March 30, 2007
Interview: Rafael Ramírez, president of Pdvsa and Minister of Energy and Oil
Venezuela and China create $6 billion revolving fund Published by El Universal
By Marianna Párraga
"The recent signing of five cooperation agreements that will lead to an integrated business deal that will place up to one million barrels a day of Venezuelan oil in China, two thirds of what is currently being sold to the US, has made China a priority issue on the schedule of the Minister of Energy and Petroleum and president of State oil company Pdvsa, Rafael Ramírez.
Q- What does Venezuela expect out of the alliance with China?
A- The agreements signed on March 26th are a result of the talks held in August last year between President Chávez and Hu Jintao concerning the export of up to one million b/d to China . The new president of the China National Petroleum Corporation (CNPC), Jiang Jiemin, visited us in order to expedite these agreements.
Q- What do the agreements entail?
A- The first one covers producing 800 thousand of barrels of crude daily in Venezuela through a mixed company where Pdvsa will be a 60 percent shareholder. This volume will come from a number of blocks: from Junín 4 and the Orinoco Belt block, where the reserves are being quantified by the CNPC, 200 thousand b/d will be produced; from MPE3 block, of the 50 kilometers that had been assigned to Sinovensa in order to produce orimulsion (a bitumen based fuel), another 200 thousand b/d will be produced from here; and from the Carabobo block, also part of the Orinoco Belt, around 400 thousand b/d will be produced.
Q- But isn't Petrobrás already working the Carabobo block?
A- Yes, they are quantifying and certifying the reserves, but we are talking about a very large block that will be subdivided into a number of sub-blocks that each will produce around 200 thousand b/d of crude.
Q- Do these blocks that you are mentioning have specific predetermined dimensions?
A- No. The reserves and the retrieval factor determine the block's final dimension. For example, with the CNPC, we agreed that the retrieval factor will be no less than 20 percent.
Q - And the blocks that had been promised to the CNPC?
A- The petition to assign CNPC the Zumano block, made-up of 15 mature fields in eastern Venezuela, has already been signed and is ready to be introduced before the National Assembly. This block will begin by producing 40 thousand b/d of crude and in the future it will produce up to 100 thousand b/d. All that is left is for it to be approved in the extraordinary Ministers Council.
Q- Is it true that the agreements signed on March 26th also include the transportation of the crude?
A- Yes. A new contract was signed which covers the supply of 320 thousand b/d of crude and fuel oil for one year and also includes the creation of a mixed shipping company, with Pdvsa and CNPC each being 50% shareholders, in order to ship the oil to China in VLCC (very large crude carrier, the highest capacity oil tankers in the industry) thereby reducing the freight loading of tankers.
Q- Does this company solve the financial obstacles of shipping Venezuelan crude to China?
A- It is improving, but we see China as a market for our heavy crude, and in that sense, sending it over there revalues the crude. An important point is that we are selling the crude FOB (in Venezuelan port) and the mixed shipping company takes care of everything from then on out. It is a company without practically any risk because it has a route secured for 25 years.
Q- Will that company's fleet be made up of the tankers that China is building PDV Marina?
A- Yes, but we are still evaluating that because Pdvsa should also have its own tankers. The last part of these agreements concerns the refining of up to 800 thousand b/d of Venezuelan crude in three refineries with deep conversion unites which will be built in China through a mixed company with CNPC being a 60 percent shareholder.
Q- So, what role does the announced US$6 billion heavy fund play then?
A- The Chinese government agreed to create this fund to which they are contributing US$4 billion and Venezuela the other US$2 billion. It is a revolving fund, which is to say that every time you take funs from it you have to put them back. The fund will work along the line of Fonden and it will finance Venezuelan infrastructure projects. China has never been a part of such a fund with anyone. For its part, the Development Bank of China will use the fund to back oil projects.
In addition to the oil production blocks being assigned, the Menpet will also directly assign to the CNPC, one or a number of gas producing blocks in Falcon or in the gulf for the company to work for the Chinese domestic market. The Ministry will also evaluate the Chinese company's participation in the petrochemical complex that Pequiven is planning to build in order to develop refining techniques for the Paraguaná Refining Center (CRP).
Q- The Menpet is offering companies that participate in the quantification of the Orinoco Belt reserves to become a part of the mixed company project in order to produce the crude. How is that going?
A- Since we know that we are working towards establishing mixed companies, we are offering these companies the opportunity to come onboard once the initial 27 blocks have been subdivided into sub-blocks. Brazilian Petrobrás and Petropars from Iran have advanced the most with the quantifying process, but we are not going to wait until each company finishes its quantifying process in order to start establishing mixed companies. We will begin to do that this year.
Greater control
Ramírez admitted the obstacles mentioned in the yearly report with respect to the measurement of volumes of hydrocarbons, particularly gas, in order to collect royalties and other oil taxes, which last year did not meet the projected goals.
With regard to this issue, he informed that after a meeting with Vice-minister of Hydrocarbons, Bernard Mommer, the Autonomous Service of Metrology and Hydrocarbons was recently created, which will report back to the Ministry of Hydrocarbons, and will quantify the volumes exported and extracted from the fields, including Pdvsa and private companies.
Q- Is the personnel required for this in place yet?
A- We are making-up the technical teams and installing the volume and quality measuring devices.
The gas royalty goals forecasted for 2006 were not met.
One of the reasons for this was problems measuring, especially in western Venezuela where the infrastructure is so old. And also, the forecast was a mathematical one. What we are doing here, with the measuring devices, is a big step forward".
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