Venezuela to pump 12% more oil as project costs rise and credit freezes

The credit crisis is hitting home in Venezuela in South America. Days after Chavez won his beloved struggle to be able to run for re-election plans have been announced by the government that Venezuela pans to boost oil output by at least 12%.

By 2013, Venezuela aims to increase its production capacity to 4.94 million barrels a day. This will require around $4.41 billion usd for drilling, $2.2 billion usd for steam injection to increase production and $6.51 billion for equipment to facilitate converting the region's tar-like oil into a low-sulfur crude oil for export.

Back in October 30, PDVSA opened the bidding for potential partners for ventures in the Orinoco oil belt. Which by the way Chavez never forgets to mention now puts Venezuela up there with Saudi Arabia and Canada in "proven petroleum deposits."



PDVSA is currently offering a 40% stake in a joint venture with the Venezuelan state oil company to develop new projects. According to Bloomberg the contracts can extend up to 40 years.

South-South Cooperation: Venezuela's PDVSA begins drilling in Bolivia's Vibora Field

Petroleos de Venezuela SA (PDVSA), announced today one of its oil rigs began operations in Bolivia. Drilling is reported to have begun in the Vibora field, roughly 170 km north of the city of Santa Cruz.


Not a bad headline for Morales and his supporters who voted "yes" for a new constitution just days ago which allows for Morales to run beyond his term limits and which is partly designed to empower indiginous rights.

South-South Cooperation in focus: Venezuela & Argentina

Argentine President Cristina Fernandez signed 21 agreements on Thursday with the country of Venezuela. The agreements are meant to lay the foundation for future cooperation between the two South American nations in such fields as energy, industry and transportation.

Argentinian President Cristina Fernandez (L) and Venezuelan President Hugo Chavez
attend the signing ceremony in Caracas, the Capital of Venezuela, Jan. 22, 2009.

The two presidents agreed to set up a joint venture between Petroleos de Venezuela (PDVSA) and Argentina's state-operated Enarsa energy company to develop oil fields in Venezuela.

"Our strategic cooperation is increasing," Chavez said when referring to the commercial and diplomatic ties between Venezuela and Argentina.

Click here to read further details from this article, courtesy of Xinhua

Latin America in focus: Commodities, food and South-South Cooperation (delayed post from Oct 30)

1) Brazil Petrobras agrees to explore for oil offshore Cuba – Benito's take

Brazil frequently enjoys assuming the role as a leader in the developing world of promoting South-South Cooperation.  This time the nation has agreed to help Cuba explore for oil and gas. Brazil's Petrobras is expected to sign an agreement with Cuba for deep-water oil and gas exploration during President Lula da Silva's two day visit to the island this week.

Cuban media is reporting both sides will “sign a contract for the production of hydrocarbons.” No further details have been reported, but the Cuban Foreign Minister Felipe Perez Roque has stated he “anticipates Cuba will sign in the presence of Lula da Silva a very important agreement for oil exploration in deep water.”

Although the details are shady at best, it no less is a sign of Brazil further developing its reach in promoting economic cooperation among developing nations, with the pretext of mutual economic development.

To read more about this development check out this article published by Merco Press.



2) Petrobras Transpetro unit won't delay 49-tanker plan (update 2) courtesy of Bloomberg LP

Oct. 30 (Bloomberg) -- The transport unit of Petroleo Brasileiro SA will be able to maintain a 49-ship fleet expansion program because it has sufficient financing from a government fund and can ignore the world credit crunch, the unit's president said.

Brazil's Merchant Marine Fund, managed by state-development bank BNDES, has enough cash to pay the $2.5 billion needed for 26 tankers that have already been ordered, said Sergio Machado, president of Rio de Janeiro-based Transpetro, as the unit is known. The fund can also finance another 23 ships that will be ordered by the end of the year, he said.

State-controlled Petrobras, as Transpetro's parent is known, may delay some investments as oil prices fall and credit becomes scarce, Chief Executive Officer Jose Sergio Gabrielli said Oct. 20. The credit crunch may force the cancellation of 20 percent of the deepwater oil rigs under construction, Brian Uhlmer, analyst at Pritchard Capital Partners in Houston, said.

``Everything regarding our shipbuilding program is defined and is part of Brazil's strategic plan,'' Machado said in a phone interview from his office. ``The Transpetro program is fully financed.''

Click here to access the full article from Bloomberg LP



3) Favorable 2009 beef export prospects for Brazil and Argentina, courtesy of Merco Press

Beef exports are forecast to rise nearly 2% during 2009 as gains by Brazil, Argentina and the United States outweigh downturns in Australian and New Zealand shipments according to the US Cattle network.

As the world’s leading trader Brazilian exports are forecast to spring back nearly 5% to over 2.0 million tons. Shipments are projected to decline in 2008 for the first time since 1996. However, by overcoming sanitary barriers, it is now poised to regain sales to Chile, EU-27 and other key markets...

...

In Argentina exports are forecast to expand 20% to 480,000 tons in 2009 after plummeting an expected 25% in 2008.

