Monthly Archives: September 2010

Why are my lungs burning (2)

Looking at a map, Santiago de Chile looks vaguely like Sacramento, California — a big city in a long north-south agricultural valley, with a low mountain range separating it from the Pacific and a high, steep cordillera to the east. Both are at about 35 degrees (one north, one south) so there is a persistent high pressure system over them all summer: air that rose in ecuatorial thunderstorms and dried out in the upper atmosphere falls back to earth at about 35 degrees, with the aridity especially notable around 28-38 degrees on the west coasts of all the continents.

But there are big differences. Maybe the biggest is that in Sacramento, despite more cars and plenty of industry, you can breathe the air pretty dependably. A few indications of why:

Metallurgical coke by the sack

Everything you could need for proper lung care: thermal coal, metallurgical coke, and cigarettes

burning farmland

Burning mulch off a field before planting, north of Santiago, Aug. 27 2010

Gold Reserve cuts damages claim 60% to mildly less outlandish figure

Gold Reserve, one of the mining companies that have taken Venezuela to international arbitration after losing access to the Las Cristinas/Brisas gold deposit, said it’s asking for $1.928 billion in compensation. This is a bit lower than the $5 billion damages they were talking about 11 months ago.

Opinion time: I suspect it’s still a goofy number. Continue reading

More charts: Latin America-Caribbean oil & gas drilling booms

I know you’ve been wondering: what is going on with oil drilling across Latin America? Is it really going great guns, or is that just Brazil?

Here are a couple pictures based on the monthly rig counts from Schlumberger, the world’s biggest oilfield services company.

First, the main Latin American and Caribbean oil countries:
Latam's main oil countries rig utilization

The main trend is that things are up, up and up. Good news for Spanish- and Brazilian-speaking drill bit salespeople.

Next a picture of the less substantial oil producers:
Continue reading

Geek out on electricity tariffs

GTZ, the German foreign aid organization known for its international survey of fuel prices, has put out a new international survey of residential electricity prices. The report is pretty inconclusive — I don’t see any obvious trends, and residential electricity rates don’t necessarily have anything to do with industrial tariffs or subsidies for efficiency and renewables — but heck, I love these folks’ research and thought you might like the link. All yours for no extra charge, just for reading this website.

Here’s the key table: Continue reading

PDVSA cuts and delays production goals, raises capex forecast

PDVSA cut its output goal by 9%, pushed back its target for that goal by 2 years, and expanded the amount of money it expects to ante up in order to fulfill the plan, according to a comparison of the company’s 2009 annual report with its 2008 edition.

Take a look at p. 43 of the report released Aug. 2 (my translation):

Review of Investment Plan and Principal Development Projects
Developing these business strategies, PDVSA estimates that its investment plan will require, in the 2010-2015 period, about $252 billion to reach a sustainable output of 4.46 million barrels a day (crude + natual gas liquids + ethane [sic – should be natural gas, most of which is methane]) by 2015. PDVSA expects to provide about 78% of the funds required for this plan ($197 billion), 15% from outside investors ($38 billion) and 7% from investments associated with the Socialist Orinoco Project ($18 billion).

That’s a change from the 2008 report, published June 2009 (my translation):

Review of Investment Plan and Principal Development Projects
Developing these businesses, PDVSA estimates that its business plan will require, in the entire 2008-13 period, about $139 million [sic – should be billion] to reach a sustainable output of 4.9 million barrels a day by 2013. PDVSA expects to provide about 75% of the funds needed for this plan, and 25% from outside investors.

That’s a lot of changes. The only thing they didn’t cut back on was the number of editing errors.

This is part of a trend. Back in the 2007 report (p. 35), they said (my translation):

Developing these business strategies, PDVSA estimates that its business plan will require, in the 2007-2012 period, about $78.116 billion to reach a sustainable output of 5.8 million barrels a day by 2012. PDVSA expects to provide about 75% of the funds needed for this plan, and 25% from outside investors.

Look ma, no major editing errors. Just a bit OPUD.

