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Home , A New Era, Lake Maracaibo, PDVSA, Schafik Handal

Bolivarian Republic of Contact , August 2006 • # 7 with the New PDVSA A Newsletter about Venezuela’s National Industry

Transcaribbean Gas Pipeline Page 10 takes off

4 6 8 12 gains Venezuela and create New era in relations with Energy integration under strength Petroandina Panama Mercosur

Cutting-edge PDVSA is New technology ’s investors increases second largest captivated at eastern company OTC production 19 15 16 Contact Contact with the New with the New PDVSA PDVSA

The Plan for Sowing the Oil » With PDVSA contributions Mass transport systems in Venezuela proceed full-speed ahead

or a large city like Caracas, the The startup of major infrastructure projects is F inauguration of a new line in its subway system is a solution that a palpable example of the investments carried reflects a better quality of life for its inhabitants, who live stressful lives and out to improve quality of life for Venezuelans, for whom time is a vital resource in dealing with their daily duties. made possible by the sale of oil

The Bolivarian government, through the New PDVSA, brings to fruition projects that benefit Venezuelans. The revenue that former governments Development Fund (Fonden), which Caracas subway system (Metro) at seldom invested in social development. received a contribution of $290 million present has four lines that daily, and in from Petróleos de Venezuela (PDVSA). a few minutes, transport hundreds of Investment by New PDVSA thousands of passengers to their various This is a case of harvesting what the destinations in the city. The recent Line 4 of the revolution sowed: the Sowing the Oil inauguration of Line 4 is a palpable Metro required Plan. “I would like to invite all of you to example of the investments carried out an investment keep on sowing”, urged Hugo Chávez, to improve quality of life for Venezuelans, of $860 President of the Bolivarian Republic made possible by the sale of oil, a million, funds supplied by the National of Venezuela at the inauguration

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ceremony of the new branch which, together with the three existing lines, now has more than 39 stations. Major transport systems

“Formerly, PDVSA had to hand over all of its dollar earnings to the Central Bank of Venezuela, which and endorsed the technology located at La Rinconada, in handled it though procedures that being employed, stating their southwest Caracas. benefitted the rich”, Chávez said. intention to cooperate in this project which will benefit the Fonden today has $15,560 million inhabitants of one of the most earmarked for investment in 88 projects important industrial cities in with a major social impact in the areas the center of the country. of infrastructure and housing, among Los Teques Metro (State of others. PDVSA weekly adds $120 Miranda). It will link Caracas million to the Fund; which is to say, with the State capital. It increases it by $480 million per month. will benefit the 500,000 Central Region Railway inhabitants of the Altos System, Puerto Cabello -La Mirandinos. Inauguration of More than 360,000 passengers Encrucijada section. It will the first stage of Line 1 is establish a rail corridor in the will use the new line planned for the last quarter of 2006. center of the country. The The Line Metro (State of project will benefit some 3.5 4 sector ). It will have a total of 4 million inhabitants inaugurated is lines, with 61 kilometers of 5.8 kilometers track and some 75 stations. long, and has The inauguration of the four stations: first line is expected to take Teatros, place at the end of 2006. Nuevo Circo, The Maracaibo Metro is a Parque project of great importance Central Valencia Metro (State of for the west of the country and Zumano Rental. It will provide ). Work on the and, above all for Zulia, an transport for the more than 360,000 first stage of the Valencia eminently oil-producing State. Line 1 Trolleybus (State of inhabitants who move around the Metro’s Line 1 advances Mérida). A surface public parishes in the west of the city. speedily; by last June 96% Caracas-Tuy Medio Railway, transport system that operates of the civil works had been Stages I & 2. The Caracas- on electricity. The monthly The passengers will be able to completed. The inauguration Cúa link, which represents volume of users estimated do the complete trip in 8 minutes, of this stage is expected to the first stage of the Central for this system is 3.5 million being transported comfortably in take place in the last quarter Region Railway System, people, thereby having a a French built infrastructure using of 2006. Directors of Spain’s connects Caracas with the Tuy positive impact on one of the cutting-edge technology. The Line 4 Madrid Metro visited the Valleys (State of Miranda). States with the greatest tourist facilities have been designed for use Valencia Metro’s facilities This stage’s point of origin is attractions in the country. by the physically impaired, who can make use of ramps and elevators especially designed for them. required will go a long way to reduce In this sense he referred to the status the pressure on roads used daily by of the subways at Valencia, State Sowing the Oil people who work in Caracas and of Carabobo, and Maracaibo, State have their homes outside the city. of Zulia, which have progressed The income generated by the sale of 96% and 67%, respectively. oil will continue to be invested in the Without exclusions Nation’s development. A second stretch On this point, President Chávez pointed for Line 3 is to be inaugurated at the “This is an infrastructure built for out that “it is not only the case of end of the year. With a 5 kilometer society as a whole, and not for a Caracas; it is a question of articulating length, the extension links El Valle in given sector of it. This is social the whole country, bringing it together Caracas with Los Teques, in the State infrastructure, infrastructure for the and offering our people progress and an of Miranda. The $850 million investment common good”, the President said. orderly development in their cities”.

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CARIBBEAN INTEGRATION » Consolidating energy security Petrocaribe strengthened

Venezuelan Energy and minister, Rafael Ramírez, and Phillip Paulwell, his Jamaican opposite number, signed agreements that strengthen Petrocaribe

Petrocaribe ensures that profits from these activities directly benefit the people. Towards this end, the ALBA Caribe Fund was created with a $50 million initial deposit made by Venezuela, and to which each country will contribute the savings generated by the financing of their oil invoices.