The rebound stems from the Argentine government setting a higher export quota, cattle and beef supplies not expected to be limited by farmer strikes, and thermo-processed product to be exported outside of the quota.

Click here to access the full article from Merco Press



4) Venezuela books 10.252 billion barrels more in oil reserves, courtesy of Dow Jones Newswires

Venezuela said Wednesday it was adding 10.251 billion barrels of crude to its national reserves as part of an ongoing review of its hydrocarbon reserves.

With this increase, the oil-rich country's total reserves now amount to 152.561 billion, making Venezuela the country with the second largest crude reserves, the Venezuelan oil ministry said in a statement.

Click here to access the full article from Rigzone
http://www.rigzone.com/news/article.asp?a_id=68576

5) Chile trims 2008 copper output forecast again, courtesy of the Mining-Journal

Chile on Wednesday trimmed its 2008 copper output forecast for the second time since July, this time to 5.45Mt, citing operational issues but not slumping prices for the metal.

Limited financing due to the global credit crisis may delay or cancel some new projects, said Eduardo Titelman, executive vice-president of Chile`s state copper commission Cochilco, one of the world`s leading copper think-tanks.

Copper prices rose above US$2/lb on Wednesday, but they remained less than half the record levels of over US$4/lb hit in July. A global credit crunch and fears the world could enter a recession have hit demand for metals like copper, heavily used in the auto and construction industries.

Click here to access the full article from the Mining-Journal

http://www.mining-journal.com/Breaking_News.aspx?breaking_news_article_id=5174

South American Energy in focus

Venezuela's PdVSA Reports Successful Oil Drilling Ecuador

A slew of energy developments in a handful of countries in South America has made headlines in the past day or so. For starters Venezuela and Ecuador made headlines this morning once again... this time for successful drilling and exploration in the Amazonian region. The newly established supply of crude will eventually be sent to the new refinery being build on the pacific coast.

Click here to access the full story from Rigzone.



Petrobras' Production Soars 3.3% More in June

Petrobras’ average oil and natural gas production abroad was 218,117 barrels of oil equivalent per day (boed) in June, 8.1%.

Added to the volume lifted from the domestic fields, Petrobras’ total production in June set a monthly record, topping out at 2,421,155 barrels of oil equivalent, 3.3% more than a year ago and 2.3% higher than May 2008.

Click here to access the full story from Rigzone.



Arduous Process of getting the Camisea facilities in Peru up and running
- Wood Snag 3-Year Maintenance Contract for Camisea Facilities

The Camisea Project comprises the exploitation The San Martin and Cashiriari fields natural gas fields, the construction and operation of two pipelines, one for natural gas (NG) and one for natural gas liquids (NGL) and the distribution network for natural gas in Lima and Callao. The pipelines wiII make NG and NGL available for domestic consumption and for export.

Natural gas wiII be transported to the main consumption center in Lima, where it will be used for residential and industrial purposes and to generate electricity, that will then be distributed nationwide through Peru’s existing transmission infrastructure (click here to read more about the Camisea Project)

Wood Group Production Facilities has been awarded a three-year, performance-based contract by Pluspetrol Peru Corporation to provide integrated maintenance services for the Camisea facilities in Peru. The Camisea project includes the largest natural gas field in the region.

Click here to access the full story from Rigzone



Shell to invest $300m in search for oil and natural gas in Peru

Royal Dutch Shell is ready to invest as much as $300 million in exploring for oil and natural gas in Peruvian waters as part of a agreement with BPZ Energy, executives from the two companies said Thursday.

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In March, U.S.- and Peruvian-owned BPZ found an estimated 60 million barrels' worth of crude oil and 40 million cubic feet of natural gas in the same region off Peru's northern Pacific coast.

The accord announced Thursday calls for Shell to spend up to $300 million on exploration and - if reserves are found - exploitation of natural gas, while BPZ will put the same amount into searching for crude oil along with an additional $150 million to build an electric plant in the area.

Under the deal, BPZ will get 51.75 percent of any oil or gas produced and Shell will claim the rest.

Click here to access the full story from Rigzone



Geopark Grabs up Additional Petroleum Block in Chile

GeoPark Holdings Limited announced that the Ministry of Mining in Chile has awarded the Otway Block in southern Chile to a consortium consisting of GEOPARK (42%), Methanex Corporation of Canada (16%) and Wintershall Energia SA, a division of BASF Ag of Germany (42%).

The Otway Block is a large new attractive exploration area (5,992 square kilometers) located in the Magallanes region near GEOPARK's Fell Block operation in Chile. GEOPARK is the first and only private-sector oil and gas producer in Chile and the addition of the new Otway Block will further enhance GEOPARK's position as the premier private-sector oil and gas operator in Chile.

Click here to access a previous post in regard to GEOPARK's natural gas discoveries in the Magallanes Region -- published on South-South Cooperation on June 17th, 2008.

Click here to access the full article from Rigzone



Colombia to create oil price stabilization fund

Colombia's government is creating an oil price stabilization fund (FEPC) that will be used to cushion domestic oil prices from unexpected rises on international markets, government news agency SNE reported.

