No, no connection at all (CVX)

Update I hear from the El Universal reporter, Ernesto Tovar, that the interview actually took place before Maduro spoke. That just shows that Chevron wasn’t responding to Maduro, nor Maduro to Chevron. The differences in their discourses is enlightening.

March 1:

Nicolás Maduro: La agresión de Chevron a Ecuador es también contra Venezuela

(Nicolas Maduro, de facto president of Venezuela, says Chevron Corp. is attacking Venezuela by, I guess, defending itself against what’s likely the biggest environmental law verdict ever. His phrasing was reminiscent of the NATO treaty, which declares that an attack on one is an attack on all.)

March 4:

Estamos abiertos a ampliar el financiamiento a Petropiar

(Ali Moshiri, president of the Chevron Corp. division responsible for oil production in Africa and Latin America, gives a rare lengthy interview in the Venezuelan press and says “The collaboration between Chevron and PDVSA is one of the best.”)

As is so often the case, strong words from the Bolivarian government against a multinational oil company coincide with the government’s opening to increased investment from a multinational oil company.

How much do oil companies save under Venezuela windfall tax cut? (reposted)

(Reposted, because when I posted this the other day, I was using some incorrect assumptions. It’s all much better now. Crummy old version of post can be seen here.)

So Venezuela’s legislature approved the cut in the “special contribution for exceptional international oil prices” or whatever they call it. Windfall tax, in effect. And people wonder, how much do the oil companies save?

I don’t know, since when you save money on one tax you often end up paying more on some other tax. But here’s what the chart looks like on the windfall prices tax, which isn’t a tax but a “special contribution” (meaning it goes right to the presidential slush fund, rather than being shared with state and local governments):

Venezuela windfall oil taxes as of 2007, 2011 and 2013. Click for full size

At $100 a barrel, under the 2011 rates, oil companies had to contribute $31 a barrel. Under the new rates, you contribute only $21. According to my math, anyway. At $110 a barrel, the difference grows to $10.50 per barrel, and stays there — from there on up, the difference is always $10.50.

Several of the big joint ventures in Venezuela are aiming for output of 200,000 barrels a day. The private partners generally own 40%, so they can count 80,000 barrels a day as their production. At that output, a difference of $10.50 a barrel works out to $306 million a year ($307.4 million in leap years).

But that isn’t exactly how much the oil companies save. Because that $306 million is pretax income, and all sorts of other taxes come in. And to figure that out, you really need to go beyond some dude writing for free on the internet.

Comments on Chevron-Ecuador in Argentina

An informed observer sends this in:

I love the subsidiaries argument. As in, this thing belongs to me, but when you want to take it away from me, it doesn’t belong to me, it belongs to something that belongs to me, therefore you can’t take it from me. I’m a bit disappointed this has been taken at face value.

… Pretty quick turnaround for a decision of that magnitude. And pretty lame that the judge said “If you want to appeal this decision, take it back to Ecuador, because that’s where we go the order from.” Seems flimsy. A pretty big fight for Argentina, which already has some nasty fights on the horizon anyway.

But I kinda want to think this will eventually make Chevron uncomfortable. Best case scenario would be at some point they’d stumble across a legal regulation that says they have to provision some part of this, which means they have to put it on their books, which gets investors talking about it, which means it gets interesting. I’m guessing we’ll never get to that.

Speaking of subsidiaries, here’s a link to Chevron’s annual report to the US securities regulator. I can’t find the part where they say “those 27,000 barrels a day of oil equivalent we’re producing in Argentina, we shouldn’t count those cause they really aren’t ours, they belong to a subsidiary that has nothing to do with us, really guv.” However I do see that the company makes some rather lawyerly terms, and I wonder if this is what they are going to rely on: “Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates.” I certainly don’t know Argentina corporations law, so I have no idea how all this plays out. The only clear winner I see is Buenos Aires law firms and their caterers.

Oh also, you can see how important the market thinks this is: CVX stock has moved with XOM, its closest competitor, for last 2 days. No obvious news-driven divergence, just CVX winning by a bit.

More notes on Chevron-Ecuador in Argentina

A few items for the record.

Statement from James Craig, Chevron’s US-based spokesman on this issue (sent by e-mail):

“Chevron Corp., the Lago Agrio judgment debtor, has no assets in Argentina. All operations in Argentina are conducted by subsidiaries that have nothing to do with the plaintiffs’ fraud in Ecuador. The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources.