This makes Petrocaribe one of the geopolitical initiatives with highest impact ever proposed in the ne year after the signing of and in bringing about infrastructure Caribbean, “which is a vital region O the Petrocaribe agreement by projects, such as the construction from the geopolitical point of view, Venezuela, and Barbuda, of refineries, storage tanks and an area that Venezuela never took Belize, , Dominica, Grenada, the marine facilities required. into consideration, and that for more Guyana, Jamaica, Dominican than 70 years was in the hands of the Republic, St. Kitts and Nevi, and St. Energy sovereignty transnational companies”, as stated Vincent and The Grenadines, the in the Caribbean by Energy and Petroleum minister and accord has made significant progress. PDVSA president Rafael Ramírez. These achievements initiate a phase Petróleos de Venezuela, through its of change in these countries, where Petrocaribe reaches Central PDV Caribe subsidiary, has advanced the supplies of energy have been America and Haiti in the constitution of mixed companies, dominated by the transnational oil Despite the fact that they are not in the signing of supply contracts, companies and private intermediaries. members of Petrocaribe, local

Progress in the Caribbean

ANTIGUA & BARBUDA Petroleum and Energy assets; one with a received on 07-06-2006. distribution facility has The Antigua and Limited 45%. capacity of 700 cubic The mixed company begun. Barbuda state-owned The recent discovery meters of LPG and PDV Caribe Dominica company PDV CARIBE of oil in Belize gave rise 20,000 barrels of clean Ltd. was founded on 26- GRENADA Antigua & Barbuda Ltd., to the idea of building products capacity, and 06-2006. PDVSA Caribe Supply contract signed was founded. a small-scale refinery the other one for 40,000 holds 55% of the shares on 16-06-2006. (10,000 bpd). barrels of crude. and Dominica Petroleum Addendum to the supply BELIZE Reactivation of the Company Ltd 45%. contract on LPG, Avgas, 15,000 barrels of gas oil CUBA Cienfuegos refinery. The construction of a Jet A1 and oil were shipped at the end The mixed company Basic engineering being refinery is foreseen. signed. of 2005. PDV-CUPET was set up developed since May The land would be PetroCaribe Grenada With a $2 million on 10-04-2006, with 2006. contributed by the Ltd. founded. capital, on 08-06-2006 PDVSA Cuba holding government of Dominica the mixed company 51% of the shares and DOMINICA as an asset of the GUYANA Alba Petrocaribe Belize CUPET 49%. On 02-11-2005 PDV mixed company. The State-owned Guyana Energy Limited was TransAlba, a shipping Caribe shipped a tank for topographical studies Energy Agency (GEA) founded, with PDV company, was created. Diesel oil storage. have been completed, designated. Caribe holding 55% of TransAlba has two First shipment of 1,200 and earth movement the shares and Belize tankers among its barrels of asphalt for the tank farm and

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governments of and the region geopolitically, extend the Nicaragua created the mixed reach of the integration principles companies ALBA Petróleos of El and diversify its customer portfolio by Salvador and ALBA Petróleos of marketing its products in the Caribbean Nicaragua (Albanic), respectively, region, which has a consumption of to benefit from financing terms that more than 400,000 bpd. stipulate payment of 60% of the invoice in 90 days, at 2% interest, and the remaining 40% in 23 years, with 2 years’

grace and 1% interest Energy security will result in a better quality of life for the people. Haiti, for its part, signed a bilateral agreement with Venezuela and receives MARKET DIVERSIFICARTION 7,000 barrels per day (bpd) of crude, and its future adhesion to the multilateral agreement Cuba is expected soon.

Venezuela in turn St. Kitts & Nevis will receive goods Belize Antigua Atlantic & Barbuda and services as Jamaica Ocean part payment,

while its Dominica ia

presence will St. Luc St. Vincent strengthen Nicaragua & The Grenadines

Grenada

El Salvador

Guyana

Surinam Venezuela Pacific Mixed Companies Ocean Supply Contracts JAMAICA Infrastructure projects Petrojam, the State- Petroleum Corporation Mixed Companies with Central America owned energy company, of Jamaica (PCJ) has been authorized to holding 51% of the 2006, with PDV purchase shares and PDV Caribe Caribe holding 55% of within the Petrocaribe 49%. the shares and Nevis framework. Supply contracts for Energy Company 45%. representative. Basic engineering to crude and byproducts The government of expand the Kingston (2006-2007) signed by St. VINCENT and THE St. Vincent and The authorities to define refinery, from 35,000 PDVSA and PCJ. GRENADINES Grenadines contributed agreement adhesion bpd to 50,000 bpd, Framework supply the site for the future strategies being planned. began in March 2006. St. KITTS and NEVIS contract signed on 21- hydrocarbons reception, Operational startup Framework supply 10-2006. storage and distribution SURINAM is scheduled for the contract signed on 21- 47,800 LPG gas bottles facility, thereby boosting State oil company second half of 2009. 10-2006 were delivered. the creation of the mixed Suriname Staatsolie was The mixed company The mixed company State-owned St. Vincent company. designated PetroCaribe PetroCaribe Jamaica PDV Saint Kitts Electricity Services representative. Limited was founded and Nevis Ltd was Limited (Vinlec) St. LUCIA in August 2006, with constituted on 26-06- designated PetroCaribe Visit of PDV Caribe

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unIoN » Strengthening South-South relations Venezuela and Bolivia celebrate the creation of Petroandina

