Tag Archives: numbers

Venezuela rationing changes – we’ll see

I wrote a lot about the rationing changes in Venezuela, and WordPress.com, which I don’t recommend, just lost it all. But the short answer to Jakob’s question:

In Venezuela, Chavez is saying that the power-rationing that has been necessary for the last few months is coming to an end…but where is Setty to tell us what is really going on??

is, so far, it’s unclear that this will make a whole lot of difference. If the basic industries and Caracas are going to stick with their savings programs, the only effect of these new measures is that it will free people psychologically to waste even more. But as I wrote before, the rolling blackouts didn’t save energy, and in fact the areas under rolling-blackout rationing all increased energy consumption. A lot.

The best part of this is that the courts will be back in service for more than three hours a day.

The bad news is that the wasteful habits people developed under the blackout rationing system are likely to stay. Without blackouts, that means power use is likely to increase even more. And if they get rid of the rationing for Caracas and the basic industries, Guri’s recent slight recovery is likely to slow, and my call of a bigger crisis in 2011 will become almost a certainty, with or without an unusually rainy season.

Meanwhile Igor Gavidia, who is apparently more or less in charge of the power rationing, says that the power waste in Venezuela is a result of capitalism encouraging waste. Spanish speakers with 18 minutes to spare on some prize demagoguery are encouraged to listen.

Electricity update – opportunity cost

Use of diesel fuel in Venezuelan power plants jumped in March to a record 66,000 barrels a day, up 33% year over year, increasing the opportunity costs of lost diesel sales.

Daily diesel use in power plants (from CNG) multiplied by spot diesel price in U.S. in first week of month (from U.S. EIA), minus $5/barrel shipping cost.

The fuel was used to keep the country’s lights on as hydro dam managers cut power generation 5% to save water after a drought. Conservation programs imposed by the government had little effect, as year-over-year electricity use fell only 1.5% year over year. Electricity use rose to 316 gigawatt-hours a day in March from 303 in January and 309 in February.

The opportunity cost — the money not earned by a dealer that dips into his stash — of diesel consumption rose by about $1 million a day to $7.5 million a day in March, the highest since soaring diesel prices in 2008 meant Venezuela was temporarily sacrificing as much as $9.3 million a day by burning diesel in power plants.

Use of fuel oil fell slightly from February to 54,000 barrels a day, still 11 percent higher than a year earlier. The opportunity cost of fuel oil is lower, as it is a less valuable substance.

If Venezuela reaches the 100,000 barrels a day forecast by the energy ministry in a document that Reuters got a few months ago, and spot diesel prices remain around the $2.89 a gallon seen at the beginning of March, Venezuela will be sacrificing $11 million a day by burning diesel in power plants rather than exporting the fuel.

This can be seen as a lot of money: $10 million a day could build a lot of nice schools, or import a lot of water-heater timers and water-conserving shower-heads. Or it can be seen as less than 1% of GDP, an insiginificant sum compared to the instability that would result from widespread blackouts.

Setty Venezuela travel guide Part I

Bring cash.

That’s the key thing to know about Venezuela. Currency controls mean that your foreign cash is worth more than a foreign ATM or credit card. And with the way things are going this week, way more.

A foreign credit card or ATM card will give you a constant exchange rate of 4.3 bolivars to the dollar. Today, the bolivar has fallen to almost 7.5 to the dollar for people seeking to buy bolivars, 7.7 for those seeking dollars. So if something costs 4,300 bolivars, that is $1,000 at the official government exchange rate, but only $573 if you can get your bolivars at 7.5

The Gringo Discount, now offering 43% off list price for anyone with access to dollars.

OK, worry if you like

A few posts ago, I upset a Venezuelan reader by suggesting that we probably don’t have to worry about massive electricity outages in 2010, what with rain arriving and Guri Dam’s water level starting to rise. Since then, nationwide power use and hydropower generation both jumped to 1-month highs, the streams feeding Guri settled back to well below their normal rainy-season levels, Planta Centro turbine 1 went back out of service after only one day, and Guri’s water levels fell to 248.66 m above sea level, 13 cm below the prior bottom April 16. So, worry away.

However, collapse won’t happen this year, unless the rains just quit. Water levels have declined 8.66 cm a day for last 3 days. That works out to a meter every 11.5 days, and we have about 7 meters to go before things really fall apart nationwide. Even if the decline speeds up, we have a couple months of slack in there. The problem comes at the end of the rainy season, if we still have only a couple months of slack.

