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.

24 Responses to “Some numbers about Venezuela just don’t lie”

  1. Maria Elisa Says:

    Es decir, etamos quebrados.

  2. moctavio Says:

    Los paises no quiebran, los ciudadnos pagan las estupideces de sus lideres

  3. Jesus Says:

    “Around US$ 10 billion is invested, mostly euros.”

    Hasn’t the euro been going down for a while? How much of those $10B are we sure still exist? For that matter, how do we know they haven’t sold all the gold already?

    These idiots aren’t exactly trustworthy with money or numbers.

  4. keplerito Says:

    you mean, you mean… it is not el niño’s fault?

  5. Lemmy Caution Says:

    The stupidity of the last few years is coming back to haunt the Government.

    .. as expected

  6. Antonio Says:

    I think PDVSA will look to the Commercial Partners to assume the near the whole invests.

    Then, in the first years Commercial Partners will sell the barrels and products discounting to its favor the PDVSA’s part of the investments.

    The “Apertura Petrolera” (oil openings of investments) was better approach; sorry we loose the whole idea. I think at this time, we should to have like 5 millions barrels of production, side to side with a very intensive refineries and petrochemicals, with the better and advancers partners of the industry.

    We will finish eating the oil that will be in underground in the second half of this century.

  7. concerned Says:

    It makes you wonder why PDVSA would scare off investment with upfront demands that few would risk under the current scenario. Why they didn’t lure in the investors and take over, or modify the original agreements after completion like their other ventures is the 27 billion dollar question.

  8. Mérida Says:

    It still went down .04. I am not so sure we are out of this electricity mess yet to be honest. We will see in the coming months.

    I however liked your analysis on PDVSA’s debt.

  9. island canuck Says:

    “I am not so sure we are out of this electricity mess yet to be honest.”

    Here in Isla Margarita we have gone from rationing 2 hours x 3 times a week to 2 hours x 4 times a week.

    That’s not the whole story.

    Last week unannounced we had a 4½ hour cut off in the middle of the night & last night another 2½ hours from 10 PM to 12.30 AM.

    The time of the cutoff was exactly 10 PM & it returned exactly at 12.30 PM. This was not maintenance or rain (their favourite excuse right now after sabotage). It’s not logical that the timing would be so exact. These are hours of rationing that they are slipping in without publicizing it.

    IMHO this problem is far from resolved.

  10. Juancho Says:

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

    Everything I have heard per PDVSA’s current state of affairs is that their is no mechanism in place to ever have even a remote chance of building pipelines, power plants, et al. They simply do not have the wherewithal to do it. Period.

    The present folks can’t even maintain existing thermo plantas, let along build new ones. The only option would be to sub-contract the building out to foreign contractors, whence $3 billion becomes $4 or $5 billion.

    Juancho

  11. paul Says:

    She will be dangerous as long as she puts her teeth in

    a chavez foot soldier

    http://www.telegraph.co.uk/

  12. deananash Says:

    The sooner the house of cards collapses, the sooner the country can begin to recover. That’s why I’m always encouraging the opposition to mock/support Chavez…to push him to GO FASTER.


  13. Salaries at PDVSA have been capped at Bs. 12 million per month. An engineer with ten years experience, not many left, could get hired by Shclumberger for about Bs. 30,000 a month.

  14. Lazarus Says:

    Production and upgrading costs in the Faja are around $8 to $10 per bbl, before royalties and taxes. Breakeven in the Canadian syncrude operations is upwards of $40 per bbl. This being a bit of apple and oranges comparison, but still each Faja bbl is more valuable, ignoring political risk, and this would raise the potential cost to Venezuela to settle with XON and COP.

    Further, the new Faja contracts were delayed, among other things, until PDVSA agreed to include international arbitration, basically saying that Venezuela accepts the validity of the process…

    Just a question of time, probably +/-2 years until the bill comes due

  15. Lazarus Says:

    I cannot comment on royalties and taxes, know some but not enough to comment as expert… but I do believe the Venezuelan properties are more valuable.

    The difference between the cement companies and XON and COP, a finding for these companies could be addressed in different ways. Venezuela has US assets and properties that could be assigned over (not even close to an expropriation, as it would follow international adjudication and a finding based on international law which the Venezuela government has agreed to) in lieu of payment. Mexico has no assets in Mexico I am aware of.

    I am familiar with some of the discussions, and it appears COP and XON may have PDV over a bbl, so to speak.

  16. Lazarus Says:

    sorry, I meant PDV has no assets in Mexico…


  17. [...] some dollars, the arepa project ain’t working wellImages of the “armed people” of VenezuelaSome numbers about Venezuela just don’t lieHarder to write about Venezuela as its leader and the country become more bizarre by the dayOne day, [...]

  18. moses Says:

    Check the latest info from Guri on Alfredo Weill’s Twitter:

    http://twitter.com/AlfredoWeil

    Nivel de Guri (22 abr) 248,92 msnm (-7 cm). Caudal de entrada 3.815 m3/s, caudal “turbinado” 5.354 m3/s. Pérdida neta 1.539 m3/s
    about 2 hours ago via UberTwitter

    Nivel de Guri (21 abr) 248,99 msnm (-4 cm). Caudal de entrada 4.808 m3/s, caudal “turbinado” 5.201 m3/s. Pérdida neta 393 m3/s
    11:47 AM Apr 22nd via UberTwitter

    Nivel de Guri (20 abr) 249,03 msnm (+ 0 cm). Caudal de entrada 5.830 m3/s, caudal “turbinado” 5.024 m3/s. Ganancia neta 806 m3/s
    11:47 AM Apr 21st via web

    Nivel de Guri (19 abr) 249,03 msnm (+5 cm). Caudal de entrada 6.385 m3/s, caudal “turbinado” 4.277 m3/s. Ganancia neta 2.058 m3/s
    12:55 PM Apr 20th via web

    # Ayer, luego de varios meses, OPSIS reporta una subida de 1 cm en #Guri. Lo curioso es que subió a pesar de un déficit de 477 m3/s
    3:13 PM Apr 16th via web

    Nivel de Guri (15 abr) 248,80 msnm (+1 cm). Caudal de entrada 3.844 m3/s, caudal de salida (“turbinado”) 4.321 m3/s. Pérdida neta 477 m3/s 3:11 PM Apr 16th via web


  19. [...] rats, another $1 billion debt Jump to Comments These things just keep turning up. From Correo del Caroní‘s generally reliable Natalie Garcia. Workforce now to be cut from [...]

  20. George Says:

    Hi –

    there is ONLY one number and today the number is 7.35
    as simple as that….

    Saludos


  21. [...] that, in this case US$ 9.78 billion. It sounds great, but where is the money going to come from, as I discussed in a previous post. This is something not even Ramirez can answer, his and the administration’s management style [...]


  22. [...] (Läs mer här, här och här.) [...]


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