Explaining those Venezuelan petrol imports from USA

(reposted cause first version got buried by my technical incompetence)

There has been a lot of hubbub over Venezuela’s growing petroleum imports from the USA.

Clearly, Venezuela’s refining system is breaking down. And the country’s policy of giving away fuel domestically and selling it to allies with basically free financing means that when Venezuela imports fuel, that is money coming right out of social programs and largely going to US refining companies, US taxes, and the US military-industrial complex. I don’t think this was the Bolivarian socialist revolution that anyone signed up for.

The long-term chart of US oil & refined product exports to Venezuela — which I have edited for clarity — tells a clear story. Here it is, courtesy of the US Energy Information Administration and too much time playing with Excel:

Venezuela fuel imports from USA in barrels a day

Venezuela fuel imports from USA in barrels a day (smoothed into 6-month rolling averages), click to enlarge

(Note that these are rolling six-month averages for the most part, with the most recent months shrinking to five, four, and finally three-month averages. It’s not the best chart practice but it was the only way to smooth out a very noisy chart while also giving some suggestion of the extremity of the recent surge.)

The story here is this: in 2002-03, Venezuela’s oil industry was essentially shuttered by a management strike over increasing politicization of the company’s top offices. That strike included, if you don’t recall, an oil tanker being grounded in the ship channel that connects Lake Maracaibo to the Gulf of Venezuela, refineries shuttered and oil pipelines frozen up by some mix of striker sabotage and their replacements’ incompetence. It was a big deal at the time, spiking global oil prices to the long-untouched level above $35 a barrel. Yeah, yeah, you giggle about it now.

But look at what that meant for US exports to Venezuela. A little spike — which again, was a big deal at the time — which within months was simply gone. Things were back to normal on that front.

But starting in 2005, things are different. First, the US banned MTBE for being a water-soluble potential carcinogen that shouldn’t be in leaking underground storage tanks (LUSTs, a real acronym). Venezuela was simultaneously seeking a way to eliminate lead from its gasoline, and MTBE prices were dropping fast. So why not import from the US for a while until the domestic ethanol industry gets up to speed? But unlike the oil strike, the MTBE imports never ceased. 300,000 hectares of promised sugarcane plantations and a dozen ethanol plants, due to be completed this year, were never really started, despite years of PDVSA reports on money being spent on them. (The 2011 report did say that PDVSA produces ethanol — in a joint venture in Uruguay. Well outside the best climate zone for efficient ethanol production. Argh?) So while the US uses inefficient corn-based ethanol, Venezuela, in prime sugarcane habitat, imports gringo fossil fuels. Not exactly the sovereignty and independence from US hegemony that Pres. Hugo Chávez likes to talk about, and for which some of my San Francisco friends even today like to say “Viva Chávez.”

(I’d hate to see what testing might reveal about the country’s aquifers after this decade of MTBE flowing into rusty underground storage tanks at filling stations.)

Things were largely unchanged until 2011, when you see a surge in Venezuelan imports of liquefied petroleum gases and special naphthas. Again, this is not entirely a bad-news story. Their price is coming down in the US thanks to fracking, which produces a lot of natural gas condensate. Venezuela needs diluent for its heavy crudes, and both of these substances can be used as diluent. As the USGS put it a decade ago, you need a barrel of diluent for every 3 or 4 barrels of Venezuelan Orinoco crude. So these are the “good news” stories — situations where Venezuela is getting a good deal and probably making money. But again, in a well managed country, these materials would be imported sporadically if at all. Venezuela likely has plenty of condensate in its offshore gas fields, but they as yet aren’t in production after more than a decade of talk and broken agreements.

Then, in the upper right are the real bad news stories. The top three items — distillate fuel oil, gasoline blending components and finished motor gasoline — are all things that Venezuela’s state oil company essentially gives away for free. Normally, they are produced domestically at what were once the world’s biggest refineries, but the Amuay explosion and other refinery problems have turned Venezuela, once South America’s most industrialized country and still its most urbanized, into an importer of these important fluids. Aside from issues of history and national pride, this is a macroeconomic hemorrhage. Every dollar — and these are dollars, not bolivars — spent on this stuff is money not spent on the country’s social needs.

After the 2002-03 strike (or in official parlance, sabotage), Oil Minister Rafael Ramírez tallied up the costs.

Venezuela’s state oil firm PDVSA suffered losses and damages of US$12.8bn as a result of a 63-day strike that brought the country’s oil industry to a halt from late December 2002-February 2003, company president and energy and oil minister Rafael Ramírez told reporters.

Ramírez quoted the figure from the company’s 2003 financial statements, which were only approved by PDVSA’s board on Tuesday. The company has long blamed the strike for loss of sales and damage to facilities as well as to certain mature oil wells, which needed constant injection of water, steam or natural gas to maintain production.

He described 2003 was “an atypical year because of the effects of the sabotage.”

Striking workers did more damage to PDVSA facilities than an occupying army would have done, Ramírez claimed. “Not even in Iraq” did the US armed forces carry out such destruction, the official said. “There’s no political flag that can justify this.”

Hey, his words, not mine.

About these ads

10 Comments

Filed under Uncategorized

10 responses to “Explaining those Venezuelan petrol imports from USA

  1. damorop

    Setty, do you know is those gasoline imports are coming from Citgo?

    • I don’t know. I suspect so, as Venez can probably buy more cheaply from Citgo. I think there is a way to find out through EIA but I am a bit swamped to look it up!

  2. Dr. Faustus

    I really enjoyed reading that post.

    “As the USGS put it a decade ago, you need a barrel of diluent for every 3 or 4 barrels of Venezuelan Orinoco crude.”

    So, the Bolivarian Revolution may be dependent on US fracking technology, and its production of natural gas condensates, to keep a reasonable cost for each barrel of diluent needed for the production of Orinoco crude. If PDVSA is gonna develop the Faja, they’re gonna needs this stuff by the millions of barrels. What happens if the United States government decides to ban all exports of natural gas condensates, liquefied petroleum gases and special naphthas, to Venezuela as a result of political actions taken by Chavez against US interests? Or, how about a stiff tax levied on exports? This could force Chavez into future cooperation with the US government. Otherwise, he could risk reprisals taken by the US on products (natural gas condensates) he desperately needs for the development of Orinoco crude. Interesting stuff.

  3. Patrick

    Just back from Venezuela! Fill-up of a Ford Explorer 50c. Talk about outflow of the country’s wealth. Unimaginable mismanagement of the economy.

    • Dr. Faustus

      With regards to ‘outflow of wealth,’ just imagine this story, released today, as being just the tip of the iceberg.

      http://www.cnbc.com/id/50037661

      “HARTFORD, Conn. – Some Venezuelan pensioners are telling U.S. prosecutors they have not been able to get back money put at risk by a massive Connecticut-based fraud scheme, which has exposed investors to losses totaling potentially hundreds of millions of dollars.”

      And, ah, who were those “investors?” The pensioners? ..or PDVSA?

  4. NorskeDiv

    Nice, good business for the US. The US is Venezuela’s number one petrochemical partner, and has grown only closer under the Bolivarian revolution.

    • it’s not a bad plan. quebec has long been the main source of venezuelan xmas trees, going back decades. i’m glad this vital trade pairing is getting some exposure!