The Big Lie: Venezuela’s Oil Production

November 13, 2011
View this document on Scribd

We interrupt the Devil’s vacation for a short note on the Big Lie that Venezuela’s oil production represents. While I have not been keeping track of the news in much detail, I am after all on vacation, I do read my mail and the comments you make on the blog. One reader, call him VJ, sent me this incredibly revealing document above of a request by Minister Ramirez for Chavez to approve that PDVSA withdraw money from the Chinese funds to pay royalties and taxes as well as paying for the production of the oil that goes to pay for the Chinese loans.

When I return, I will analyze this document further, but for now, this document confirms clearly in page 3, the Big Lie that Venezuela’s official oil production represents.

According to the recently published financials of PDVSA, the country produced 2.95 million barrels of oil a day. These financials are audited, but using standard accounting rules, only financial aspects are audited, oil production is simply not part of the audit.

However, this document on page 3 contradicts this official number, as reader VJ notes. If 430,000 barrels of oil a day is sent to China to pay for the loans, as is clearly stated in the document, then Venezuela’s real oil production is 2.687 million barrels of oil a day, some 262,500 barrel a day less than the official numbers in PDVSA’s 2010 financials.

This number is higher than IEA or OPEC’s by a couple of hundred thousand of barrels of oil a day, but when one considers that in 2008 PDVSA said it was producing 3.3 million barrels a day, but this was reduced to comply with OPEC production cuts, you know the lie was even much bigger than it is today.

Not that one has any reason to believe this number either, after all: Would Ramirez tell the President the whole truth about his incompetence and the lies he has been telling since 2003? I doubt it, so take this number with a grain of salt. Do remember however, that PDVSA’s and CITGO’s US registered debt was repurchased in 2004 so that the members of the PDVSA Board could not be held liable in the US for lying. In Venezuela, they can lie all they want, there is no punishment for it.

But let’s assume for a moment the 2.687 million barrels a day is the truth.

Subtract Venezuela’s daily consumption of around 700,000 barrels

Subtract 430,000 barrels of oil a day to pay the Chinese loans

Subtract some 85,000 to Cuba, 20,000 to Argentina and 120,000 to Petrocaribe.

That’s some 1.355 million barrels of oil a day that do not generate any cash flow for the country in foreign currency (Except of Petrocaribe which we are told generates 50%). Subtract that from 2.6875 and you get 1.352 millions of barrel a days that generate foreign currency, according to official numbers. At US$ 100 per barrel that is less than US$ 50 billion a year, US$ 49.3 billion to be exact, a number smaller than CADIVI exports.

So, the Big Lie says that the Government is betting the farm on Chavez getting reelected. To Hell with the future, the future is NOW, borrow everywhere, issue bonds, borrow from China and hope for the best, unless the hand of God intervenes…

But the Big Lie is right there and it should be punishable by law at least as deception or misleading, at most as treason. But unless there is change, it will simply not matter. Ramirez can lie, deceive and manipulate all he wants as he allows PDVSA to be destroyed for the sake of Hugo’s reelection.

30 Responses to “The Big Lie: Venezuela’s Oil Production”

  1. Cal Says:

    I’m afraid a few words are missing:
    “If the 430,000 barrels of oil a day sent to China to pay for the loans, as is clearly stated in the document, [represent 16 per cent of daily production] then Venezuela’s real oil production is 2.6875″

  2. sapitosetty Says:

    Very nice catch. Even if the amount is really 15.5% and Ramirez is just rounding off, that means that the real production is 2.77 million bpd, not the 2.97 claimed in the most recent financials.

    The bit in there about the Wistar loan is also interesting.

  3. PM Says:

    Why are you subtracting the 430 k barrels sent to China twice? I didn’t get that part.. Also, even when 430k are being sent to china. Why is that not considered actual oil production?


