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Billion Barrels) Francisco Monaldi Visiting Professor of Energy Policy and Roy Family Fellow at the Belfer Center, Harvard Kennedy School Adjunct Professor of International Energy Policy, The Fletcher School, Tufts University Non-Resident Scholar, James Baker III Institute for Public Policy, Rice University Director, International Center on Energy and the Environment, IESA, Venezuela Duke University, December 2013 source: BP Statistical Review of World Energy 2013 Oil Reserves Proven Oil Reserves (billion barrels) 1992 2002 2012 % Argentina 2.0 2.8 2.5 >1% Brazil 5.0 9.8 15.3 4.5% Colombia 3.2 1.6 2.2 >1% Ecuador 3.2 5.1 8.2 2% Mexico 51.2 17.2 11.4 3.3% Peru 0.8 1.0 1.2 0% Venezuela 63.3 77.3 297.6 88% Total 128.7 114.8 338.4 100% Source: BP Statistical Review of Energy, 2012 3 Oil: Net exporters and importers Venezuela Vs. South America 4500 4000 3500 3000 daily 2500 barrels Venezuela Brasil 2000 Mexico Thousamds 1500 1000 500 0 Source: BP Statistical Review of Energy Oil: Net exporters and importers Oil Net Exports (+) Net Imports (-) 3500 3000 2500 2000 1500 Venezuela 1000 Brazil Mexico 500 Thousand Barrels Daily 0 -500 -1000 -1500 Source: BP Statistical Review of Energy High prices Huge reserves 5 million bpd production potential in 10 years Investment projects on join-ventures for more than 120 billion dollars … although there are significant risks 6 100 120 140 20 40 60 80 0 Jan-99 Jun-99 Nov-99 Apr-00 Sep-00 Feb-01 Jul-01 and US$ in71.56 2010. inUS$103.46US$101 2012, in 2011, October 2013:$98, November 2013:$94 15): US$100.36 2013 (untilNov. Average Basket Venezuelan Dec-01 May-02 Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 Feb-06 Jul-06 Dec-06 May-07 Oct-07 Mar-08 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13 Aug-13 7 7 Venezuela will continue to produce oil… until the world demands it Venezuela’s official proven oil reserves are 297 billion barrels (using a 20% recovery rate on the Orinoco Belt, for 257 billion barrels). The USGS estimates that 510 billion barrels would be ultimately recoverable in the Orinoco Belt (using a 45% recovery rate). Even using a 10% recovery rate Venezuela would have the second largest reserves after Saudi Arabia, at around 190 billion barrels Sources: PODE hasta 2008, (*) Informe Operacional y Financiero de Pdvsa (2009), (**) Informe de Gestión PDVSA 2010 e (***) Informe de Gestión PDVSA 2011. 8 Venezuela: Proven Reserves (billion barrels) Type Grav, API Reserves Orinoco Condensates >39 2.0 H = 4 Light 30 – 38.9 10.3 Medium 22 – 29.9 10.4 XH = 255 Heavy 10 – 21.9 17.6 X Heavy 0 – 9.9 257 TOTAL 297 Venezuelan crude oil proven reserves: a comparative look (billion barrels) Comparison of Venezuelan crude oil reserves: 21.215% of Colombia (1.5) 2.285% of Brasil (13) 386% of Rusia (77) 258% of Iraq (115) 217% of Iran (137) 170% of Canada (175)* 112% of Saudi Arabia (265) 92% of South America 89% of Latin America 75% of America 26% of OPEC 20% of the World 10 * The oil sands are included only here. Source: BP Statistical Review of World Energy 2012 Venezuela Kuwait Iran EAU OPEP Arabia Saudí Nigeria No-OPEP Rusia E.E.U.U. 0 50 100 150 200 250 300 Años Source: BP SRWE 11 Extraction rate: Production/Reserves Venezuela would produce, at the extraction rate of: • Iran -> 6.9 MMBD • Saudi Arabia -> 12.8 MMBD • Russia -> 36.2 MMBD 5.0% 4.0% 4.4% 3.0% 2.0% 1.0% 1.5% 0.3% 0.8% 0.0% Venezuela Saudi Arabia Russia Iran Source: BP Statistical Review of World Energy 2013 12 11% 11% 18% 2 34% 1% 5% Carabobo 2: MOU with Rosneft (Russia) 13 • Bonuses ($1.5 bn.) • Loans to PDVSA ($2.1 bn.) • Early production 260 MBD for 84 months. Revenue $5-6 bn. • Investments ~$15 – 20 bn. ~50-60% in upgrader. Fuente: PDVSA 14 Serious problems developing the necessary infrastructure will continue. The new upgraders planned location might be uneconomical. Depending on the assumptions, only about 100 - 200 MBD of lighter crude are available as diluent, the first join-ventures to start production would have an advantage. For the IOCs, it is a game of maximizing the early production stage without making the upgrader investments. Fiscal framework is uncertain, in particular the windfall tax. The government has promised that for new projects this tax would only be activated after investments have been recovered, but the details and credibility are important. A temporary royalty reduction to 20% is also on the table. On January 2013 the windfall tax was reduced. International firms say they are willing to invest if the fiscal framework is clarified, the infrastructure and project construction frameworks are well defined, operational control is effective, and the financing of PDVSA’s share is settled. 