September 30, 3004
Venezuela: the end of the tunnel
By Alfredo Toro Hardy
Ambassador of the Bolivarian Republic of Venezuela to United Kingdom

(El Universal) - "Everything seems to indicate that Venezuela is at the end of the tunnel and about to enter into a new period of prosperity. Apart from evidencing the highest economic growth in the region for the year being (13,3% according to a recent poll in which Credit Suisse First Union, HSBC and JP Morgan Chase were consulted), a group of structural reasons seem to announce a sustained period of high oil prices and important investments in the energetic sector. Let's explain this step by step.

First, according to the majority of specialists, oil prices will remain high in the mid term. A joint model of the International Energy Agency, the OEDC and the IMF, estimates a price of 35 dollars per barrel during the following four years (Oxford Analytica, May 2004). According to an "increasing chorus" of analysts, these prices will not descend 30 dollars per barrel "for many years to come" (The Economist, 21 August 2004).

Second, directly linked with the aforementioned, we find a gap between the accelerated increase in oil consumption and the fast decrease in reserves. According to Lee Raymond, Executive President of EXXON-Mobil, consumption increases 2 percent annually, while reserves decrease 3 to 4 percent a year. This generates a gap of 6 million barrels a day (Newsweek, 6 September 2004). According to The Economist (21 August 2004) consumption increases 3% annually. "The increasing gap between supply and demand is creating and urgent need to find new sources of supply". (Financial Times "Comment and Analysis", 22 September 2004).

Third, and related to what was explained before; oil reserves are decreasing due to the simple fact that no new sources of supply are being found. According to Financial Times (22 September 2004 and 13 September 2004) since the last significative discovery in Kazakhstan in 2000, findings of new sources have decreased in 40%. The "structuralist", "depletionist" and "oil peak" schools consider that world oil reserves are running out (Oxford Analytica, 17 August 2004 and Financial Times, 22 September 2004).

Fourth, the apparent running out of oil sources, forces to concentrate the attention on the adequate development of existing ones. According to Peter Duncan, President of the Geophysical Exploration Association of the United States "attention must be drawn to extracting the last drops of the existing reserves" (Financial Times, 22 September 2004).

Fifth, facing this situation, reserves of bituminous oil and gas are transformed into areas of vital development. "Analysts of Deutsche Bank believe that, after 2008, half of the opportunities for oil companies will be on LNG and GTL, and the Venezuelan and Canadian oil sands" (Financial Times 22 September 2004).

Sixth, in addition to 78.000 million oil barrels reserve, Venezuela is number six worldwide and number one in the Americas in gas reserves, and possesses a new Saudi Arabia in extra heavy oil reserves (1,3 trillion barrels of estimated reserves, of which 270 billion barrels are proven reserves).

Seventh, higher oil prices and technological development have rendered profitable developments of Venezuela's Orinoco extra heavy oil belt and the gas sources of Plataforma Deltana and Mariscal Sucre Project.

Eighth, attention from the world press and the international oil corporations has been strongly drawn to Venezuelan hydrocarbon reserves.

Ninth, the combined impact of high oil prices and strong investments in the hydrocarbons sector, together with the multiplying effect this has on the economy as a whole, forecasts a period of sustained and important economical growth.

Tenth, all of the above is being accompanied by a pot referendum growing sense of political certainty, and an increased rapprochement between government and private sector".