Friday, April 28, 2006

The New Cuba: Venezuela

Chavez is the new Castro. And the federal legislators can't blame it all on the oil companies.

Chavez hastens drive for bigger share of oil revenues

By Andy Webb-Vidal in Caracas Published:

April 28 2006 03:00 Last updated: April 28 2006 03:00

President Hugo Chávez is raising the pace at which his government asserts "full sovereignty" over Venezuela's vast oil reserves, the largest in the Americas.

The government is expected to raise royalties and taxes, possibly by as much as double, on four facilities in the Orinoco River Belt that convert extra-heavy crude into lighter synthetic oil for export. Pressed on the issue this week, Rafael Ramírez, the energy minister, said Venezuela's relationship with the companies operating in the Orinoco Belt would be "adjusted".

Chavez is not too bright when it comes to oil, but Russia is.

Venezuela buys Russian oil to avoid defaulting on deals

By Andy Webb-Vidal in Caracas

Published: April 28 2006 03:00 Last updated: April 28 2006 03:00

Venezuela, the world's fifth-largest oil exporter, has struck a $2bn deal to buy about 100,000 barrels a day of crude oil from Russia until the end of the year.

Venezuela has been forced to turn to an outside source to avoid defaulting on contracts with "clients" and "third parties" as it faces a shortfall in production, according to a person familiar with the deal. Venezuela could incur penalties if it fails to meet its supply contracts.

Documentation obtained by the Financial Times shows that the state-owned Petróleos de Venezuela (PDVSA) made a financing arrangement this month with investment bank ABN Amro to facilitate the purchases of oil from Russia via Rotterdam.

PDVSA is believed to have dropped the Dutch bank after the Russian government agreed to provide Venezuela with an "open account" facility to buy the oil.

The Ruhr Oel refinery in Germany, in which PDVSA has a50 per cent stake, may be among the clients that are being supplied with the Russian oil.

PDVSA would not confirm yesterday that it was buying oil from Russia but said a statement would be issued today. The company said it would be "logical" that the Ruhr refinery was sourcing some of its oil from Russia because it would be cheaper than transporting it from Venezuela.

One US trader who deals in Venezuelan oil agreed, saying: "We have been expecting PDVSA to start buying [oil from the] Urals for the Veba system for some time. It is possible that they are trying to buy directly from Russian producers."

The move suggests a growing gap between Venezuela's declining domestic output and its expanding contractual obligations to international customers.

Luis Pacheco, a former planning director of PDVSA, said: "Why would Venezuela be buying crude oil from Russia? I would imagine it would be to meet obligations for light oil deliveries, but they are relatively small. Most of PDVSA's obligations are for heavy oil."

Under President Hugo Chávez, PDVSA's oil output has declined by about 60 per cent, a trend analysts say has accelerated in the past year because of poor technical management.

Mr Chávez's push to extend his influence throughout Latin America and the Caribbean with promises of cheap oil for friends and allies may be overstretching PDVSA's finances, however.

Venezuela currently supplies about 300,000 barrels per day of oil and products to Cuba, Nicaragua and others under favourable long-term financing arrangements.

This week, Venezuela signed a deal to send oil to town mayors in Nicaragua aligned with the leftwing Sandinista party.

{emphasis added}

Russia is coming to the aid, but will they give credit or seek payment on delivery?

Chavez must be scratching his head as he kicked Exxon out of Venezuela and Russia is looking at buying natural gas from them.

What is interesting is to see the comments of those who like to think of themselves as Democrats. I could never understand why you would go underground, unless of course you make comments like this.

How is Chavez going to hurt us or South America? Cut off the oil? It is their oil. Chavez is standing up to America and the Bush corporate cabal meddling in his country. Please - give me some examples how Chavez is going to hurt us. REMEMBER - they are a sovereign nation. They have no obligation to operate in accordance with what is best for the USA.
I bet this individual is just shouting with glee that he or she is paying $3.00 at the pump. But then, the oil companies will get the blame for a 60 percent decrease in production in Venezuela.

Sometimes you just can't win.

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