Oil output – your thoughts?

If you look down below, you’ll see one of my first second post, Statistical Battle I: Rig counts. By the title, you might guess that I’m planning a few other Statistical Battles. The next one will be on Venezuela’s oil output. And I need your help.

Anyone who follows Venezuela knows that the country runs on oil money. So everyone wants to know how much money that is. It’s not simple to figure out.

The Energy and Oil Ministry publishes a weekly price for the standardized “Petroleum Basket” that has little to do with the proportions of items actually exported. An oil ministry official told me that the makeup of the basket was published years ago in the Gaceta Oficial, but I have never been able to find it, and no one I’ve asked has had it. So the price per barrel has error bars of an indeterminate length.

But if you want to see error bars, you need to look at the oil production and export figures. Here are a few outside estimates, measured in barrels a day:

International Energy Agency (PDF) 2.23 million
U.S. Energy Information Administration
(only updated through December, excludes condensate)
2 million
OPEC (PDF) 2.29 million
Bloomberg 2.29 million
Platts 2.22 million
Petroleum Intelligence Weekly 2.65 million

The government has started sending (through an oddly back-channel method) a monthly report on how many barrels of each type of crude and condensate were reported for royalty purposes, the name and cargo of each tanker ship that embarks from a Venezuelan terminal, the domestic dispatches at each fuel terminal, and an independent tally of the bills of lading of outgoing and incoming tankers.

In the latest mailing, the government says oil production in February was:

Ministry of Oil and Energy
(and no, the link doesn’t go to the report)
2.89 million

2.89 million barrels a day — 9% higher than the highest of the outside estimates, and 45 percent higher than the estimate from Washington. That’s error bars. But it’s almost identical to the 2.87 million that you get when you add up the country’s self-reported net exports and domestic sales. So at the least, the ministry is being internally consistent.

When the government started sending its report, I Petroleum Intelligence Weekly revised its estimate upward by something like 500,000 barrels a day. If the others had followed, at least there would be a cluster vaguely near the official number. But instead, most of the outside estimators have glanced at the Venezuela government mailings and more or less dismissed them without public disclosure or discussion.

I’ve heard that back when the government claimed the production was 3.3 million barrels a day, a bunch of experts got together in Caracas to discuss the numbers, and concluded that the EIA-IEA-OPEC range was several hundred thousand barrels a day too low. As far as I know, no one has held a similar discussion since the government started releasing its monthly numbers.

Nobody has the whole picture. Given that I am seeing lots of big names in the access logs of this website, I hope that some smart people can write with their thoughts of what is going on. If you prefer to send an e-mail rather than leaving a comment, that’s great with me — settysoutham@gmail.com. Your confidentiality is assured if you need it. The only thing I don’t welcome is uninformed opinion. Be in touch.

Venezuela electricity conservation fails

Venezuela was going to cut 20 percent of its electricity consumption in a vast consciousness-raising exercise. Instead, electricity consumption is flat year-over-year as small consumers swamp the huge savings imposed on heavy industry.

The breakdown, utility by utility:

Peak demand, jan and feb y-o-y

Source: Centro Nacional de Gestion monthly reports

electricity consumption jan and feb y-o-y

Source: Centro Nacional de Gestión monthly reports

To explain:
Cadafe is the country’s biggest utility, handling 3 million customers, most of them unmetered small businesses and homes in low-income neighborhoods. Their consumption and peak demand rose year-over-year.

Edelca is the utility that handles the biggest users, such as steel mills, aluminum smelters, and municipal water districts. Their consumption and peak demand are down enough to balance out the increased consumption among most other utilities.

EDC is Caracas’s utility. There was a bit of savings there in January. Flat consumption in February. March, which hasn’t been released yet, will very likely show increased consumption year-over-year, as a heat wave caused demand to rise. (Air conditioning is probably the biggest single energy user in Caracas.)

Enelven is the utility for Maracaibo, the second-largest city. They actually have a relatively smart version of rationing there, in which neighborhoods are excepted from rolling blackouts for the week if in the prior week they saved at least 10% of their power. Sadly, some smarts haven’t been enough to save electricity, as electricity use surged year-over-year.

Enelval, which covers the industrial city of Valencia, predictably boosted energy use. Factories subjected to unpredictable blackouts are working longer hours to make up for the interruptions, and homes have their air conditioning and refrigerators turned up so when the lights go out, they can stay fresh for a while.

