PDVSA: Approaching Critical Condition….

Via El Universal, a very dire outlook on state-run oil holding Petróleos de Venezuela (Pdvsa).  As the article states:

“…Pdvsa has little cash flow.”

Pdvsa is looking for money to keep the pace of expenses, lamented Diego González, former manager of Pdvsa Oilfields and Gas.

Pdvsa’s alarms have set off. Ten issues bring the company in question. While the debate continues, another of the corporate former officials, ex Finance Executive Officer Ramón Espinasa pointed to additional failures, such as the gap between the official information and the information provided by the agencies to which the very Pdvsa is a member.

1.  Production plummeted in 10 years. The 3.26 million bpd that the industry produced in 2008, according to its last annual report, accounted for 3 percent less than the 3.33 million drilled in 1998. It is not a great difference, but a worse scenario has been envisaged from abroad. “According to the International Energy Agency (IEA), Venezuelan crude oil drilling plummeted to 2.3 million bpd in 2008 or 26 percent,” explained Espinasa in a report released by the University of Miami last February.

2.  Indebtedness grows fast. While Pdvsa reported in 2008 record revenues at USD 126.3 billion, it also accrued high indebtedness, that is, USD 15.0 billion. This number does not include a USD 1.5 billion loan requested in March 2009 from Japanese bank JBIC or USD 3.0 billion in debt bonds issued last July. In addition, Pdvsa should pay the 76 contractors under expropriation. Further, based on the last report provided by the industry, in 2008 accounts payable amounted to USD 7.5 million, more than twofold the amount of 2007.

3.  Less liquidity. The industry is able to respond. Pdvsa is far from bankruptcy. However, ending 2008, rather than fulfilling previously undertaken commitments, it used most of its income for social welfare. Further, doubtful accounts, including funding of allied countries, amounted to USD 244 million or additional 467 percent compared with 2007.

4.  Stretched payroll by 266 percent. Except for 19,374 people hired by Pdvsa contractors, the number of workers and employees with the company over the past few years went from 30,000 up to 80,000, a twofold rise. According to Pdvsa President Rafael Ramírez, there is a difference of 50,000 employees. However, the turnover has been much higher because the government fired more than 23,000 employees after the strike of 2002 and 2003. This means that less than 10,000 people have experience or years of service in the largest industry in the country.

5.  Less US dependence on Venezuela. Venezuela lost its leading position from 1995 to 1999 as the main crude oil supplier to the United States. The numbers from the Energy Information Administration show that in 1997, the United States received from Venezuela 1.8 million bpd, compared with 890,000 bpd last April. Venezuela has been displaced by Canada, Mexico and Saudi Arabia. Pdvsa is looking for alternative markets, but analyst Diego González thinks that “the US is a better customer. It is closer, pays in cash and without discount.”

6.  Increasing losses in the domestic market. Venezuela uses one fourth of its oil production and for 11 years the rate of USD 0.3-0.4 per liter of gasoline has remained unchanged. “The gasoline relative price dropped by 70 percent,” said Ramón Espinasa. Each barrel sold inside the country at USD 7 costs about USD 25, but it could be exported at USD 90.

7.  Blurred corporate mission. “No oil and gas company in the world sells food or manufactures refrigerators and stoves,” said Diego González. Pdvsa is also accused of taking a hardcore political stance. Pdvsa President was not ashamed to note in 2006 that “the new Pdvsa is red, very red, upside down.” In another, recent speech in Cabimas, western Zulia state, he justified a political rally. “We hate the oligarchy,” he admonished.

8.  Numbers do not match. There is a shadow of a doubt on the reports of Pdvsa and the Organization of Petroleum Exporting Countries (OPEC). A paper on “The outcome of the Venezuelan oil sector, 1997-2008,” by Ramón Espinasa accounts for a gap between the export numbers recorded by Pdvsa and those from the EIA. “The difference between the two of them is at 1.24 million bpd, or 42 percent.” Additionally, Pdvsa did not produce any performance assessment from 2002 to 2006.

9.  Claims of corruption abound. Pdvsa suffered a setback last year at a Miami court in the trial against a group of Venezuelans accused of scheming to conceal the source of USD 800,000 in cash carried in a suitcase into Argentina –the suitcase scandal. One of the talks disclosed on September 10th, 2008 involved the Venezuelan government. “President Chávez already knows that Rafael Ramírez’s assistant was the one who took the suitcase into the plane,” businessman Franklin Durán told his colleague Guido Antonini, according to the exhibit. It is an unfinished case at the Attorney General Office and the National Assembly, in addition to the irregular purchase of drills in 2007; alleged smuggling into Colombia in 2004, and the attempts at selling crude oil to the United States through dubious firm Free Market Petroleum in 2003.

10.  No goals attained. The government has spent about USD 77.3 billion for the so-called Oil Sowing Plan, the main purpose of which is to increase the oil output to 5.8 million bpd. However, the nearest amount reached 3.2 million bpd last year. Only three out of the 100 projects trumpeted by the new Pdvsa in 2005 has been halfwaycompleted. “There are no new refineries or petrochemical industries, and idle wells have not been refitted,” lamented analyst Diego González.

This entry was posted on Monday, August 3rd, 2009 at 2:39 pm and is filed under Petróleos de Venezuela, Venezuela.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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