Petroandina’s first project will be the renovation and flagging of 15 service stations for the sale of , Diesel oil and gas in eight cities of Bolivia’s nine departments

he visit of the President of the Venezuelan Energy and Petroleum Invitation to Ecuador and Peru TBolivarian , minister and president of PDVSA, Hugo Chávez, to Bolivia last 26 May Rafael Ramírez, and the president The Venezuelan president called helped materialize Petroandina, an of Yacimientos Petrolíferos Fiscales for Ecuador and Peru to join initiative based on the principles of Bolivianos (YPFB), Jorge Alvarado, Petroandina, an initiative which the solidarity and complementarity of signed the creation of the Petroandina seeks to fight neoliberalism and peoples to achieve harmonious and Commerce and Supply Mixed the North American empire. balanced for the Corporation, a company that will nations of the region. have the Bolivian state as majority “What Venezuela wants is to cooperate shareholder, with a 51% share. in the independence of our peoples. This is an historic commitment”, the Benefit for Bolivia’s departments Venezuelan Head of State said. Technology at the peoples’ service Petroandina’s Similarly, president Chávez and first project , his Bolivian opposite PDVSA Intevep to train will be the number, signed four agreements Bolivian technicians renovation on energy integration. These will and flagging originate development projects in The Bolivian sector gathers of 15 service hydrocarbons exploration, production strength with the Venezuelan government’s support. In this sense a Memorandum of stations for and refining on Bolivian soil. Understanding for the creation of Fertisur, the sale of a nitrogen-based manufacturing gasoline, On the road to gas complex, was initialled. Diesel oil and gas in eight cities industrialization Additionally, it was established that 200 of Bolivia’s nine departments. Bolivian technicians would receive training Among the documents signed were on the development of President Chávez explained that, Letters of Intent for the installation of technologies at INTEVEP, PDVSA’s research with the proceedings from the sale of two plants for extracting liquids from and technology arm. Similarly, 200 students these , Venezuela would open , thereby obtaining additional from the Bolivian highlands would be trained at Pequiven’s Polymers School. a fund with $100 million, for Bolivia’s components, such as Liquefied small and medium- sized producers. Petroleum Gas (LPG).

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COOPERATION WITH CENTRAL AMERICA » ALBA is growing Mixed companies with El Salvador and Nicaragua directly benefit the people

he Bolivarian Alternative for TAmerica (ALBA, in spanish) is strengthened with the putting into practice of the agreements signed with various countries in the continent. Venezuela recently extended its energy cooperation to El Salvador and Nicaragua, both Central American countries

Petróleos de Venezuela, through its PDV Caribe subsidiary, signed together with the local authorities of both El Salvador and Nicaragua, the PDVSA Refining vice-president and president This is the first event in of PDV Caribe, Alejandro Granado, signed the constitution of mixed companies that agreements with the municipalities. will enable the energy development of which an agreement is these countries and the diversification signed between the of markets for the Corporation. Venezuelan State and the local commercial considerations, because authorities, because of the it has to do with cooperation and In honor of Salvadorian impossibility of establishing complementarity among peoples”. Schafik Handal accords with the Both Alba Petróleos de El Salvador national government The President of the Bolivarian Republic and Albanic are part of Petrocaribe, of Venezuela, Hugo Chávez, said an initiative agreed to on 29 June that the agreements arose from an Hugo Chávez 2005, and which envisages financial initiative by Schafik Handal, the recently President of the Bolivarian conditions in terms favorable to the deceased leader of the Farabundo Martí Republic of Venezuela members that purchase fuel, crude 20 March 2006 Front for National Liberation (FMLN). and other products from PDVSA.

PDV Caribe and Energía para El Benefits for local governments Salvador (Enepasa), the inter-municipal The secretary general of the Sandinista association of FMLN mayoralties, formed Front for National Liberation (FSLN), Both companies will pay 60% of the oil the mixed company ALBA Petróleos Daniel Ortega, together with Dionisio invoice in 90 days, at 2% interest, with de El Salvador, which will market, store Marenco, Amunic’s president and mayor the remainder payable over 23 years, and distribute 100,000 barrels per of Managua, highlighted the agreement with 2 years’ grace and 1% interest. The month of hydrocarbon byproducts. with PDVSA which will help, among benefits obtained from these conditions other things, to invest in projects to will be transferred to the health, PDVSA reaches all improve the supply of potable water education, security and housing sectors. municipalities in Nicaragua to municipalities in which 40% of the population lacks this resource. The presence of Venezuela in Central The agreement with the Municipalities America and the Caribbean countries Association of Nicaragua (Amunic), An initiative beyond was formerly almost nonexistent, which brings together 153 the commercial because of the intermediaries in the municipalities from all over the oil trade. These added between $5 country, gave birth to ALBA Petróleos PDVSA Refining vice-president and $10 per barrel to the oil invoice, de Nicaragua (Albanic), will power and PDVSA Caribe president, with the consequent negative that Central American country’s Alejandro Granado, explained: “ this impact on the economies of the energy and social development. is an initiative which goes beyond Central American countries.

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BRINGING PEOPLES TOGETHER » In the context of the 180 years of the Confederative Congress’ celebration of energy relations with Panama

Some 14,000 ships from all over the world (equivalent to 5% of world trade) annually The location of this Central American country, and cross the Panama Canal every year. its important engineering resource: the Canal, make this nation a strategic point in commercial traffic. he visit of Venezuelan president, For Venezuela this alliance will allow for a greater THugo Chávez, to Panama City on the occasion of the commemoration presence in the region and open the possibility of of 180 years of the Confederative Congress, left the door open to seek extending energy marketing to Asia economically profitable results for both countries, but above all, to to go forward in the project of bringing people together in a union that conscience, with the very soul, of these an executive cooperation agreement on transcends the energy issue. peoples”, president Chávez said. energy. The second is a Memorandum of Understanding between the Bolivarian “It is a case of again taking up Bolívar’s Of the six agreements signed by Republic of Venezuela’s Ministry of dream: the Protocols of the Isthmus; both countries, four are related to the Energy and Petroleum and the Ministry an integration that begins with the hydrocarbons sector. The first of these is of Commerce and Industries of the

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Republic of Panama pertaining to the supply, handling and storage of fuels.

