The Devil's Excrement

Two articles today in El Nacional (page A 20, by subscription only) and El Universal page 1-22 on international reports on PDVSA and the country’s difficulties with oil production.

The one in El Universal focuses on the report by the EIA (Energy Information Administration) which says that PDVSA’s exports are down by 25% so far this year in dollar terms.

The one in El Nacional has some interesting numbers and is base on reports by the IDB (International Development Bank) and CAF (Andean Corporation for Development). CAF projects that if the company does not invest US$ 4 to 5 billion to recover production, it will have a cash flow shortage that will be up to US$ 11 billion by 2008, this assuming the Government stops drawing dividends from the company which is unlikely to happen. According to an unidentified source at CAF, the only recourse the Government may have is increase the price of gasoline, a highly unpopular move (The price of gas in Venezuela is currently 15 US$ cents a gallon at the parallel market exchange rate.

The IDB report concludes that PDVSA’s own oil production has gone down by 1.2 million of barrels of oil per day since 1999. Total oil production is two hundred thousand barrels of oil less than in 1990 and PDVSA has compensated the drop partially with the operational agreements of the oil opening (much criticized by Chavez) which add half a million barrels per day and the strategic associations of the Orinoco heavy oil belt which contribute 450,000 barrels of oil a day.

These numbers are very scary to me; the only way that the standard of living of people can improve is for there to be economic growth. The private sector is doing terrible and it sounds like PDVSA will do worse going forward. This makes it impossible to expect any improvement in the standard of living unless this course is reversed. Even scarier would be if the price of oil were to fall….

This entry was posted on September 7, 2003 at 3:04 pm and is filed under Venezuela.