“The Ecuador judgment is a product of bribery, fraud, and it is illegitimate. We do not believe that the Ecuador judgment is enforceable in any court that observes the rule of law.”

Amazon Defense Coalition statement:

In a major blow to Chevron’s effort to avoid paying a historic $19 billion environmental judgment in Ecuador, an Argentine judge today signed the first of what is expected to be many orders freezing billions of dollars of assets owned by the U.S. oil company.

The order, signed by Judge Adrian Elcuj Miranda of the Commercial Court of Justice in Buenos Aries, freezes almost all Chevron assets in Argentina pending enforcement of the Ecuador judgment. The embargo applies to 100% of Chevron’s capital in Argentina, 100% of dividends, all of Chevron’s stake in pipeline operator Oleoductos del Valle SA, 40% of Chevron’s oil sales to Argentine refineries, and 40% of the money Chevron has deposited in Argentine banks, said Enrique Bruchou, the lawyer who represents the indigenous and farmer communities in Ecuador who brought the lawsuit.

Argentina vs. Chevron: It’s $19 billion worth of on

Remember how Ecuadorian rain forest villagers won an $18 billion judgment against Chevron Corp. because Texaco polluted the Amazon back in the day? Never mind that the Chevron still says they discharged all their responsibilities long ago and the trial judge was corrupt. Never mind because they got the venue they asked for, they lost the case, and they have spent the last year acting as though no judgment existed. For the most part, that strategy worked fine. No US court was about to seize their assets, at least no time soon. A court case in Canada to enforce the Ecuador judgment promises to be sloow, only with more os. Some have suggested that Chevron try Venezuela, but Venezuela is more dependent on Chevron than vice versa — so that’s not going to happen. But Argentina well, we shall see.

Reuters, take it away:

Argentine judge puts embargo on Chevron assets-lawyer

Nov 7 (Reuters) – An argentine judge has put an embargo on $19 billion in Chevron Corp assets in the South American country over an environmental damages suit in Ecuador, a lawyer for the plaintiffs told reporters on Wednesday.

And that’s the whole article, for now.

For those of you in North America, an “embargo” in South American law is usually pretty much the same as an asset freeze. The company can still use its stuff, but can’t sell it or give it away. I’m sure we’ll all have much more to learn about the term over the next few weeks.

UPDATING WITH CHEVRON STATEMENT:
Bloomberg now has this, from Chevron:

Chevron is unaware of either a filing by the plaintiffs or a court order in Argentina, James Craig, a spokesman for the San Ramon, California-based company said in an e-mailed response to questions.

“The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources,” he said. “The Ecuador judgment is a product of bribery, fraud, and it is illegitimate.”

Just how well does Venezuela get on with Chevron? Very.

A couple days ago, Raúl Gallegos published a decent little column about how Chevron is, if not betting on a Hugo Chávez reelection, at least setting itself up for a long, happy relationship with the Bolivarian Republic.

Chevron has no illusions about how Venezuela works. It first set up shop there in the 1920s, when strongmen showed heavier hands than Chavez. Scores of populist governments and two oil-industry nationalizations later Chevron is still pumping crude. And when PDVSA asked for a couple of billion to invest in Boscan, a jointly-run field Chevron first came across in the 1940s, the oil major obliged. The 13-year loan is costing PDVSA Libor plus 4.5 percent, far less than the 11 percent that its 2027 bonds pay.

I quibble with a bit of the column, but basically, he’s right. Chevron in Venezuela is now too big to nationalize.

I had thought Repsol fell into the same category. But maybe not. Check out this article from last night.

Venezuela President Hugo Chavez warned Repsol SA (REP) to “think carefully” about taking action against Argentina after it nationalized its YPF SA (YPFD) unit, indicating the Spanish company may face ramifications in Venezuela.

“They have a lot of investment here in Venezuela,” Chavez said on state television after holding a meeting with Argentine Planning Minister Julio De Vido in Caracas. “What happens there in Argentina affects what happens here.”