15 Declining production Low investment levels Increasing debt Increasing costs Credibility issues with investment partners Local capacities have declined 16 17 Thousand barrels daily 1000 1500 2000 2500 3000 3500 500 0 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Source Jan-10 : Jul-10 OPEC Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 18 Oil Riggs 100 10 20 30 40 50 60 70 80 90 0 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Active Oil Riggs: Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 2001-2013 Jul-07 Source: Baker Hughes International Rig Count. Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 19 Jul-13 20 2.50 2.00 1.50 1.00 0.50 0.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Canadá Brasil Colombia Venezuela (PDVSA) Iraq OPEP (exc. Venezuela) Rusia Source: BP Statistical Review 21 PDVSA’s Debt (US$ Millions) • PDVSA’s current external debt at ~US$45 billion • ~ US$10-12 billion in accounts payable • ~ US$5-8 billion in probable arbitration settlements. • ~ VEB Bs.250 billion (about US$40 billion) debt with Central Bank. 45,000 40,000 35,000 30,000 25,000 MM US$ 20,000 15,000 10,000 5,000 0 2006 2007 2008 2009 2010 2011 2012 22 Source: PDVSA *Planned Source: PDVSA 23 Thousand Barrels Daily 1000 1500 2000 2500 3000 3500 500 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: BP Statistical Energy BP Statistical World Review of Source: 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013. 24 North America (St. Croix included) Central America & The Caribbean Not paid (MBD) Asia Cuba 100 Others Petrocaribe 50 Petroamerica 10 Europe Domestic market 700-750 China funds loans 430 ($50) South America Total ~ 1.1 MMBD Africa Actual production in cash flow 1.7 MMBD Others 0 200 400 600 800 1000 1200 1400 1600 1800 2012 2011 2010 2009 2008 2007 2006 Source: PDVSA 25 Gasoline price: $0.07 per gallon ($0.01 at black market exchange rate) Domestic subsidies: $16-24 billion 26 Credibility problems: Obstacles to investment Texas 5 Qatar 33 United Arab Emirates 39 Colombia 48 (índice 32) Alberta 51 Trinidad and Tobago 58 Brazil (Off shore presalt area profit sharing contracts) 66 Alaska 83 Angola 118 Nigeria 124 (índice 79) Algeria 126 Russia 127 Libya 128 Iraq 129 (índice 84) Kazakhstan 132 Iran 133 Bolivia 134 Ecuador 135 Venezuela 136 (maximum index100/100) 27 Source: PDVSA Bls/employee 29 Source: PODE 2005 2012 2012 Variación (meta) (observado) (observada) Producción (MBD) 3.269 5.837 2.910 -11% Refinación (MBD) 3.142 4.050 2.822 -10% Exportaciones (MDB) 2.993 4.700 2.568 -14% Gas natural (MMPCD) 6.885 9.780 7.327 +6.4% Source: PDVSA 30 PDVSA’s production from own effort has declined even more dramatically (from 3.2 MMBD in late nineties to about 1.8 MMBD today). Excessive bureaucracy: more than 100 thousand employees and 20 thousand contractual (from about 40 thousand employees and 20 contractual pre-strike). Arbitrations. Conoco, Exxon, and others. Claims above $40 bn. Probable ~$5-8 bn. The ICC arbitration was the result of contractual compensation cap, rather than book value. The nationalization of the service companies has had a negative impact. Debt has increased exponentially during boom times, still manageable, but on an unsustainable path. PDVSA and the government are increasingly dependent on the price of oil. PDVSA and the government require average oil prices above $90 to avoid significant stress. 31 IOCs Renewed pragmatism? 32 When the government’s fiscal situation is critical. (To some extent true today). When the local NOC is in bad shape. (Yes) When production is declining. (Yes) When they need to initiate large and risky investments in exploration and new frontier developments. (True in Orinoco, off-shore, and exploration) When they need technology that only some IOCs control. (To some extent, to increase recovery rate). When the price of oil is low. (Not the case now). This key driver is not in place.
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