The other two memoranda cover the supply, handling and transport of natural gas, as well as the conversion of crude , an activity that would be feasible through the construction of a refinery in partnership with Panama, an operation for which Venezuela would supply up to 150,000 barrels of crude per day.

Should the refinery’s construction materialize, the next step would be to build a large bunkering facility to supply the various ships that use the Canal.

Strategic Isthmus

Similarly, the expansion and modernizing of the oil pipeline across It is a case of again taking Panama has not defrauded the Isthmus was agreed. The pipeline, up Bolívar’s dream, the Bolívar’s dream. We always which was built in the 70’s under the Omar Torrijos administration, is Protocols of the Isthmus; an rise to the occasion marked by the currently underutilized since although integration that begins with the times the world lives in. We are its capacity is 800,000 barrels per conscience, with the very much more mature as a Nation, with day, it only transports 60,000 bpd. soul, of these peoples our eyes on every corner of the world Additionally, a capacity expansion and a system upgrading have been foreseen, Hugo Chávez the latter through the installation of bi- President of the Bolivarian Martín Torrijos directional pumping facilities that would Republic of Venezuela President of Panama enable the transport of Venezuelan crude from the Caribbean to the Pacific.

Direct government negotiations the region still needed some time. “The mixed company is a proposal and, So that the benefits are channeled more than that, it is a necessity”. directly to the people, the Venezuelan president said that business dealings For his part, Panamanian president would be undertaken directly by both Omar Torrijos said that “Panama has governments, without intermediaries. not defrauded Bolívar’s dream. We He underlined that “friendly nations, always rise to the occasion marked such as the Isthmus, should be given by the times the world lives in. We are support”, and showed himself in favor much more mature as a Nation, with of leaving behind the times when oil our eyes on every corner of the world.” was sent to the , without benefitting other countries in the region. Torrijos maintained that the international maritime community had confidence “We do not reject private initiative, we in having the management of the only defend those strategic sectors Canal in Panamanian hands. He also that should be in State hands, and stated that the project to expand the the energy sector is one of them”, Canal provided an opportunity for it to Chávez stated. In this direction he continue being a vital and competitive indicated that the Panamanian project route in the integration process. The Venezuelan president emphasized the to create a mixed company to serve fact that Panama would play an important role at the birth of the new America.

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INTERCONNECTION » Venezuela and begin energy integration project Construction of the TransCaribbean Gas Pipeline takes off

Paraguaná Amuay Refining Ballena Center Cardón

GULF OF VENEZUELA

Antonio Ricaurte Section Central-Western Ruta Ballena - Maracaibo Interconnection System

Ulé - Amuay Maracaibo ULÉ System COLOMBIA Bajo Grande

The presidents of Venezuela, Colombia and Panama attended the ceremony marking the start of the TransCaribbean Gas Pipeline’s construction. Here they witness the first welding operation of this integrationist project. PANAMÁ

The project will cross borders by transporting gas VENEZUELA

between Venezuela and Colombia during a first Transcaribbean Gas Pipeline. Ruta Ballena (Colombia) - Maracaibo (Venezuela). stage, later going on to Panama Internal venezuelan system. Ulé-Amuay.

he presidents of Venezuela, countries. Venezuela and Colombia, eastern shore THugo Chávez; Colombia, Álvaro with their access to the Caribbean, link of Maracaibo, in Venezuela. Uribe; and Panama, Martín Torrijos, the Atlantic to the Pacific through the last 8 July initiated the construction supply of gas to Panama, an isthmus of The completion of this project, which will of the TransCaribbean Gas Pipeline geo-strategic importance to world trade. require a $335 million investment, has by attending the symbolic ceremony been planned for March 2007, when the of the first weld of the “Antonio A 225 kilometer connection pipeline will transport 150 million cubic Ricaurte” section, near the Colombian- feet per day (m cu ft/d) from Colombia to Venezuelan border in La Guajira. At an early stage, the pipeline will have Venezuela. In 2011 a similar volume will a length of 225 kilometers, from Punta be transported from Venezuelan territory The project is of great importance due Ballena in the Colombian Guajira, to the to Colombia, with additional capacity to to the strategic location of the three supply Panama and other countries.

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A locomotive for integration with our peoples to settle the State of Zulia, entailing a the social debt”. $40 million monthly savings. On the startup of the project, President Chávez stressed its historical Benefit for Venezuela Ramírez said that the material used in importance, since “it is a central nerve, the project is Venezuelan steel, which a locomotive for the integration of both promotes the relationship between peoples”, who will benefit from the the private and public industrial generation of more than 10,000 jobs. sectors, as well as the negotiations with Colombian industrialists. The TransCaribbean Gas Pipeline will be connected to Venezuela’s internal gas It is anticipated that, in about four distribution networks for the purpose years’ time, once PDVSA completes of transporting the hydrocarbon the infrastructure required to transport to the Paraguaná Refining Center gas from eastern to western Venezuela, (PRC), which requires large volumes The Venezuelan Energy and Petroleum 150 m cu ft/d would be exported to of gas to refine oil, one of the most minister and president of PDVSA, Colombia, and possibly to Panama important activities of the business. Rafael Ramírez, pointed out that the through an undersea pipeline. gas from Colombia would enable the The Colombian president, for his substitution of the 17,000 barrels per part, emphasized the selection of day of Diesel oil used by the Rafael a practical agenda with a social Urdaneta and Ramón Laguna reach, “which is bearing its fruits thermoelectric plants in Paraguaná for a deeper integration”. Amuay Refining Ballena Center Cardón

