Oil, Oil, Oil

December 28, 2003


Even at quiet times (I will ignore Chavez asking to spend the international reserves again today) oil is always in the news in Venezuela, the latest:


-PDVSA signed a letter of intent with Russian conglomerate Alfa Group to sell the 50% it owns in the Ruhr refinery with Veba oil. The procedure is certainly unorthodox. Alfa will carry out a due diligence process, after which a price will be discussed. Now, this seems to be unusual and no explanation has been given as to why the process will lack so much transparency. The traditional way: you open a data room, everyone that wants can see the financial and technical information, this is followed by a bidding process with a minimum price and the highest bid wins would seem more appropriate. Of course, some may say I am just against the Government.


El Nacional (by subscription) today points out the widening disparity between the numbers that PDVSA claims and those that the Central Bank publishes. According to PDVSA the corporation has sold US$ 17 billion in oil, but the Central bank reports only 12.6 billion. According to a source quoted in the article from within PDVSA, the US$ 17 billion is an “estimate” as the company no longer has the systems and controls to even verify its sales. Thus the difference between the two numbers PDVSA claims it will hand over the remaining US$ 4 billion during December.


-Alberto Quiroz Corradi in today’s El Nacional says that production is at 2.6 million barrels per day, the oil fields in the North part of Monagas state have severe damage that might force PDVSA to shut them down, western production is severely down and  all oil tankers owned by PDVSA require overhaul.


Of the above, the first two are facts; the third is an opinion from an expert. All three are cause for concern. Of course, given the title of this blog, maybe some may think it is a positive that we are managing to destroy the devil’s excrement too.

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