Venezuela has Huge Natural Gas Deposits, but a shortage looms

[protocol rv]

According to a local paper, refined product exports from Venezuela are being reduced because the fuel is needed in the country. This fuel is being used because PDVSA, the state oil company, is unable to produce sufficent gas to satisfy internal demand. Venezuela is already importing natural gas from Colombia, and may need to arrange for natural gas imports from Trinidad. The country has the largest natural gas reserves in South America, but evidently the Chavez administration, as it is prone to do, has put people in charge who can't get the job done - they don't know how to get the gas out of the ground, or Chavez has denied them the funding to do so.

This is quite a contrast to the situation in the United States, where new technology has increased natural gas (methane) supplies so much, the price has dropped, and the US may be exporting more natural gas to Mexico in the future. This happened, of course, because in the US they use a very competitive privately-run gas industry, with hundreds of small companies investing to extract the gas alongside the larger companies.

http://www.el-nacional.com/www/site/p_contenido.php?q=nodo/129729/Economía/Pdvsa-reduce-exportación-de-combustibles

[protocol rv]

1. Interesting retro look

I took this from venezuelanalysis (dated September 2008).

"Last Friday, Chávez announced that the Venezuelan state oil company PDVSA signed eight new accords with companies from the United States, Qatar, Portugal, Japan, Italy, Russia, and Malaysia to produce natural gas in Venezuela by forming mixed enterprises, of which PDVSA must control at least 60% according to Venezuelan law."

http://venezuelanalysis.com/news/3823

As far as I know, none of these accords led to anything. Also, the statement about Venezuelan law requiring PDVSA control of 60 % of a Joint Venture is wrong. The 60 % is an arbitrary figure. The law states 50 % plus one share.

[naaman fletcher]

2. Bombastic politicians can't run oil companies. News at 11. nt.

[protocol rv]

3. He doesn't have to run the oil company

But he sure needs to have an oil minister, a have a different individual be the president of PDVSA. it's a mistake to have the same person do both jobs - it causes handicaps from both a legal and practical standpoint. The other problem, PDVSA is managed poorly - they have significant delays paying their contractors, and have developed a very poor reputation in the international oil environment, to such an extent that many companies are no longer willing to do business with them. I also notice their management is very distracted with topics other than what should be their core focus area - oil and gas operations and development of new fields.

This is caused by serious misunderstandings on the part of President Chavez regarding how a modern oil and gas company should be run. He lacks the knowledge, seems unprepared to make the right decisions, and is surrounded by people who are, for the most part, promoted too far above their capability. To make things even worse, they have a very difficult task ahead: most of the oil and gas to be developed is either offshore, or it is very very heavy oil, and they are, as engineers, not very familiar with this environment. The net result: a very difficult situation, with production capacity dropping, and failures to execute projects according to plans.

[naaman fletcher]

4. I used to work in the oil industry...

The vast majority of people are ignorant of just how complex and technically involved industry that it is. Most people seem to think the oil is just sitting there in a big pool and you just drill a hole and such it out.. it doesn't work that way.

[protocol rv]

5. So what did you do, drill oil wells?

I'm curious, because I'm from Maracaibo. I know lots and lots of oil people. Although recently most of them have left Venezuela. I bet there's more than 20,000 oil personnel out of the country by now. Hell, if you live in Maracaibo, maybe I know you.