The president of Panama similarly expressed his thanks for the

invitation to participate, Antonio Ricaurte Section Central-Western Ruta Ballena - Maracaibo Interconnection while he underscored System that this Ulé - Amuay Maracaibo infrastructure “is an ULÉ System obligation we have COLOMBIA Bajo Grande

PANAMÁ VENEZUELA

Transcaribbean Gas Pipeline. Ruta Ballena (Colombia) - Maracaibo (Venezuela). Internal venezuelan system. Ulé-Amuay.

SOCIAL STRATEGY » Endogenous development

More than $33 million for community progress

The towns neighboring the from improvements in the Similarly, the Corporation will pipeline’s route will benefit health area. In Zulia’s Páez lay a 3.3 kilometer-long 20” from the development plans of municipality, PDVSA will set water main, acquire 50 tanks the Venezuelan government, up an Integral Attention Center for water storage and four which will invest $33.5 for the population containing trucks, an operation million. surgeries, laboratory, that will benefit 115,000 medicinal herb garden and inhabitants.

The construction of the Antonio The Wayúu indigenous an indigenous alternative RIcaurte section will generate population, one of Venezuela’s medicine pharmacy. more than 1,000 direct jobs. 26 ethnic groups, will benefit

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STRATEGIC ALLIANCES » Under the Mercosur scheme Enarsa and PDVSA boost South American energy integration

30th Mercosur Summit, held from July 20 to 24 Venezuela’s formal entry into the Southern in Córdoba, Argentina. Common Market provided the framework to Venezuela is already Mercosur define new agreements on hydrocarbons with Argentine president Néstor Kirchner, countries of this entity, such as Argentina and as President Pro Tempore of Mercosur, expressed his ‘profound satisfaction” at Paraguay, thereby consolidating strategies that the progress made in energy matters.

promote the union and well-being of the people With its five members, the southern trading block represents 78% of Latin America’s Gross Domestic he entry of Venezuela into the Uruguay, Tabaré Vázquez, signed Product (GDP) and 65% of South TSouthern Common Market the protocol of Venezuela’s accession America’s population; which is to (Mercosur, in Spanish) as a full as a Member State of the block. say. more than 255 million people. member, an event of historical significance, took place on 4th The Venezuelan president emphasized South-South strategic association July last, one day before the that his country’s adhesion to the block commemoration of Venezuela’s was the response to a harangue by Kirchner highlighted the agreements Declaration of Independence. the Father of the Nation, Simón Bolívar, signed with Venezuela, especially those and elaborating on the subject of the between ENARSA, Argentina’s national The presidents of Venezuela, Hugo struggle to achieve the integration energy company, and Petróleos de Chávez Frías; Argentina, Néstor of peoples, stated that “None of our Venezuela (PDVSA), which confirm Kirchner; , Luiz Inácio Lula Da countries could on its own undertake the progress made in the proposed Silva; Paraguay, Nicanor Duarte; and a true integral development project”. projects covering hydrocarbon reserves’

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exploration and development on Argentine territory, and the quantification PDVSA, ENARSA and ANCAP and certification of Orinoco Oil Belt to certify Orinoco Oil Belt reserves reserves in southern Venezuela.

“We are achieving the association Orinoco Oil Belt fields of our oil companies in joint projects and investments, which will enable us to to attain the energy integration Carabobo Reserves Boyacá Junín Ayacucho processes”. Kirchner said. He in billion barrels also thanked the government of Proven Venezuela for its solidarity and 80 support in overcoming his country’s Estimate 2004-2005 supply problems, thereby 235

“consolidating Argentine growth”. Total 315 State Summit, held in the to west, and 70 kilometers “As Pro Tempore President of Mercosur, The presidents of state- Argentine city of Córdoba wide from north to south, I believe that the addition of Venezuela owned operators PDVSA, last July 20, and which was and covering an area of is a qualitative step which comes to Rafael Ramírez; Argentina’s attended by presidents Hugo 55,134 square kilometers. For consolidate the region’s perspective ENARSA, Ezequiel Espinosa; Chávez of Venezuela, Néstor exploration and production and projection towards the world, to and Uruguay’s ANCAP, Daniel Kirchner of Argentina, Tabaré purposes it is divided into four Latin America itself and the integration Martínez, signed in Argentina Vázquez of Uruguay, Luiz zones: Boyacá (formerly know processes that will allow us to meet the an agreement for a study Inácio Lula Da Silva of Brazil, as Machete), Junín (formerly expectations of our peoples”, he said. on the quantification and Nicanor Duarte of Paraguay, Zuata), Ayacucho (formerly certification of the existing Evo Morales of Bolivia and Hamaca) and Carabobo Together with Chávez, Kirchner reservoirs in Block Ayacucho Fidel Castro of Cuba. (formerly Cerro Negro). The evaluated the progress made on the 6 of the Ayacucho area in the current area under exploration Great Southern Gas Pipeline and on Orinoco Oil Belt in southern The Orinoco Oil Belt is covers 11,593 square the creation of the “Southern Bond”, Venezuela. located in the central band of kilometers. a joint financial instrument that will Venezuela’s Eastern Basin, generate a major source of income The concrete form of the south of the states of Guárico, It is estimated that the and enable opening the way to agreement between PDVSA, Anzoátegui, Monagas and Orinoco Oil Belt holds 236 Venezuela’s “Southern Bank” proposal. ENARSA and ANCAP was Delta Amacuro. It runs parallel billion barrels of extra-heavy completed on the eve of to the Orinoco River, being crude, which makes it the Oil exploration in Paraguay Mercosur’s 30th Heads of 600 kilometers long from east world’s largest oil reserve.

