of agreements, most of which are shelved as soon as he leaves, without any follow up.
The problem is that this works both ways. He has announced the construction of seventeen (or is it eighteen?) refineries that have never panned out, but recently there have been four announcements that may have some truth to them, but are handled in such shoddy and strident way that in the end one has no clue if they are true or not.
It used to be that any oil exploration and production project had to go through the National Assembly. Even if Chavez can get anything through the Assembly faster than a speeding bullet, he does not even care for such details, the Hugo Chavez show must go on and there will not be any discussion of the details. Ahora PDVSA es de Hugo Chavez.
In Russia, for example, Chavez signed a deal by which Russia would invest US$ 16 billion in the Orinoco Oil Belt. Chavez signed an agreement on it and said that the PDVSA-Russia project would set up an upgrading plant that would produce 450,000 barrels of oil. No time frame was given for completing it. No details of the contract. Nothing. If true, the contract would have given a boost to Venezuela’s debt, but why bother? It’s the show that counts.
From Moscow, Chavez went to Madrid. He decided to go to a bookstore to buy some reading material to occupy his time when he is not talking. By “Chavista chance” he happened to run into the President of Repsol at the bookstore and proceeded to have a conversation with him that sounds too good to be true. With one well, a miracle of Spanish engineering, Repsol was able to estimate that the natural gas field it is exploring is 33 squared Kilometers in size and one of the biggest natural gas fields in the world. I am sure there is evidence that there is lots of gas, but the fact that only one well has been drilled, that little is known about the gas in it and that it was announced in such a non-standard fashion, means that the announcement has little credibility at this time. Exerts tell me that even if the whole enchilada was true, it would not be until 2016 that this project would contribute to PDVSA’s bottom line anyway.
Chavez then came home to check on his economic non-plan and announced that he had signed a project with the Chinese to produce 450,000 more barrels of oil from the Orinoco Oil Belt and that the Chinese oil company would invest US$ 20 billion within three years to produce another 450,000 barrels of heavy crude from the Orinoco.
But then it was not clear, was this an agreement that was reached? Or did Venezuela really sign something? (Without anyone knowing the details)
Because lots of question arise. Some are basic: Why does it cost the Russians US$ 16 billions to produce 450,000 barrels of oil a day, while it will, cost the Chinese US$ 20 billion? Just asking…
And there are others. For example, is this the total investment? If so, where is PDVSA going to find the money for its 60% stake in each project? That is, if the Russian and Chinese oil companies will participate in US$ 36 billion worth of partnerships, then PDVSA will have to contribute 60% or US$ 21.6 billion. How can a company that can not even pay its suppliers and contractors US$ 5 billion it owes them come up with that amount of money?
Of course, it may be that the Russians and Chinese are willing to lend PDVSA its share just so that they can learn about heavy oil upgrading and production (Neither of them have experience in this), but since no details were given, we just don’t know.
Once again, if true this would be great news for Venezuela, just the idea of US$ 36 billion being spent in the country in the next three years would be an incredibly positive development.
But wait, can you really build a 450,000 barrel a day heavy oil upgrader in the Orinoco Oil belt within three years?
Well, it doesn’t seem very feasible. The old Cerro Negro, Sincor, Petrozuata heavy oil projects took a minimum of five years to start production to get and they were smaller and developed by companies that had experience in heavy crude production and upgrading. So, once again, if half of the whle thing was true, it would be great, but the lack of detail, colors everyone skeptical on all this.
Sounds like another lost opportunity.
And then just when people are starting to feel that this whole set of showy announcements by Hugo Chavez may be be a boost to Venezuela for the next few years, comes this extremely solid and positive announcement by Eulogio Del Pino, Vice-President for Exploration and Production of PDVSA, that PDVSA and France’s Total, plan to spend US$ 25 billion on another upgrader in the Orinoco Oil Belt, including technical details and all.
Except that Total rained on the PDVSA parade by issuing a press release saying that “Oil projects with Venezuela are plans, not facts”
Which by now, makes everyone a skeptic.
Sadly, there has to be some truth to some of all this. Even a fraction of what has been announced would make Venezuela’s and PDVSA’s debt go up, which means that both could get cheaper financing in the future and cheaper financing means more funds for Venezuelans.(There are rumors that the Government will sell US$ 4 billion in bonds next week in a 2019 and a 2024 issue to be sold locally for Bs.)
But no such luck, because besides Chavez’ desie to be in the limelight, showing off, he relies on a bunch of people that suck up to gim and Ramirez who have to keep pleasing him whether what they say is true or not. So, even before the anything is finalized they make announcements about things that are not even off the drawing board, like Total’s project and in the end screw up regular Venezuelans,who get no health care, have to buy more expensive items or do not receive the social serives they need simply because the Hugo Chavez show must go on.
And that is all that matters.