International press and the Venezuelan oil industry

October 31, 2003

Two interesting articles on the Venezuealn oil industry in the Financial Times and the Houston Chronicles. The first (by subscription) talks about how some analysts view Venezuela as a lower risk oil investment when compared to Russia as renationalization of the oil industry appears remote (I agree, but Venezuela never ceases to surprise me):

“In Venezuela, the long-term risk is probably less,” says Amy Myers Jaffe, the Wallace Wilson Fellow for Energy Studies at Rice University’s Baker Institute. “Chances are that they will not renationalise.”

The second one, taks about the damaging effect of current policies on the oil company PDVSA and how activity has been reduced significantly:

“I used to repair 200 to 300 pumps per month, but I haven’t been called to service anything since February,” said one contractor, who spoke on condition of anonymity. Buyers complain of high water content of crudes, and contractors report high sand presence in wells and constant problems maintaining well pressure. “

But I found the part about how the country is trying to inflate its oil production figures to be the most tragic. Maybe if I did not live here I might even find it to be funny:

“Furthermore, Venezuelan authorities now insist on including upgraded synthetic crude as part of petroleum production figures, whereas Venezuela previously categorized synthetic crude as bitumen and therefore not part of quotas. While Venezuela used to understate its production figures, now it is doing its best to inflate them. “

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