The official ceremonies also provided the opportunity for the Venezuelan president and his Paraguayan opposite number, Nicanor Duarte, to engage in the creation of a mixed commission to undertake exploration for oil in Paraguay.

It is anticipated that, should oil be found, the Paraguayan State would cease to import products such as gasoline. “Paraguay has an ample potential; it must be developed and converted into power”, president Chávez said.

The projects being undertaken jointly by both governments have the aim of improving the quality of life of the region’s peoples, to fight exclusion, defeat poverty and unemployment, while consolidating high economic growth. Energy and Petroleum Minister and PDVSA president, Rafael Ramírez, signed the agreements with ANCAP and ENARSA for the certification of the reserves contained in Block Ayacucho 6 of the Orinoco Oil Belt.

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GUIDELINE » Towards an expansion of the Corporation’s marine fleet Cooperation with and Argentina in the development of Venezuela’s shipping

he market diversification Venezuelan personnel, as well Tstrategy being executed by as an evaluation of the possible PDVSA includes, within the Plan construction of shipyards in Venezuela for Sowing the Oil (2006-2030), an through the expansion of Diques y increase of energy supplies to the Astilleros Nacionales (DIANCA). Asian market. Towards this end, PDV Marina plans to increase the crude Alliance on supplies to Asia and products volume being handled by 15%, and up to 45%, by 2012. PDV Marina during this visit also signed First cutting of a steel plate for the ship “Eva Perón”. a Memorandum of Understanding with With this premise as an objective, a the National United Oil Corporation PDVSA technical commission headed (CNUOC), a subsidiary of China represents a $112 million investment by the Corporation’s executive director National Petroleum Corporation (CNPC), and “will have strategic importance of Commerce and Supply, and on establishing a strategic alliance for in the concept of energy security for president of PDV Marina, Asdrúbal the transport of crudes and products Venezuela and the region”, according to Chávez, went to China for the purpose from Venezuela to the Asian continent. the PDV Marina president and PDVSA of meeting with representatives of the Commerce and Supply director. China State Shipbuilding Corporation “Eva Perón”, first new (CSSC) and China Shipbuilding PDVSA tanker PDVSA also maintains agreements Industry Corporation (CSIC). with Astilleros Maua Jurong and The alliance with Argentina, and EISA, of Brazil for the proposed Construction of 18 ships specifically between Astillero Río construction of another 10 vessels. Santiago (ARS), PDV Marina and The meeting aimed at firming up Diques y Astilleros Nacionales an agreement for the construction de Venezuela (DIANCA) led to PDVSA evaluates the of 18 ships to help optimize marine the start of the construction of the transport and distribution processes “Eva Perón” product carrier. construction of 18 ships for crude and products, an operation requiring an investment estimated at This will be the first of four vessels to be to increase commercial $1.3 billion, which is part of a plan built in Argentina as part of Venezuela’s to acquire a total of 42 tankers over new tanker fleet. The“Eva Perón” will interchange with Asia a six-year period ending in 2012. have a 47,000 ton capacity and and raise the volume of transport refined products. The agreement also crudes handled by 45% envisages the The construction of the technology first two product by 2012 transfer carriers required to train

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BUSINESS » Boosting the Corporation’s business PDVSA captivates new investors at the 2006 OTC

PDVSA’s exhibition stand and business center was where the representatives of more than one thousand international companies expressed their interest in investing in Venezuela

etróleos de Venezuela PDVSA’s participation in the 2006 Corporation’s offshore technological Pparticipated in the 2006 Offshore OTC ratified the Corporation as a technicians and specialists and Technology Conference (OTC) that took leading company worldwide in regard representatives of transnational place last May in Houston, Texas, USA. to hydrocarbons and, at the same companies who seek business The event gathered together 2,229 time, emphasized its commitment opportunities in Venezuela, with the offshore technology companies from to the socioeconomic development intention of becoming partners of the 30 countries and was the conference of the country through the support leading Venezuelan corporation. in this specialty that attracted the most that it gives to the social missions attention in the world. of the Bolivarian Government. PDVSA was represented by the managers and authorities of its PDVSA’s exhibition stand was where The most visited stand subsidiaries, such as Corporación the representatives of more than one Venezolana de Petróleo (CVP), thousand international companies The PDVSA business center attracted Bariven, PDVSA Intevep and the expressed their interest in investing in over 59 thousand professionals who Corporate Management of the Venezuela and studied the prospects for attended the OTC. Here business Social Production Companies. new business ventures and agreements. meetings were held between the

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BUSINESS » The Plan for Sowing the Oil moves forward Cutting-edge technology increased crude and gas production in eastern Venezuela

PDVSA, conjuntamente con ANCAP, fortalecerá su presencia en el mercado de combustibles de Argentina.

