Archive for March 27th, 2011

The Petrobras/PDVSA refinery: Another Failed Promise By The Revolution

March 27, 2011

(Lula to Hugo: You are such a Pinocchio!)

As Chavez promises now and ever increasing number of new projects, news from Brazil is that his biggest and most aggressive project with Brazil, the Abreu and Lima refinery may not happen, because Venezuela is showing very little interest in it. The refinery was supposed to be the centerpiece of Venezuelan/Brazilian cooperation. Many times Petrobras has given up on it, but Chavez and PDVSA have always said they would go forward with it, but then nothing happens, like so many things in the revolution and in Chavez’ promises.

In fact, Petrobras has said a couple of times Venezuela’s participation in the project was dead, but Chavez and his Minister of Energy and Oil have revived it every time they went to see former Brazilian President Lula Da Silva.

In a note published in Brazilian business newspaper Valor, sent to me by a reader (Thanks!), Roberto Costa Petrobras’ Director for Downstrean operations, clearly shows his frustration over PDVSA’s lack of interest in providing adequate guarantees.

According to the note, Petrobras was going to have 60% of the refinery, while PDVSA would have 40%. Petrobras obtained financing from that country’ development bank Bndes. Bndes, which is run like a serious bank, it has a  credit rating and issues bonds internationally, asked PDVSA for some guarantees for the loans. PDVSA presented some 5-year revolving lines as guarantee, which Bndes rejected. Minister of Energy and Oil Ramirez said that by February the problem would be solved, but here is late March and nothing has happened.

If PDVSA does not come up with the guarantees, the project will die in August when Bndes’ credit approval expires.

This raises so many questions, that it is difficult to choose a sarting point:

-How can a company like PDVSA not be able to furnish appropriate guarantees if the project is considered to be so important?

-Was this another Chavez whim and PDVSA really has no interest in it?

-Is it that now that Lula is gone and the new Brazilian President is not as friendly to Hugo that Chavez is no longer interested?

-Is it simply lack of coordination and management on PDVSA’s side?

All of these questions remain up in the air at this time.

In the end, this is another Chavez whim/promise made to be in the headlines but that never materializes. Recall that Chavez made a lot of noise about another loan Bndes had given it a year and a half ago and nothing has happened, like so many other things Chavez promises.

Chavez is great at announcing and promising, but very bad about delivering, as so many of his “projects” show. The Bndes/Petrobras and the Bndes story is just another example of over promising and populism by the Venezuelan President.

But hey, it works, people buy it and he never delivers it!