A peek behind the curtain

On stage, big oil* and the Venezuelan government tend to get along, with lots of big smiles. Bigwigs from Chevron, Schlumberger and Eni attend the signing ceremonies, wait for President Hugo Chavez to show up, shake hands with Oil Minister Rafael Ramirez, pose for photos, and a good time is had by all.

The Guardian’s Rory Carroll has the U.S. Embassy memos that give a bit more color behind the scenes. For example:

In separate private conversations with the ambassador, Patrick Duddy, industry figures detailed the parlous state of the industry. A senior manager from Chevron estimated the state oil company’s output at 2.1m to 2.3m barrels per day, well below official declarations of 3.3m.

The original cables, so far posted only at the Guardian website, are really something. For your reference, titles and a few prize quotes:


…Chevron is withdrawing profits through a deal to take crude oil shipments from Petroboscan to its Pascagoula refinery in Alabama. In contrast to Chevron’s perspective, Baker HughesXXXXXXXXXXXX confided to the Ambassador that PDVSA continues to owe the company $100 million, even though it paid $70 million in early September (Ref B). Of $12 million in foreign exchange requests pending with CADIVI, Venezuela,s foreign currency control board, BHI has received approvals for only $700,000…

Insights into Recent PDVSA Activity from Mitsubishi

XXXXXXXXXXXX stated that privately, senior PDVSA leadership is extremely upset with the failure of international companies to register bids. XXXXXXXXXXXX added that Mitsubishi sent a letter to PDVSA explaining why the conditions offered by Venezuela were insufficient and what would need to be changed to make a bid commercially viable. XXXXXXXXXXXX suggested the obstacle to Mitsubishi’s bid was the expected price for natural gas that participating companies would receive from the GBRV (GBRV wants to buy natural gas for $1.25/million cubic foot and international companies are looking for a price above $3/million cubic feet).

Regular readers might find this argument familiar. (Note that the report refers to prices per million cubic foot, but they probably mean million BTU, which is basically the same as 10,000 1,000 cubic feet. Update: hey look I got the number wrong too.)

Italian Ambassador Briefs on Eni Oil Deals

Maccotta disputed press reports that Eni had paid a $646 million bonus to PDVSA, saying that Eni had agreed to a $300 million bonus, which will not actually be paid given that PDVSA owes Eni nearly $1 billion…Maccotta shared that the GBRV had rejected Eni’s proposed changes to the terms and conditions of the oil deals, but 30 minutes before the ceremony was supposed to begin, XXXXXXXXXXXX told Ramirez, “take it or leave it, I can get on my plane and move on.” Ramirez apparently used that half an hour to convince President Chavez to accept all of Eni’s proposed changes or risk losing the deal.

(I take this last bit with a grain of salt, as an Italian ambassador chatting “privately” with his U.S. counterpart may be excused for a bit of writers’ embellishment. Who knows.)

A warning about both the embassy memos and the Guardian story. It’s important to distinguish between the reporting and the analysis. I put a lot of stock in what Chevron or Baker Hughes has to say about the oil business in Zulia. And I think the embassy officials Duddy and Steuart write reliable reports. Caulfield gives me pause. The Guardian quotes him thus:

The memos depict an unfolding economic fiasco and suggest some of Chávez’s key allies – Argentina, Brazil and Cuba – are gravely concerned at Venezuela’s direction. “President Chávez, for his part, is acutely aware of the impact the country’s general economic trajectory has had on his popularity,” says one cable.

Clicking to the original, we see:

Mounting economic problems have contributed to a decline in Chavez’s popularity, which is an important reason Chavez agreed to a devaluation that would substantially increase government revenues and permit massive spending prior to the September legislative elections. Chavez is betting that short term measures can delay the long term consequences of his ill-conceived policies.

It’s an old journalistic saw but it bears repeating: we can’t know what people think or feel, especially politicians. We can only know what they do. Anyone who writes in absolute terms about a politician’s motivations is taking his chances with the truth.

P.S.: Thanks to readers DC, PK and OR for the heads-up on this article

PPS: Caracas Chronicles digs into the same stew. And Inca Kola continues to pump this blog, which is awful nice of Otto.

*Exxon excepted

3 thoughts on “A peek behind the curtain

  1. Francisco Toro

    Now I can say I know something thanks to Wikileaks that I wouldn’t have known without it. The full scale of PDVSA’s Nat.Gas crunch just wasn’t apparent to me before this.

    Did you check out the (admittedly hear-sayish) story about Asdrubal Chávez refusing to honor any gas supply agreement reached before he was vice-minister?! Crazy stuff!

    1. sapitosetty Post author

      About the Asdrúbal Chavez item: It’s hard to know what to make of it. For once I was more cynical than you. After his teflon-coated but rather worrisome leadership of scandal-ridden PDVAL, my first thought was that his statement was a shakedown for some commissions. But who knows, with this level of sourcing it’s hard to know what he said and to whom. And with his weird communication style you never know how seriously to take anything he says. He has baldfacedly lied to my face many times, particularly about refinery operations.

  2. Kepler

    Setty, do you have more information on what is going on with the oil fields in the Delta region? Who is exploring/exploiting what there?
    I see old information in PDVSA’s site.

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