Well stimulation through

etróleos de Venezuela, through gas production in the 11 wells, from 24.2 considerably increased Pits Northern Social District’s million cubic feet (m cu ft) to 115m cu ft. Reservoirs Management Unit, was the production of 11 wells successful in applying the hydraulic Teamwork in the Northern Social fracture technique to 11 wells in the District, thereby obtaining a significant The success of the operation was District, which will production increase where it was the product of a multidisciplinary applied. team made up of specialists from the contribute various Reservoir Management units, Hydraulic fracturing is a technique which carried out in-depth studies to meet the production that consists of generating a fracture on the technique’s application. within a reservoir for the purpose of targets set in the injecting a support agent -such as Osmel Molina pointed out the Corporation’s Plan for bauxite- to establish a high conductivity experience and training of the personnel channel for the production of fluids. involved in the application of the Sowing the Oil technology and explained that it was More than 17,000 barrels necessary to know the conditions of of crude per day the well being stimulated because, as he said, ”to subject it to equipment The Maturín Production supervisor, with more than 7,000 HP of hydraulic Osmel Molina, explained that prior to the power could damage the reservoir”. technique’s application, total production for the 11 wells was 4,130 barrels per Due to the success achieved, the day (bpd), and that it rose to 22,032 application of hydraulic fracture bpd after the technique was applied; to more wells in 2006 is being in other words, a net increase of more considered, which would help meet than 17,000 bpd. The application of the targets set in the Sowing the Oil hydraulic fracture also increased natural Plan for the 2006-2030 period.

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GUIDELINE » Support for the integral development of the Nation Cutting-edge technology increased crude Social Projects received $8 and gas production in eastern Venezuela billion from PDVSA in 2005

uring the XIII Latin-American Oil DShow, which gathered together 848 national and foreign companies related to the energy sector in Maracaibo, State of Zulia, the Minister of Energy and Petroleum and President of PDVSA, Rafael Ramírez, announced that during the year 2005, PDVSA invested $ 8 billion in social projects.

At this event, which is considered to be the most important in Latin America and the third in its category worldwide, Ramírez affirmed that PDVSA answers to the interests of the country. “Nothing is done within the framework of our oil policies without the approval of the The Minister of Energy and Petroleum and President of the Republic, Hugo Chávez, President of PDVSA, Rafael Ramírez, announced not only because he is our boss, the leader of a strong popular movement, the Corporation’s investments and strategies to but also because our oil industry cannot be managed in isolation”. support the industry’s commitment to the country

Appropriate Projects for the Nation generates. We return it through the has directed more than $4 billion Ribas, Barrio Adentro and University towards social projects, whilst fiscal He added that the policy of Full Oil Villages missions, so that people will contributions were over $7.7 billion; Sovereignty fulfills this principle and have work, health and education, worldwide earnings were $42 billion he reiterated that this will destroy the because a country full of people and national earnings some $23 billion. enclaves that developed over 100 abandoned to their fate gets nowhere”. years of hydrocarbons exploitation. Opportunities for the “The new oil and gas projects must be A positive PDVSA Private Sector implemented in accordance with our reality; there will be no more projects Regarding the Plan for Sowing the which run against our reality”. Oil, the Minister emphasized that this represents a great opportunity The Minister emphasized to the for the private sector, as an businessmen present the state investment of $130 billion until operator’s commitment to national the year 2012 is contemplated to

development. On this point he More than 800 companies took part cover the first phase of the plan. reaffirmed that“there is no other oil in the petroleum exhibition. corporation which does this, but PDVSA ”PDVSA is capable of implementing is a national corporation in a country During the event, national and this effort but it is not enough, and for with millions of poor people, and it is foreign businessmen were informed this reason we welcome the presence not only a case of money, because of the operating results of the new of the national and foreign private PDVSA is also providing human PDVSA. In this regard, the president companies. We have taken some capital. This is one way of returning of the Corporation stated that from steps, and now we need you to take to the people the dividends that oil January to May of this year, PDVSA some with us.”

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Petrotips PDVSA in figures 2005*

State District Attorney’s office PDVSA workers to study for MSc degrees confirms the humanitarian quality in Oil and Gas Engineering of the program at a Scottish university

The District A total of 60 Attorney’s office Petróleos de of the State of Venezuela workers Proven Reserves Connecticut are to study Crude oil 80 Bn Barrels

confirmed the for Master of Gas 150.4 tcf humanitarian quality Science degrees Venezuela’s production capacity of the Bolivarian in Petroleum and 3.9 m BPD Republic of Venezuela’s initiative in Gas Engineering at the Robert Gordon Crude supplying cheap fuel to the country’s University in Scotland, as the product Gas 6.9 Bn cf

poor communities, a program being of an agreement signed by PDVSA LNG 0.25 m BPD run by PDVSA’s CITGO subsidiary. Exploration and Production vice- Refining capacity president Luis Vierma, and Andrew In Venezuela 1.3 m BPD Venezuelan president, Hugo Chávez, McCreath, the University’s director stated: “What we want is for the of Technological Information. Vierma Abroad 2.0 m BPD

Venezuelan people to become aware revealed that the target set in this Total 3.3 m BPD of what we are doing. We want to invest matter is to train 600 professionals in Global income part of CITGO’S profits in helping the 5 years. neediest among the American people”. 85.3 Bn US$ PDVSA provides support for the Glossary * Preliminaries numbers country’s thermoelectric sector. m: Millions Offshore gas development Bn: Billion cf: Cubic feet studies advance further BPD: barrels per day MBD: Millions of barrels per day m cf pd: Millions of cubic feet per day The Corporation Bn US$: Billions US dollars ’s seismic extended a free ship Akademik loan of land Quote of the Month Nemchinov to CADAFE, completed the Venezuela’s For the first time in 70 years seismic studies electricity we have a fluid relationship with carried out on generation and “ the South and with the Caribbean. blocks Urumaco distribution authority, for the purpose We cannot behave towards these I and II in the Gulf of Venezuela, of building two thermoelectric plants countries like a transnational northwest of the State of Falcón. The that would be adjacent to the Puerto company. We are building a new area under study is thought to contain La Cruz refinery in Anzoátegui and the geopolitical influence, with a potential reserves of 26 trillion cubic Paraguaná Refining Center (PRC) in new ethic, with a different way of feet of natural gas not associated to Falcón. crude production. handling oil affairs, which translates The new should improve into a strategic positioning for our According to the terms of the the performance of both refineries and country respective agreement, Gazprom has benefit the neighboring communities. ” 18 months to complete the first phase Rafael Ramírez and determine the most appropriate Minister of Energy and Petroleum location to drill the first well. and President of PDVSA

