Chavez Plans to Double Venezuela Oil Output by 2019
Even the detractors of Venezuelan President Hugo Chavez have never accused him of thinking small.
Chavez is currently running for re-election in Venezuela’s upcoming presidential election, scheduled for 7 October, against opposition candidate Henrique Capriles, the former governor of Miranda state. Fifty-eight year-old Chavez, who has held power since 1999, is seeking his third six-year term as president. Chavez has survived three cancer operations. Depending what (notoriously unreliable) poll you read, the forty year-old Capriles is closing the gap, even though Chavez said, “The bourgeois say they are going to win, but they know they’re losing and it is impossible to reverse a gap (in the polls) of not less than 15 points with less than a month and half to go.”
Should Chavez win the election, he has big plans for the country’s economic crown jewel — oil. During a visit to Carabobo in the Orinoco Oil Belt in Monagas state, Chavez pledged to invest $130 billion in Venezuela's Orinoco Oil Belt between 2013 and 2019 to boost national production from 3 million barrels per day to 6 million bpd, doubling output to make it OPEC’s second-largest producer after Saudi Arabia, knocking Iran into third place.
It is a substantive pledge, as $130 billion represents roughly a third of the $383 billion the Venezuelan Treasury has collected over the decade. As Chavez noted about the country’s petroleum reserves, "It is the main material wealth that Venezuela has had for 200 years, but we need independently to manage the country's wealth." Chavez said in a televised address that of the estimated 6 million bpd to be produced in Venezuela in 2019, “Four million bpd will come from the Orinoco Oil Belt, which now produces 1.2 million bpd.”
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Chavez is not making an idle boast about Venezuela’s oil reserves, as two years ago OPEC reported that Venezuela, which has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere, of the organization's 81.33 percent of the globe's known oil reserves Venezuela had 24.8 percent, exceeding Saudi Arabia with 22.2 percent. Geological studies by the state-owned Petroleos de Venezuela (PDVSA) hydrocarbon conglomerate estimated that 300 billion barrels can be extracted from the Orinoco Oil Belt.
Accordingly, the number of foreign oil firms involved in joint ventures with PDVSA is formidable, and includes Spain’s Repsol, Malaysia’s Petronas, India’s ONGC and Oil India in the Petrocarabobo SA joint venture with PDVSA; the Carabobo 1 bloc operated by a consortium of U.S. firms Chevron and Texaco, Japan's Inpex and Mitsubishi and Venezuela’s Suelopetrol; the PetroMacareo SA (Junin 2) joint venture between PDVSA and Petrovietnam; the PetroUrica SA (Junin 4) joint venture between PDVSA and China National Petroleum(CNPC); PetroJunin SA (Junín 5) between PDVSA and the Italian company ENI; PetroMiranda, SA (Junin 6) joint venture between PDVSA and the Russian National Oil Consortium (NOC) consisting of Rosneft, Lukoil, Gazprom, TNK-BP and Surgutneftegaz: the Junin 1 and Junin 8 joint venture between PDVSA and Sinopec (China): Junin 10 joint venture between PDVSA and Total (France) and StatoilHydro (Norway), which was later terminated and the Junin 11 joint venture between PDVSA and a Japanese consortium consisting of JOGMEC, Inpex and Mitsubishi, among others. But according to Venezuelan law foreign ownership in joint ventures is limited to 40 percent.
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Seeking to calm the fears of the country’s capitalist and bourgeois classes, Chavez told the audience at a televised campaign event at the Caracas Municipal Theater last week that his reelection would be “beneficial to the bourgeois class,” as “Our triumph will guarantee even the rich that they can continue living their lives in tranquility. A victory for the big bourgeoisie would destabilize our country and this is not in the interests of even the rich, as they like tranquility.”
But all is not necessarily smooth sailing for El Presidente’s re-election. Dissatisfaction has been rising over mounting prices, as in 2011 inflation reached nearly 28 percent and is currently at 20 percent, along with food shortages and deteriorating public services and infrastructure.
In the energy sphere, some are questioning agreements between PDVSA and the Corporacion Venezolana Guayana (CVG) state industrial holding company, intended to develop the Orinoco Oil Belt in a deal that relies on a 30 percent stake for Chevron.
The fact of the matter is that if Chavez is to double the Orinoco Oil Belt’s output in six years, he’s going to need an influx of cash and expertise to do so, a policy somewhat at odds with both his rhetoric and the ideals of his Bolivarian Revolution, which have effectively led to Washington sanctioning his regime.
Assuming the voters don’t turn him out.
By John C.K. Daly of Oilprice.com