Archive for April 12th, 2010

Some numbers about Venezuela just don’t lie

April 12, 2010

Numbers, numbers, numbers, they can be painful, but they tell the truth. Some interesting ones from around the country and the world.

1) Today Chinese company Synopec bought Conoco’s 9.03% stake in Syncrude for US$ 4.65 billion.

What does that have to do with Venezuela?

Easy. The Chavez Government nationalized Cerro Negro, a heavy oil crude project, in which Exxon Mobil owns 41.6% of the company. It also nationalized Petrozuata, a similar project in which ConocoPhillips had 50%. Both companies have gone to arbitration as Venezuela offered a tenth of what these companies want in compensation.

The World Bank arbitration Court always looks at comparable transactions in the world when awarding compensation. Thus, this becomes a good comparable, a very recent one at that. Moreover, ConocoPhillips sold a minority stake, while PDVSA took control of these projects, the price is different but we will ignore that in this discussion.

Syncrude produces 280,000 barrels a day according to their website, but they can take it to 500,000 barrels a day. But both Cerro Negro and Petrozuata can be expanded and that requires money in any case. So, I will consider all three projects to be static, valued at their current levels of production.

At the transaction price, the value of 100% of Syncrude is US$ 51.5 billion for a project that produces 280,000 barrels of oil a day, that says each 1,000 barrels is valued at 184 million dollars. That means that Cerro Negro with 120,000 barrels of production is valued at US$ 22 billion and Petrozuata at US$ 36 billion.

This also means that Exxon Mobil’s stake is worth around US$ 9.1 billion and CoconoPhillips’ stake is worth around US$ 18 billion. ExxonMobil is asking the arbitration Court for US$ 12 billion, I have not seen a number for what ConocoPhillips is demanding.

So, just there Venezuela has a debt of some US$ 27 billion. Not a pretty number. It will take four or five years, but the number is final, no appeal.

2) We continously hear about Carabobo and Junin, those wonderful projects that are the future of PDVSA. Except that they cost money and PDVSA has to come up with 60% of the money, to wit:

Carabobo 1 and 3 Total Cost 40 billion, Financing 2 billion, PDVSA’s share US$ 22 billion

Carabobo 2 Total cost 20 billion, PDVSA says it will go at it alone                   US$ 20 billion

Junin signed projects (3) in partnership with Russia, China and ENI. Total cost US$ 60 billion, PDVSA’s share US$ 36 billion. Assume Russia and China finance US$ 4 billion, PDVSA’s share US$ 32 billion.

Junin 10 field which PDVSA says it will do alone Total cost US$ 20 billion

PDVSA is responsible for US$ 3 billion in infrastructure, such as pipelines, power plants and the like.

That gives you like US$ 97 billion in five years if all of the promises of Hugo and Ramirez become reality, which, of course they will not. Half of that would be too much. I wonder if these companies or countries will sue Venezuela or ask for more if PDVSA can’t come up with the funds. BTW, the “oil opening” model of each project issuing its debt is looking better and better, except that PDVSA did not control them, the partner did. Hard to repeat now. Losing sovereignty one stupid mistake at a time.

We are talking 20 billion a year in debt, loans, whatever. Simply impossible. The stupidity of the last few years is coming back to haunt the Government. Add to this the other deficits and it gets very tough. And the arbitration in part 1) adds US$ 27 billion.

3) Venezuela’s reserves went under US$ 28 billion for the first time in one year.

Around US$ 12.7 billion is in gold.

Around US$ 10 billion is invested, mostly  euros.

Around US$ 4 is not there, it is rights, or money available to be borrowed

Getting tight there, no wonder CADIVI is so stingy. Reserves (without Fonden) are down US$ 2 billion so far this year.

You do the math, unless oil prices go up. Oh baby!

4) Good one (For once!). It must have rained quite a bit in the Caroni river basin. Flow jumped from something like 775 m^3/sec. on Friday to 2,886 m^3/sec on Sunday. Rarely has flow jumped down below 1,000 m^3/sec after being so high this late in the spring.

And since we are on the topic of Guri, here is a truly historical char, since 1950 of the flow into the area

So, as I have said for a while it looks ok, like we are going to make it, 2011 may be trouble, but it does not look like we will get to the critical point this year.

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