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Reuters – CARACAS – President Hugo Chavez’s re-election on Sunday means Venezuela’s state oil company PDVSA will remain highly politicized and will continue its discount supply deals with his socialist allies.
Chavez, 58, won a new six-year term with more than 54% of the vote against opposition rival Henrique Capriles, a young state governor who sought to end his 14-year, self-styled revolution.
Critics say Chavez has hobbled PDVSA with the weight of his government’s financial demands — it helps pays for everything from sports teams to health clinics and home building – meaning it has neglected to invest enough in the oil business.
The industry brings in more than 95% of the OPEC nation’s hard currency revenue. PDVSA produces almost 3 million barrels per day (bpd) and boasts the biggest crude reserves in the world.
But the company, which has more than 100,000 employees, has repeatedly failed to hit its own production targets and has suffered a string of sometimes-deadly accidents in recent years. Following Chavez’s comfortable victory, his government will seek to push forward a raft of ambitious joint ventures with foreign partners in the huge Orinoco extra-heavy crude belt – one of the planet’s biggest, mostly untouched oil reserves.
Venezuela’s crude production fell in 2010 to its lowest level since a months-long strike at PDVSA a decade ago, and Orinoco is key to the government’s hopes of increasing output by as much as 2 million bpd or more over the next few years.
In total, the Chavez administration — which has repeatedly raised taxes on the oil industry while requiring that PDVSA have a majority stake in all projects — expects investment of more than US$80-billion in the Orinoco belt over the next several years.
It has signed deals for projects there with foreign companies including Chevron of the United States, Spain’s Repsol, Italy’s Eni and a consortium of Russian companies, including Rosneft.
Executives from foreign companies in some of those joint ventures say they have suffered delays because of late payments by PDVSA, lack of infrastructure and uncertainty over tax rules.
Those delays are likely to continue, but the Russian joint venture began pumping its first oil last month, and others are due to come onstream soon.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2012/10/08/more-of-the-same-for-venezuela-oil-after-chavez-clinches-re-election/