OPERACIONAL CRUDE OIL GAS REFINING EXPORTS OIL BASKET PRICE INDICATORS First Quarter 2006 m m m m $ barrels3.3 a day cubic6.9 feet a day barrels1.2 a day barrels2.4 a day per58.68 barrel averages (Vzla/Isla loop)

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FIGURES » AméricaEconomía report PDVSA holds second place among Latin America’s largest corporations

etróleos de Venezuela’s “Venezuela’s state-owned PDVSA Oil Belt crude recognized Poperational and administrative achieved place number 2 by increasing for its quality performance was once again sales revenue from $64,757 million recognized by specialized publications in 2004, to $85,618 million in 2005”, BP and IEA reports place the in the energy area. The latest edition of the magazine’s report stated. Nation’s proven crude reserves at AméricaEconomía’s annual corporate 80 billion barrels, without including ranking positioned PDVSA in second The report has been published by the Orinoco Oil Belt volumes, which place among Latin America’s 500 AméricaEconomía since 1991, based would reach 235 billion barrels and largest corporations. on the annual results of more than one that, after their quantification and thousand companies in the region. certification, would position Venezuela as the country with the largest It should be pointed out that on hydrocarbon reserves in the planet. prior occasions companies such as British Petroleum (BP) and the The IEA report mentions that International Energy Agency “Venezuela’s Orinoco crude is now (IEA) have also confirmed the included in OPEC totals”, thereby recovery of Venezuela’s oil removing all doubts on the quality production, by placing it at and type of the Belt’s hydrocarbons. more than three million barrels per day for 2005. These reports endorse a palpable fact: PDVSA’s absolute recovery, the Corporation having surpassed the production levels posted before the December 2002- January 2003 oil sabotage.

BUSINESS » With 9,000 barrels per day of medium-gravity crude Well FUL-9 leads national production

he North District of PDVSA’s medium gravity crude (26º API) and TEastern Exploration and has stable reservoir conditions. Production unit, located in the State of Monagas, added a new record by Luna also said that, to date, the operating the well with the largest well has not logged any water or accumulated production. Well FUL-9 gas cuts, which confirms the belief is located in the El Furrial field, in the that its flow is 100% crude oil. State’s northern region. The Furrial-Orocual reservoir The superintendent of the Furrial- “Venezuela’s giant” superintendent added that data Orocual reservoir, Luis Luna, explained from other oil fields in that since 1988, when well’s production Well FUL-9, known as “Venezuela’s are being checked with the aim of began, it has logged an accumulated giant”, is currently producing more determining whether FUL-9 can claim total of 62 million barrels of crude. than 9,000 barrels per day of to a first place in the region.

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GAS » With the installation of 8,000 kilometers of polyethylene tubing Piped gas to benefit more than 3 million homes

bottled Liquid Petroleum Gas (LPG). The metal cylinders required would be filled at the seven communitarian plants to be built in the states of Yaracuy, Cojedes, Miranda, Bolívar, Apure, and Monagas.

Honoring social debt

These actions of the Sowing the Oil Plan will enable discontinuing, in the short term, the use of gas cylinders from the market, which traditionally have been used by the majority of Venezuelan homes. PDVSA in its new vision expects that by 2030, 75% of Venezuela will have piped gas available.

In this way the process of honoring social debt, accumulated over The program being boosted by the Bolivarian so many years of carelessness government, through PDVSA and its PDVSA Gas and neglect, continues and gains strength, which is only fitting in a subsidiary, will accelerate the supply of low-cost country with the planet’s eighth gas reserves, 150 trillion cubic feet. energy to the whole country More than 20,000 jobs per year

o ensure the supply of piped polyethylene technology and the laying The national gas plan will ensure the Tgas to more than three million of the tubing 80 centimeters below the availability of a permanent service, homes, Petróleos de Venezuela, surface, ensure the observance of the minimize the risk of accidents through its PDVSA Gas subsidiary, safety measures required by a reliable through gas leaks and reduce will invest $1.6 billion in laying service with international certification. the heavy road traffic caused 8,000 kilometers of polyethylene by bottled gas distribution. tubing between 2006 and 2012. Similarly, it is expected that, The plan will generate annually more With the installation of gas distribution over the next than 20,000 direct and indirect jobs and networks and the laying of underground six years, more promote communitarian organization pipe, Venezuela would be on a par than 500,000 through its promotion of Energy Tables, with countries like Colombia. The low-income Social Production companies and use of anticorrosive high-density homes will benefit from the supply of the formation of cooperatives.

Contact with the New PDVSA is a Petróleos de Venezuela, S. A. publication produced by Public Affairs Corporate Management Unit. Caracas, Venezuela. Fax: + 58 + (212) 708.44.60. For questions & suggestions: Daniel Cortez, Communications Manager • e-mail: cortezd@.com Graphic Design: FIDES Imagen, C.A. Photography: PDVSA archive and Presidential press. Legal Deposit: If13820053502083. Free distribution. This publication may also be perused at www.pdvsa.com

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