You could go to Harvard and take classes from Francisco Monaldi. You could hire Eurasia Group’s Daniel Kerner for big bucks. And you could wait months for a meeting with Chevron’s Ali Moshiri. Or you can go to YouTube and watch them speak with remarkable candor about the big picture of oil and gas in Argentina and Venezuela. For free, while you brush your teeth.
As usual, humans are failing. This master class by three of the top names in the industry has, count ’em, 206 views.
Here are a few notes. I took more, but they’re for me. You need to go watch this one for yourself.
Daniel Kerner, Eurasia Group:
– We are seeing growing “pragmatism” driven by government ownership of YPF shares. (State interests aligned with oil companies.)
– Expect more cycles between state control with declining production, then private freedom with growing resentfulness against oil profits, and so on.
Francisco Monaldi (Harvard, IESA, Baker Center):
– Shale oil may be safer against expropriation than conventional oil, because it needs constant investment. That makes it resistant to the resource-nationalist tendency to grab oil for its benefits without recognizing the costs of feeding the golden goose. (Later, says that exploring offshore at the Malvinas is similar — too expensive & risky for a government.)
– Venezuela is “opening to the oil sector.”
– To balance current budget at current fiscal take, Venezuela needs $200/barrel oil.
Ali Moshiri, Chevron Corp:
– VENEZUELA: big risk isn’t investment, “it’s the efficiency & effectiveness of getting things done.” He would gladly spend $20 billion on a new Orinoco Belt project, but implementation is tough. Country lacks human resources. Lack of skills and “capacity.” Also, supply chain is broken. Not much expropriation risk compared to other countries.
– ARGENTINA: totally different. Chevron sells oil domestically at $75 to $80 a barrel in Argentina. YPF is “one of the best companies to work with.” Argentina has “tremendous human resources capacity.” “Everything in place.” Only problem is “energy deficit.” (Gets fuzzy and diplomatic.) YPF is better than ever these days. Chevron spending $1 billion a year in Argentina.
Setty's notebook 
Thank you for posting this piece. By the way it would be a long time brushing your teeth.
My teeth might be more complicated than yours!
I saw Moshiri’s portion and wrote these comments in my blog:
Chevron’s Ali Moshiri calls Venezuela:a country with low investment risk, etc
Ali Moshiri is the head of Chevron for Africa and Latin America. Before that he spent a long time in Venezuela and still has Chevron activities in Venezuela under his responsibility. Moshiri is a pleasant man, articulate, suave. His posture as Chevron’s spokesperson has been that of a propagandist for the Venezuelan government, often defying all evidences about Venezuela’s oil industry disaster.
In a recent talk at the James Barker Institute, in Houston, see video at https://www.youtube.com/watch?v=NOp37C8rm_U&feature=youtu.be, Mr. Moshiri’s said the following (starting at about minute 45, remarks not in this order) :
· Investment risk in Venezuela is relatively low, compared to other countries in the world
· What is important is that the rate of return on investment is very high. While the margins in Venezuela are of $18 or more per barrel, in Africa they are more like $7 per barrel
· Chevron did not feel they were being threatened with expropriation in Venezuela.. They were offered a choice and they chose to stay
· Chevron also was the first company to pump money into PDVSA, giving that company a $2 billion loan
· Chevron supports the Venezuelan government, which is the same as supporting the Venezuelan people
· We don’t get into local politics, that is something for Venezuelans to do
· We are, he said, partners of PDVSA, which is a capable organization
· We don’t try to change the system in Venezuela but work within the system
· In Venezuela finding and producing oil is cheap and the resource base is enormous
· We work in Venezuela step by step
· Chavez tried to help the poor
· Venezuela is a rich country, great place, with lots of opportunity
· On the minus side, the problems in Venezuela are not below the ground but above the ground and have to do with difficult logistics, insufficient skilled labor and a fragile supply chain
There is much here I disagree with. Venezuela a country of low investment risk? Bullshit. Mr. Moshiri certainly lowered this risk for Chevron by staying in very cozy terms with the discredited president of PDVSA, Rafael Ramirez. The change in contractual conditions to the foreign companies was an imperial ukase, take or leave it, not a choice. The proof is that several other companies preferred to leave the country and, even, to ask for arbitration. Pumping money into PDVSA (really, to the government) in an electoral year was viewed by many Venezuelans as an act of complicity with the regime, one that will not be easily forgotten. His assertion about not getting into politics is false. Moshiri did get deeply into local politics, sucking up to the government. It is true that finding oil in Venezuela is cheap, not so true that producing it is cheap. The oil from the Orinoco region is expensive to produce in a commercially acceptable form. His assertion about Chavez trying to help the poor does not stand to scrutiny. Handouts “help” the poor in the short term but deepen their poverty in the long term , as we are already finding out. Finally, contrary to what he says Venezuela is not a rich country. It is a rich government made of poor and ignorant people who depend on the government to get scraps, while the members of the regime become millionaires.
Mr. Moshiri seems to believe that ethics has no place in the Venezuelan oil business. I bet he would talk very differently about doing business in Ecuador, where the company was victim of an immense fraud in which the Correa government actively participated. Mr. Moshiri should know that ethics is not a function of geography.
It was very hard for me not to laugh at the part about Chevron not getting into politics. But hey, that’s his line and he’s sticking to it.