Short version: the heavy industry cuts saved our butts this year. We’ll see if power-plant construction can do the same next year.

(March numbers should be coming soon; I’ll update at that point.)

Caracas’s forgotten water crisis threatens again in 2011

Updated 10:08 a.m. to make table readable.

Caracas’ water system made headlines in the fall when Alexander Hitcher, then president of the water utility Hidrocapital, went on television to say that he would impose mandatory water savings measures to reduce the flow to the city by 25%. The rainy season had added almost no water to local reservoirs and demand was growing. While the public whined about the nature of the rationing — 48 hours a week without water for most residents — I heard many people say that at least he was taking responsibility and doing something before the city ran out of water completely. I met plenty of people who at least said they agreed with my assessment that at 400 liters a day per capita, Caracas water consumption was unnecessarily high, and could easily be reduced.

Hitcher was promoted to minister of environment when Yubiri Ortega quit a few months ago, with the president saying that Hitcher had done a good job. He was back in public at the beginning of March to say that Caracas had successfully cut consumption by 30%. A week later, his vice minister of hydrology came out to say that people were using water more rationally, protecting the country’s reservoirs.

Meanwhile (to their credit) Hidrocapital continues to post periodic updates on the level of water in Caracas’s reservoirs. (March 1 presentation is here.) Looking at them breaks some of the tranquility one might feel after listening to the minister and his aides.

The biggest reservoir, Camatagua, declined at the exact same rate as it did in each of the prior four years up until the end of March. Since then, the rate of decline has slowed, but water level has continued to fall. Its current level is well under half of capacity. The reservoir has been exploited at an unsustainable rate since 2006. That was the last year when rains let the reservoir recover all of the water used in the prior dry season. Since then, each rainy season has failed to fill the reservoir, leaving the city with less and less margin for a very dry year like last year. There is now no margin for a multi-year drought — hopefully the nice people at Columbia University’s IRI are right to predict a heavy rainy season. Continue reading

Electricity outlook: Still difficult

For the first time in well over a year, water levels are rising at Guri Lake, the source of more than 70 percent of Venezuela’s electricity. At last, we can stop worrying that the power grid will collapse in 2010. If the weather forecasts are right, there will be plenty of water to get us through the year. Looking forward to 2011, things are less cheery.

Traveling last week in Guayana I was impressed with how well understood it is among workers in the metals and electricity industries that 2011 is the crunch year, not 2010. The problem is simple. The crisis provoked no energy savings in the residential and commercial sectors, according to the monthly reports from CNG, which runs the power grid (and has now deleted the damning monthly reports from its website). The only sector that conserved was industrial, and even there, savings were achieved in only a small number of plants, entirely by slashing output (without layoffs). Reduced activity and shutdowns at a few iron, steel and aluminum plants saved the rest of the country its comfort.*

However, recovering the dam is going to be a long slog. Today’s report showed the reservoir has gained 24 cm since bottoming at 20 percent of its useful volume April 14. We need another 1,300 cm to get to the level we were at Jan. 1 and another 1,300 cm again to fill the reservoir, as it should be around New Year’s. At current electricity consumption and generation levels, that will never happen. Average water consumption from the dam this year — after conservation was imposed and water consumption rationed around New Year’s — has been 4,574 cubic meters a second. Average inflow into the dam in an average year is 4,500 cubic meters a second, Miguel Lara, the former president of the grid regulator (then known as OPSIS), told me in a phone interview. That means that at this year’s average water consumption and with average rains, the water level will be lower a year from now than it is now. With above-average rains, we can gain a few meters, but there are complications that make the situation worse.

First, industrial rationing has to end at some point. Venalum, Alcasa and Sidor can’t remain at such low production forever while maintaining full payrolls with (by Venezuelan standards) excellent pay and benefits. Managers at Sidor say the laborers who work in the heat of the steel mill make 7,000 to 8,000 bolivars a month, well above the salary of a Venezuelan accountant or doctor. The mills run luxury buses to and from the job sites. They have made some cuts in response to the losses they started to incur with the North American housing slowdown: they have slashed medical insurance and this year, in a local scandal, stopped providing new uniforms for their company sports teams. Cuts like that are no substitute for making and selling aluminum and steel.