What jumps out here is that Chávez has never made any similar threats against Chevron over its $18 billion debt to ostensible ally Ecuador. If you haven’t followed that whole story, here’s an article, the plaintiff’s version and the company’s version, but long story short, Chevron was sued in the US for polluting Ecuador. It got the case moved to Ecuador, apparently thinking courts there would be friendlier. Courts there ruled against the company and ordered a huge amount of compensation. Chevron insists that the rulings were flawed by corruption, though I think it’s fair to ask, if they were worried about corruption, why did they get the case moved to Ecuador? The whole thing is a mess.

If Chávez were ideological, you’d think that the anti-Chevron campaigners would find open ears in Venezuela, and would even now be auctioning off the Boscan oilfield to pay the Ecuador debts. Instead, I don’t think Chávez has ever mentioned the case. And Chevron is piling in ever more billions of dollars.

Those of you who think politics has anything to do with ideas might be surprised by this. Please learn.

Oil spills as jobs program? (PDVSA, Chevron, a rant)

Kepler points us to this depressing story about new oil spills in Anzoategui state, Venezuela.

Puerto La Cruz.- Two new oil spills were recorded at the beginning of the week in the La Peña sector of El Tigre…which caused the local population to block roads and to warn that if (state oil company) PDVSA doesn’t form teams as promised on Monday, they will take further actions.

Yes, you read it right — the big issue for the locals isn’t that there’s a damn oil spill, it’s that the oil company hasn’t yet hired locals to help clean up.

More of the article below. For now here are pictures I have taken in oilfields in Anzoategui.

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Pricing power, Colombia-Venezuela edition

There are many ways to translate “pricing power” into Spanish. But the easiest way to explain what it means is here (PDF), on page 7.

Ecopetrol’s export price for “gases” — which as far as I can tell is natural gas* — in the fourth quarter went up to US$5.80 per million BTU, from $4 in 4q2010. The average price for the year rose to $5 from $3.90. As long-time readers may recall, Colombian gas exports are basically to Venezuela, via a pipeline built (ostensibly) to export Venezuelan gas to Colombia. Because Venezuela’s natural gas situation remains grim, Colombian producers including Chevron Corp. sell to Colombian national oil company Ecopetrol, which in turn sells to PDVSA, the state oil company in Venezuela, which then sells the gas to power generators and chemical plants.

I’ll leave it to the Venezuela howling squad to worry about the fact that PDVSA’s retail prices for natural gas remain the same year after year. For me, the interesting thing here is that Ecopetrol has Venezuela over such a barrel that it seems able to pretty much raise prices. I mean, where else is Venezuela going to go? Volumes exported also rose 47 percent year-over-year because of “higher demand in Venezuela” and more gas available for export.

At some point, the shoe will be on the other foot, as Venezuela has a nearly bottomless pit of gas if it can ever figure out how to get it out of the ground, and Colombian gas — well, see the last entry for more on that. Gas sales in Colombia are at a 2-year low.

*It’s Friday night so I’m not going to bother Ecopetrol flaks about this, but this whole entry is off-base if the word “gases” includes butane. Sorry for the ambiguity, but this is the journalism you get for free. On Friday night.

Chevron responds in kind to Brazil accusations

This is pretty funny. As our cousin Lungs of the Earth reported here, Brazil has been eager to go after Chevron and beat up on the evil Yankee while ignoring any possible screwups by hometown hero Petrobras.

Yesterday, Petrobras CEO Maria das Gracas Foster says Chevron must “provide the official response to a lawsuit over last month’s offshore oil spill at a field in which the two companies operate as partners,” Dow Jones reported.

Today, Chevron responded — in its own sly way. As Bloomberg puts it, “Petroleo Brasileiro … reported a seep … near the Chevron Corp. (CVX) field where 3,000 barrels leaked into the Atlantic Ocean in November. Drops of crude were detected coming out of the seabed at the Roncador area… Chevron discovered the oil seep at the Roncador field, operated by Petrobras, on April 7 while examining the ocean floor near its Frade project and determined it was outside its concession area.”

Funny response. And yes, everyone agrees that this appears to be a seep, and oil seeps exist all over the world, and there’s a big difference between a few drops of oil and 3,000 barrels. But still. If 3,000 barrels of oil is worth an $11 billion fine, that works out to, um, wow: $87,000 a gallon. Somehow I doubt the regulators will hit Petrobras with such a fine. Happy to be proved wrong!