The good news is that PDVSA is starting to calibrate its goals with reality. The bad news is that the company has little cash flow to invest in these projects. If recent years are any indication, it may be able to come up with $15 billion a year, but that’s not even a third of what it needs. The rest, if it’s going to come, has to come from debt (or an IPO!).

Who is going to loan PDVSA $140 billion? And can this work out? Using optimistic assumptions — 5% annual GDP growth, no other new debt (!), and interest rates of 10% on new financing — this sort of borrowing would work out to the country having $287 billion in loans, the huge bulk being foreign debt. Venezuela would have to pay debt service at a rate of about $30 billion a year. In human terms, that’s almost $1,000 per capita leaving the country and enriching bankers and bondholders. In technical terms, it’s a debt-GDP ratio of 64%. I can see why the PDVSA bonds maturing in 2014 and 2015 yield almost 20%.

PS: Thanks to state newswire Agencia Venezolana de Noticias for covering the annual report 6 weeks late and leading on the new output number, which I had missed in my various prior perusals of this report. I bet some of you clever readers had already noticed this change, but from the Google I don’t see any evidence that it was covered at the time.

A wee chop

Is Mariscal Sucre the Bermuda Triangle of oil exploration? Is there some demon gas down there, from which the winds of fate try in vain to protect us? I told you a new drill ship was on the way…

There it goes!

Right into this!

Safe travels, for real. There’s something funky going on in the water out there. Two days ago three motorboats “disappeared” off Isla Margarita. While everyone was wondering where they could have gotten to, a plane — also from Isla Margarita — was flying to Puerto Ordaz and instead crashed into the Sidor steel mill property on the outskirts of town, killing 15 and, fortunately, leaving 36 alive but shaken.

Meanwhile the boaters were found, 103 miles away, on the mainland. Rescuers were taking one of the boats and its passengers back to Isla Margarita today when a helicopter carrying medical supplies came in too close hit the prow of a rescue vessel, crashing into the sea and leaving least two dead and five injured. A cargo ship is now towing the troubled motorboat and its 10 passengers off to safer waters — Trinidad.

Is Venezuela under pressure from arbitrations?

I recently joked about the outbreak of normalcy from the Bolivarian Republic of Venezuela, President Hugo Chavez and Petroleos de Venezuela SA, in which they are acting all responsible and paying off debts for nationalized companies. The wave of payments increased today, and it all makes me wonder what’s going on.

-Venezuela settles arbitration case with Holcim Group for $650 million over five years, makes first payment for 2008 nationalization of cement plants. Holcim will drop its arbitration case at the International Centre for the Settlement of Investment Disputes.

-Chavez says Venezuela has come to a “friendly agreement” with Cemex, another cement company nationalized in 2008. Cemex had also filed for arbitration. (It’s possible that he was confused and this was actually Holcim.)

-Chavez says Venezuela will pay $690 million to Groupe Casino for the nationalization of Exito hypermarkets and Cada supermarkets.

-Chavez says the country will pay for the nationalization of Vestey Group properties. No terms announced. Vestey, too, is at ICSID for the nationalization that started in 2005,

-PDVSA gives Ensco back its Ensco 69 jackup rig. The state oil company seized the rig during drilling in the Gulf of Paria in 2008, after Ensco halted drilling over a lack of payments.

So what is going on? I suspect it has to do with the upcoming rash of arbitration cases that Venezuela is facing. The country may not want to look like a serial violator of property rights, even though in theory each case stands alone.

In particular, the ConocoPhillips case had its main hearing at the beginning of June. According to Oil Minister Rafael Ramirez, the claim is for $30 billion. That’s a lot of money.

Meanwhile the liquidation of PDVSA overseas assets continues apace, with the plan to sell European assets to Rosneft and the conversion of part of the Bopec oil terminal in Bonaire into a fire insurance payment. And no, I am not saying the last one was intentional; I don’t even know if there’s an arson investigation in the case. Lighting ignites tanks fairly often.