Venezuela's Oil Tale

Article excerpt

Globally, oil prices are again on the rise, but President Chávez' oil and economic policies mean that they will likely bring few long-term economic benefits to Venezuelans.

THE UNCERTAINTIES SURROUNDing Venezuela and President Hugo Chávez make it very difficult to discern the truth about what is going on in the country. For example, how does one explain the underperformance of Venezuela's bonds in the past four years, in the middle of an unprecedented increase in oil prices? Or the market's deteriorating confi- dence in Venezuela despite the fact that is has improved its liquidity and capacity to pay?

Venezuela's oil and energy policies, which are at the heart of national politics as well as the national economy, are often misinterpreted. But it is important for analysts to focus on several key aspects of the country's economic policymaking, including the current and projected levels of oil production, the cost of Venezuelan petro-diplomacy in Central America and the Caribbean, and the opportunity cost of the domestic gasoline price. An analysis of Venezuela's energy and economic policies reveals some surprising conclusions, but one thing is certain: do not expect any changes before the presidential election in December 2012.

HOW MUCH DOES PDVSA EXPORT?

A variety of methods can be used to calculate Venezuela's oil exports. Oil export figures reported by the Central Bank of Venezuela (BCV) and the state-owned petroleum company, Petróleos de Venezuela, S.A. (PDVSA) claim total oil production of 3.1 million barrels per day (mbd) in the first half of 2010, with exports of 2.4 mbd- down from 2.8 mbd in exports from the same period in 2009. At this level, oil exports generated approximately $61 billion last year.

But figures from the Organization of the Petroleum Exporting Countries (OPEC) contradict Venezuela's. OPEC calculations claim an average oil production of only 2.3 mbd for 2010, which implies gross exports of 1.6 mbd. PDVSA has constantly said that the source of this difference is that the OPEC figures do not fully account for production in the Orinoco Belt-a territory with large deposits of extra heavy crude oil-along with condensates and other products.

Given the nearly 1 mbd difference in the Venezuelan versus OPEC figures, PDVSA hired British firm Inspectorate to verify its level of oil exports. Since 2009, Inspectorate has certified net oil exports, defining them at 2.3 mbd on average during 2010-a number close to the official figures.

Another method for determining true oil exports is to compare Venezuela's export numbers with Venezuelan oil import data reported from other countries. In carrying out this analysis with data for 43 countries from the United Nations commodity trade statistics database, no major deviation from the official gross export data published by PDVSA could be found for the 2005-2009 period.

But the same could not be said for net exports. The difference among net and gross exports could be important, since PDVSA said that it bought $24.3 billion in oil and derived products (around 1.2 mbd) in the first nine months of 2010. Basically, some of the oil processed in the refineries owned or partially owned by PDVSA could have been bought from other producers. The problem is that no other oil-producing country claims to be selling oil to Venezuela. This likely means that most of these transactions are among different refineries that PDVSA owns, or in which it has a form of participation.

From these figures, it is not possible to make a final conclusion on net oil exports. The sample does not include all countries, and PDVSA could still have some margin to distort the figures by buying oil in international markets. But these calculations indicate that actual oil exports will be closer to the official figures than those published by OPEC and other independent analysts. This implies that Venezuela does not have a problem of cash constraints. …