  4. The key words in Ramirez’s memo are “national production”. If this means, as it should mean, TOTAL Venezuelan production, then the figure Miguel calculates is correct and very much in line with what OPEC has been reporting. But what if he meant PDVSA’s production? After all, he is talking about the impact of the Chinese loan on PDVSA, not on the nation.
    Remember that the foreign partners have ownership of 40 percent of their production in joint ventures. This 40 percent is not PDVSA’s and these volumes can not be defined as PDVSA’s production.
    I would not be surprised if Ramirez does no know what he is talking about.

    What I am saying is that the real truth about PDVSA’s oil production is still somewhat murky. Sorry to add to the confusion.

    • Roy Says:

      “Sorry to add to the confusion.”

      I don’t think it is possible to make it any more confusing than it already is. You would think that any number that consists of “Barrels of Oil Exported” plus “Domestic Usage” should be easy to calculate. The domestic usage figures are are the hardest to determine independently, but this number seems not to be contested. It is the number of barrels exported that seems to be the point of contention.

      So, why should this number be difficult to determine? All international shipping requires manifests. The number of oil tankers in the world is finite, their capacities are known, and thanks to satellites, the movements of all these ships is known. I would think that determining the total average exportation of oil per day from Venezuela would be a fairly simple exercise for the analysts of nearly any significant national intelligence agency, or even a decent private intelligence service.

      So, why does this appear to be a mystery? I have no idea.

  5. megaescualidus Says:

    Wasn’t something similar to this what kept Gaddafi going for four decades? He ran Libya’s oil industry close to the ground (not re-investing in it, and most surely lying about production numbers) while it still produced just enough $$$ to keep his government propped up.

  6. Dr. Faustus Says:

    Some further thoughts here…

    And,…and,…what about “refining” that oil? On November 30th ( two weeks!) Hugo Chavez is gonna ‘fork over’ 2.5 billion for the Abreu y Lima refinery in Brasil. Within 12 months of that he’ll pay another 3.5 billion for a total of almost 6 billion dollars. Six billion freaking dollars for a 40% interest in a 220,000 per day refinery. The insanity here boggles the mind. Six billion! And what does PDVSA get for that? The refining capability of a measely 100 thousand barrels per day. That’s it. Peanuts. Bupkis. These people are barking mad….

  7. deananash Says:

    The most important part of the post was in the last paragraph. Don’t bother looking it up, it’s worth repeating; “But unless there is change, it will simply not matter.”

  8. Dr. Faustus Says:

    Furthermore….

    It ‘appears’ that PDVSA has decided to pay for the Abreu y Lima refinery by issuing yet more bonds. This came out a few hours ago…

    http://www.eluniversal.com/economia/111114/state-run-oil-holding-pdvsa-issues-bonds-for-usd-23-billion

    The 2.3 billion in bonds they are issuing is suspiciously close to the 2.5 billion they need for the refinery. Wow. They are plunging the company further into debt……

  9. Bill S. Says:

    Shipping oil from Venezuela all the way to China. Now that sounds efficient.

    • CharlesC Says:

      Yes and for 1/2 price to China. Chavez -”businessman of the
      century”? Worst.
      For Chavez wearing a suit is when he really is being a clown.
      Note when he does business for example with China
      he wears his uniform??

  10. Kepler Says:

    Gustavo,

    Cónchale, chico…ya la vaina estaba enredada y tú la enredas más :-)

    On oil and efficiency:
    They were REALLY trying to ship oil to land-locked Belarus, of all places. Can you believe it? Sapitto didn’t. A Belorussian friend living in the West simply could not believe it…until I showed him the articles in the (Bela)Russian press describing how they shipped a couple of times up to Odessa, to put that firstly on train through Ukraine (as Julia was still governing and they couldn’t use the pipelines), then tried through Lithuania, etc, until they gave up and did the usual thing, with a swap involving the Azeris.

    Miguel, on another topic: could you comment briefly on the new bonds?
    http://www.eluniversal.com/economia/111114/pdvsa-anuncia-emision-por-2394-millones

  11. Dr. Faustus Says:

    To: Miguel Octavio

    Many thanks for that info on those bonds. I had not realized that. So I gather that PDVSA is still short on US dollars…..

