PDVSA in Argentina: Good money after bad?

Ever read one of those news stories that leaves you thinking that there must be more to this than I’ll ever know? This, about Venezuelan state oil company PDVSA and its dealings in the Argentine fuel market in a joint venture with Uruguay’s state oil company, is one of them:

UPDATE 1-PDVSA takes control of Argentine fuel company

Oct 1 (Reuters) – Venezuela’s PDVSA bought Uruguay’s 47.19 percent stake in Petrolera del Conosur, which owns 100 service stations in Argentina … The head of Uruguay’s state energy company ANCAP told Reuters on Saturday the stake had been valued at $11 million.

“ANCAP will receive one dollar because there were lawsuits pending that were valued at the same amount as the shares, $11 million,” said company head Juan Justo Amaro.

…PDVSA now owns a 94.38 percent stake in Petrolera del Conosur, which operates at a loss.

Amaro said the business was not profitable for ANCAP because prices to the public in Argentina were not high enough to cover the cost of buying and distributing the fuel.

So the real story here is more like, “ANCAP Hands PDVSA Money-Losing Filling Stations.” You can then go back and look at PDVSA’s prior press releases and reports on Conosur, and see that PDVSA bought its initial 46% stake for $15 million from ANCAP.

And from the start, it was a hopeless deal. Rather than building 600 filling stations, PDV had relabeled one station as of 2008, and another couple dozen as of this year. From PDVSA’s 2010 annual report (my translation):

In the year 2010, the corporate image of PDVsur was placed on 24 service stations in the provinces of Buenos Aires, Santa Fe, Entre
Ríos and Córdoba, to complete a network of a total of 46 service stations. Additionally, development of the PDV® lubricant market in the automotive sector was continued. Fabrication of 24,000 liters of PDV® lubricants was realized in the bottling plant of the company AGIP Lubricantes, in Buenos Aires.

So in effect, PDVSA spent $15 million in 2006 and then just now assumed liabilities “valued at” $11 million (who knows how they are valuing those lawsuits), plus whatever operating subsidies they may have kicked in over time, and in return, Argentines get new labels on 46 gas stations and enough lubricant to do about 8,000 lube jobs. This all to fulfill a 2005 announcement by President Hugo Chavez, at the time obsessed with South American integration, who said PDV would run 600 gas stations in Argentina.

However, no one in Venezuela will look into this story and figure out where the money went, and whether it would be best to just pull out of this deal now. I understand. It’s hard for Venezuelan auditors, reporters and investigators to understand what’s going on there, what with the language barrier, che.

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