Congress has approved the fund, which is included in the national development plan and must go to the president for final authorization. The finance ministry would administer the fund, which would receive financing from the existing oil stabilization fund (FAEP) owned by state oil company Ecopetrol.

Click here to access the full story from Rigzone

Chavez to expand Venezuela's oil pact

Venezuelan President Hugo Chavez is flexing the country's petroleum muscle once again, stating he seeks to expand Venezuela's oil pact to poor nations in the Caribbean.

Chavez stated "Nations taking part in Petrocaribe initiative will now be required to pay just 40% of the bill within 90 days - down from the current 50%. The rest can be paid over the next 25 years at a fixed rate of 1% percent as long as oil prices are above US$100 a barrel.

"That could compensate for the horrible curve of the jump in oil prices," Chavez said. He added that 70 percent of payments may be deferred if oil reaches US$150 a barrel.

AP Photo

In this photo released by Miraflores Press Office, Venezuela's President Hugo Chavez speaks during the opening ceremony of the Petrocaribe Summit in Maracaibo, Venezuela, Sunday, July 13, 2008. President Hugo Chavez sought to expand an oil-supply pact that is delivering fuel to 17 nations, calling it a tool against poverty and dismissing opponents' accusations that he is giving away Venezuela's oil wealth.

Sounds really generous to me... Venezuela is unarguably of the wealthier Caribbean nations in the Caribbean, however it does remain a country with many economic problems. Calculating if such a long-term donation is even feasible is difficult to do. So many variables could arise in the next 25 years which could cause the cash flow from its oil accounts receivable ledger simply stop...

New government could come into power who don't honor the repayment. Alternative energy could leap frog and bring the price of oil down substantially. A new government could come into power in Venezuela and re-arrange the terms, leaving small Caribbean contries with little bargaining power against Venezuela: their provider of energy and also regional political and economic power.

No less the gesture as it stands is a nice one, and in reality there is just so much domestic investment that is possible given Venezuela's limited FDI and internal domestic capacities. Oil drills may be in shortage, but so is the industry as a whole since the PDVSA strikes. Given the set backs, PDVSA remains a relatively vibrant operation, turns a profit and even manages to give Chavez some diplomatic barganing chips by making Venezuela into a gracious, oil rich country which cares about its region and the poor of world... unlike the United States, which is a underlying point Chavez hopes to make through such efforts.

Oil and Gas in focus: PDVSA Q1 profit rises 80% to usd $3.5 billion

PDVSA 1st quarter net profit shot up 80%, to usd $3.5 billion, up from usd $ 1.92 billion in the same quarter of 2007.

Although PDVSA's actual real performance might be difficult to predict due to various news agencies and the respective bias they carry when reporting on anything Venezuelan, PDVSA hard figures suggest some hope that Chavez is re-building Venezuela's delapidated and crumbling oil sector.

I am not down on the ground in Venezuela, but from the different Venezuelan-American's i've met, most claim any news they hear from their family and friends in Venezuela is highly bais depending on the individuals political ideology (pro-Chavez or anti-Chavez).

With this in mind I will include te major figures released by PDVSA today, and reported by Business News Americas (BNAmericas). To access the full article from BNAmericas click here.

-- Net profit: rose 80% ---> usd $3.5 billion from 1.92 bilion in 1Q07
-- Total revenue: rose 52% ---> usd $31.4 billion from 20.7 billion in 1Q07
-- Ebitda: rose 85% ---> usd $ 33.3 billion from 19.7 billion in 1Q07

-- Total costs: rose 38% to usd $24.3 billion from 17.6 billion in 1Q07

-- Revenues dedicated to social spending: up a whopping 376% to usd $2.68 billion from $565 million in 1Q07
-- PDVSA total contribtion to Venezuelan state: rose 112% to usd $7.39 billion from 3.48 billion in 1Q07

-- PDVSA oil production: rose 2% to 3.21 mb/d compared with 3.11 mb/d in 1Q07
-- PDVSA natural gas production: fell by 5% to 6.41Bf3/ d (181mm3/ d) compared with 6.73Bf3/ d in 1Q07

***NOTE *** the International Energy Association estimates Venezuela's production is actually close to 2.5 mb/d. Chavez did fire large numbers of workers in the oil sector whom he felt where not supporting his "Boliviaran Revolution." He also soon came to see them as a potential threat, lush with power and money from working in the oil sector, international connections, etc. He fired them all when he took a tough position during the country wide protests which paralyzed the country for about a year. When it was over, 1000's of PDVSA and other workers from the oil the sector found their traditional economic and political power was not able to dictate terms in Venezuela, and as they continued to push they found themselves jobless. 100's of Venezuelan's left to Texas, Miami, the Middle East in search of work in the oil sector abroad.

-- PSVSA recieved an average of usd $87.89/ barrel for exported crude, up 81% from $48.65/ barrel in 1Q07

-- PDVSA exploraton activities: focused on 23 exploration projects with the principle objective of investigation and confirming new reserves.