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!

11 Responses to “The Petrobras/PDVSA refinery: Another Failed Promise By The Revolution”

  1. Roy Says:

    Here is my take on it…

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

    A: Chavez made the promise, but Ramirez knows he can’t fund it and meet Chavez’s demands for cash for domestic commitments. He knows that Chavez has a short attention span and he is ignoring the problem, thinking it will simply go away. And it just may well…

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

    A: Whim on the part of Chavez, yes. But, on the second part, in addition to the reason above, PDVSA definitely does not want to have to cooperate with any serious players, as it would expose their fundamental incompetence.

    Q: 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?

    A: Lula and Brazil was lending Chavez international legitimacy because it furthered their own international policy goals. Given the extremes of behavior exhibited by Chavez, Brazil can no longer afford to be linked so closely to him. Thus, Brazil is not being as cozy with him as before. Chavez knows that well of kindness is going dry.

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

    A: No.

  2. bobthebuilder Says:

    How many of his promises has Chavez kept during 12 years of power? As a % it must be single digits, if not much less.

    The problem is few are prepared or able to hold him to account. Who is most at fault for this – the opposition, the media, Cubans, Venezuelans?

  3. Ira Says:

    There has to be a financial story behind the “cancelled” nuclear program with Russia as well, correct? I know that the scientists and engineers aren’t there to make it happen anyway, but the abrupt cancellation after using the excuse of Japan’s problems must have to do with money.

    On the other hand, when you really look at it, when has Chavez ever sincerely invested in infrastructure in the first place?

  4. Speed Gibson Says:

    nothing like chubby fuck Hugo and savannah ass Moochelle O to tell us how to eat….

    http://hosted.ap.org/dynamic/stories/L/LT_VENEZUELA_CHAVEZ?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2011-03-27-20-03-25

  5. A_Antonio Says:

    What is your opinion about the last promise to increase production to 4.5 millions barrel days in a few years?

  6. island canuck Says:

    “What is your opinion about the last promise to increase production to 4.5 millions barrel days in a few years?”

    Ha, ha, ha

  7. A_Antonio Says:

    Bad news tothe Cubans. Jummy Carter is in the island; with his help Cubans had castros for decades. Chavez have lot to thanks him.

  8. A_Antonio Says:

    Sorry, my mistake, Chavez “has” lot to thanks Carter.

  9. Gringo Says:

    island canuck:
    “What is your opinion about the last promise to increase production to 4.5 millions barrel days in a few years?”

    About the same as my opinion of this 2004 prediction.

    PDVSA’s 2004-2009 business plan is both ambitious and realistic. The plan calls for an increase in crude oil production capacity from the current 3.8 million barrels per day to more than 5 million barrels per day by 2009.
    Boldface as in boldfaced lies. Or was that baldfaced lies?

  10. Plasmaj Says:

    another very pertinent question is why a refinery that will refine about 230k bpd will cost $12bn. They just sold their share in the ruhr oel for $1.6 bn which had almost exactly the same capacity.

  11. Yngvar Says:

    PDVSA would have to commit, but commitment means responsibilities. No one wants to be project leader or construction supervisor, with no real authority or power because of a whimsical boss. “Do nothing” – the credo for socialist self-preservation. The engineers are stalling.


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