Second, elections are coming. Normally, the Chavez government pushes consumption-oriented policies before elections to try and soothe the population. More home appliances will increase, rather than decrease, power use.

Third, when the dam levels are as low as they are now, you need to use more water to get the same amount of power. Edelca, the power utility that runs the Caroni River hydro complex, has squeezed 11.8 kilowatt-hours of electricity out of every cubic meter of Guri Dam water in the first half of April. That is down 8 percent from the 12.8 kWh of that Edelca generated from each cubic meter in the first half of December 2009. This is because when the dam is more than half full, the pressure is much greater than now, with far less weight forcing water through the turbines. In order to keep power generation average level we’ve had for the past few months, Edelca may have to increase water consumption from the dam.

Edelca cut flows through the dam from over 5,150 cubic meters a second in December to about 4,330 this month. It will take a lot of arguing for the managers there to convince Caracas not to boost flows again now that the rain is falling.

There are only two ways to escape this situation. First would be to implement effective energy-saving measures, such as water-heater timers, solar water heaters, enforcement against excessive air conditioning, a massive program of weatherization of home and offices, energy audits for small industry, encouragement to shut off televisions, requiring all residences to provide clothes lines, and increased use of natural gas for cooking. While the propaganda calling for power savings has gradually been getting better, none of these ideas are likely to be put into effect.

The other alternative is to increase power generation. This is the government’s plan. It has pledged to bring between 4 and 6 gigawatts of generation on line this year, depending on who is speaking and to what audience. Among the plans:

Generation barges parked by the Tacoa generation plant that serves Caracas. It’s unclear what’s happening with them, but this week state oil company PDVSA said a barge arrived in Lake Maracaibo to provide 103.5 megawatts of power starting at the end of May.

Planta Centro recuperation. South America’s biggest thermal generating plant, a 2,000-megawatt fuel-oil and natural-gas-powered beast, was supposed to be operating at increased capacity by now. Instead, it has continued to struggle. It has had at most one of its five turbines in service since March 26. It was completely down April 5-11. The challenges of getting it on line were epitomized in a rumor I heard from Jose Manuel Aller, a professor at Simon Bolívar University in Caracas. He said repairs on one generator were almost complete on a turbine earlier this year but the startup was rushed and technicians failed to put oil in a pump. The pump seized up and needed to be replaced. Given Venezuela’s difficult import environment, this took forever.

Wind turbines on the Paraguana peninsula. Starting next year, 70 1.3-megawatt windmills 70 meters high are supposed to start producing 100 MW of generation. (Note that this press release for the first time quantifies how much diesel is used to generate 100 MW of power in a thermal plant: about 2,000 barrels a day, it says.)

880 MW at Sidor. Former CVG president Rodolfo Sanz said 440 MW worth of turbines were on their way from the USA and that they’d be in service in May. The Nueva Prensa de Guayana reported that Sanz said the first 175 MW of plants would arrive by the end of February and the remainder two weeks later. Delays kicked in at once. This undated press release, posted between March 20 and April 5, says the second ship had just arrived. The Sidor power plant still has a long way to go before it’s operational; I can’t see how it will happen in May as promised.

So we shall see. I think that politically, Chavez has to end the rolling blackouts by August or face serious electoral consequences. I don’t see the grid getting more than about 200 MW of new generation before then. So I think Guri will recover a very limited amount this year. There are those who are more pessimistic, and believe Guri will end the year at 20%. I say at least 30%, maybe even 40. In any case, next year, there will be no room for the failures of conservation and delays in new construction that we’ve seen this year. The country will need to consume less, while running its basic industries, and with another 444,000 Venezuelans demanding their fair share of the electrons.

A challenge!

*Anglo American Plc’s Loma de Niquel mine in Aragua state used more power in February than it has in any month since May, according to CNG’s monthly reports.

Statistical Battle I: Rig counts

Oil industry watchers pay attention to the number of oil and gas rigs in the field because they are an indicator of future oil and gas production. A country like Venezuela can have all the reserves in the world, but production in existing wells always declines over time. Without new wells, nationwide production will fall.

There are several organizations that try to count oil rigs. One of the most widely cited is Baker Hughes Inc. The company, the world’s third-biggest oilfield service provider (and I believe the biggest supplier of drill bits) follows the data for market research purposes and its spokesmen insist that companies have no reason nor much way to lie about the numbers. Baker Hughes workers count how many rigs are “consuming drill bits” for at least half the month. That means that the rig has to be penetrating new ground, not cleaning out an old well, replacing mucked-up tubing, withdrawing bits, or in transport. Baker Hughes says there were 54 active land rigs and 11 offshore Venezuela in March, up slightly from 52 and 11 a year earlier.