  12. megaescualidus Says:

    I’m not much of a fan of Kiko Bautista and his TV program “Señores Buenas Noches”. However, on Monday, after the debate held by oppo candidates one of the guests invited to comment on the debate said that in his view one big thing all candidates missed across the board was to mention the expected degree of difficulty to govern should one of them win the presidency in the 2012 elections.

    PDVSA being indebted by $30 billion (according to the glenn’s linked article) is one of many aspects of these difficulties. Another one that quickly comes to mind as far as PDVSA goes, is that it will not have invested as it should in new exploration, technology, etc. (this has been said over and over).

    For whoever takes over at the country-macro scale (not just at the PDVSA scale) there will be many more difficulties to deal with.

  13. Dr. Faustus Says:

    To: Glenn….

    Thanks! That was an excellent article. One kind of sits back and reads this stuff in total awe. Really? Did they really do that? The pinheads in Caracas negotiated an oil contract with the Chinese which will bankrupt the entire state within,….what? ….a year? Venezuela will be utterly bankrupt in 2013,….right after the elections

  14. glenn Says:

    Hey, Chavez re-election at any costs! Damn the torpedoes, full speed ahead!

    • CharlesC Says:

      Chavez has really set up a “doomsday scenario” for 2012.
      Deliberately? I think so.
      Insanity ends with a “big bang”…

  15. Noel Says:

    This is an incredible document. I may be naive, but to me the most striking aspect of this Chinese deal is that it gives Pt Chavez access to $14 billion or so a year (430k x 360d x $90/barrril) with little or no control, and according to that same document, it seems that this was a key factor in setting the China deal.

  16. maracucho importado Says:

    the whole production numbers are normal chaves lies.
    i flew from barcelona to caracas 4 months ago and saw a supertanker going west, half full. my wife asked how i knew.
    easy, when you see so much red line out of the water.
    pdvsa has not paid most of thier providers.
    we are shuttering right and left.
    my people refused top work in the refineries as no maintaince, to any value, has occurred. they are afraid of being carbonizado.
    we are buying gasoline fron the brasilians. i would wager, and win,, we pay to them , more than one cent per litre.

  17. Kepler Says:

    I don’t know…so many marches people went to in 2004-2008 for every fart…but this is huge…Chavez is selling out Venezuela’s future and people do not get it…only some like us. What the hell is going on in Venezuela? What are journalists for? Are there journalists there?.

  18. island canuck Says:

    Kepler you have hit the nail on the head.
    With a free & active press this information would be front page news with reporters sniffing out the sources of fact.

    Unfortunately everyone in Venezuela is afraid to publicly denounce anyone in Chavismo for fear of reprisals. Examples abound.

    There are a few exceptions like the bloggers – Daniel, Miguel, Setty, Venpiramides, CC, Gustavo Coronel, etc. but the mainstream media shies away from hard hitting truths.

  19. John Maynard Says:

    This is from the Buenos Aires item: “The Energy and Oil Ministry — a portfolio headed by Rafael Ramírez, who is also PDVSA president (it’s all in the family) — affirms: “The financial impact of the crude oil shipments to China (some 430,000 barrels a day this year at an average of 90 dollars a barrel) over and above the PDVSA cash flow reaches 18.43 billion dollars, consisting of the costs of drilling and refining (the oil shipped), the payment of royalties and taxes and the unpaid shipments.” Does that really mean that PDVSA didn’t get paid for at least the production cost and associated expenses from the Chinese funds? And how can those shipments create a cash outflow for PDVSA even higher than earnings (even if Venezuelan crude is costly to extract, at $90 per barrel it still yields a nice margin)? Sorry for being so dumb, but this looks particularly ba.


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  21. [...] Venezuela is producing 3.1 million barrels of oil a day, a number that neither OPEC, nor EIA, nor Ramirez’ confidential memos to Chávez agree with. This document clearly states that Venezuela was producing around 2.7 million barrels of [...]


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