Schlumberger Ltd., the world’s second-largest oilfield service provider, also publishes a count. Its definition of what consitutes a rig is different, so its numbers are higher than Baker Hughes’. Current figures: 68 land, 17 offshore, down 24 percent year-over-year.

Then there are the PDVSA numbers.

“It’s a constant battle with the private companies,” Oil Minister Rafael Ramirez told me when I asked about the rig counts in 2008. He said they intentionally undercount Venezuela’s rigs, then got in an elevator before I or other reporters could ask for clarification.

Earlier this year I wrote to Eulogio del Pino, PDVSA’s vice president of exploration and production, to ask about something or another. I think it was about a process breakdown at Petrocedeño, but I don’t honestly remember. What I remember was his response: five rapid-fire text messages telling me that Baker Hughes and others miscount count rigs. He said they only count those that are leased, not the many that are property of PDVSA. I called Baker Hughes and they said he was wrong, that they include PDVSA rigs in their list.

Del Pino told me that I was welcome to pick any rigs off the PDVSA list and he’d be happy to tell me where they were so I could go and visit them. They are there, he wrote, apparently exasperated. The same VP said at an oil conference in early December that there were 140 rigs active in Venezuela.

PDVSA insists that it is the victim of a corporate conspiracy, as blockheaded anti-Chavistas seek to sabotage the company’s public image and credit rating through false data. It’s hard to judge who is right, though, when PDVSA doesn’t provide any data to refute the PDVSA and Schlumberger numbers.

My buddy Otto said in December that the Venezuela decline is in line with the worldwide decline. That was right up to a point, but this year’s sustained rise in oil prices has shown that Venezuela is less able to activate rigs compared to other countries. The Schlumberger report shows that Venezuela is the only significant producer to have fallen this amount in any of the recent months. This month, the world outside the U.S. rose 3.3 percent, while Venezuela fell 21 percent.

NOTE: I divided the worldwide figure by 40 and world outside the U.S. by 25 to keep all the figures on one scale and demonstrate the trend.

To try and determine future scenarios, the U.S. has resorted to satellite imagery to count oil rigs, according to one person in a position to know. I told Baker Hughes about that and the spokesman found it funny, saying that companies with oil rigs in the field have no way nor reason to hide their activity.

It makes sense that rig counts would be down. PDVSA stopped paying bills in 2008 and still isn’t caught up, even with oil at $85 a barrel. Drillers Helmerich & Payne*, Ensign** and at least one other drilling company have halted all work in Venezuela pending payment of old bills. While many companies report payment progress, I have yet to hear of rigs being reactivated.

The situation today may be even worse. The state newswire carried a story last week saying workers were undertaking wildcat strikes at the rigs belonging to Schlumberger Ltd., China National Petroleum Corp., Petrex (a unit of Eni SpA), and Precision Drilling Trust.

The apparent decline in drilling activity saves PDVSA money this month, but a decline in drilling now means that the country will miss out on thousands, even tens of thousands of barrels a day of production months from now, when oil prices are generally predicted to be even higher than they are today.

* “All 11 H&P rigs that formerly worked for PDVSA have completed their contract obligations and are currently idle. The Company will continue to pursue future drilling opportunities in Venezuela for these 11 conventional rigs, but it does not expect to return to work in Venezuela until additional progress is made on pending receivable collections and on conversion of local currency to U.S. dollars.”
** “The Company’s international operations experienced a reduction in contributions from its Latin American operations in the latter half of 2009 as all of the drilling rigs in Venezuela were stacked pending further negotiations with a major customer.”

Forecast: Above-normal rain coming in Venezuela

Columbia University says above-normal rains are predicted over the coming rainy season.

The most likely scenario for May, June and July is for heavier-than-normal rain along the coasts and as far south as roughly the Apure-Orinoco axis. Data is insufficient to make a solid forecast south of there.

Moving later in the rainy season, the forecast for June-July-August is for heavier than normal rain across most of the country, including the Caroni watershed.

Same with the July-August-September and August-September-October forecasts.

This is all good news. More rain means more water in Guri Lake, and less chance of catastrophe in 2011.