Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Friday, September 30, 2011

September 30th, 2011

Economics & Finance
Owens Illinois hits Venezuela with arbitration claim
U.S. bottle maker Owens Illinois has filed a claim for arbitration against Venezuela at a World Bank tribunal after President Hugo Chavez nationalized its operations in October last year. The website of the World Bank's International Center for Settlement of Investment Disputes (ICSID) carried brief details of the claim, which was submitted on Monday. It is one of more than 20 ICSID cases being battled by Venezuela. Chavez has put much of the nation's economy under state control during his 12 years in power, including multi-billion dollar oil projects run by foreign companies. (Reuters, 09-28-2011;

Government has U$D 45 billion to spend
Economic growth, stable oil prices, increased public spending and high inflation are in store for this year and 2012, according to a scenario presented by economist José Luis Saboin, of ECOANALÍTICA. He said they expect 3.1% economic growth this year and 3.4% next year. (More in Spanish at El Universal. 09-30-2011;

Venezuelan bonds rally on speculation cancer to prevent Chavez re-election
Venezuelan bonds rallied the most in seven weeks on speculation President Hugo Chavez’s health is deteriorating and will prevent him from running for re-election, paving the way for a reversal of policies that have fueled the fastest inflation in the Americas. Yields on the benchmark 9.25% dollar bonds maturing in 2027 fell 33 basis points, or 0.33% point, to 15.44% at 4:40 p.m. NYT, according to data compiled by Bloomberg.  There’s a lot of distrust surrounding his comments about his health,” said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York. “His situation does not look good and bonds will rally on the fact he may be eliminated from the picture and not be there for elections.” (Bloomberg, 09-29-2011;


PDVSA says debt to service providers falls to U$D 5.5 billion
The significant U$D 10.9 billion debt owed to suppliers by state-run oil holding Petroleos de Venezuela (PDVSA) at the end of 2010 has fallen by about 50%, according to Rafael Ramírez, Venezuela's Minister of Energy and Petroleum. As a result, the current PDVSA's financial debt amounts to U$D 5.45 billion. Ramírez acknowledged that in 2008 and 2009, when the Venezuelan oil basket plunged to U$D 35, "PDVSA's service providers made an important effort and we are very grateful. We have been able to reach (debt) agreements and move forward in the development" of projects. (El Universal, 09-29-2011;

CHEVRON sees production In Orinoco oil field in early 2012
CHEVRON Corp. expects to begin drilling in its project in Venezuela's large and mostly untapped Orinoco heavy-oil fields by the end of this year, with production as soon as early 2012, according to Don  Stelling, president of the company's Latin America business. The U.S. company has a 34% stake in the Carabobo 3 bloc, which was granted to it last year. State oil company Petroleos de Venezuela, or PDVSA, holds 60% of the project.  Stelling said that challenges still loom for production in Venezuela's large heavy oil belt."These projects are going to cost billions of dollars so we are going to have to figure out where are going to come up with such large amounts of money," he said. (Fox Business, 09-28-2011;

LNG projects frozen
Venezuela is freezing its liquefied natural gas export projects due to falling prices over recent years that make investments uneconomical, state oil company PDVSA said on Wednesday.  Fears of rule changes in Venezuela, where President Hugo Chavez has nationalized most of the oil industry, and pricing issues have meant that PDVSA has struggled to attract investment from foreign companies with the right experience.  Anton Castillo, director of PDVSA Gas, says offshore gas projects would now focus on feeding growing local demand for natural gas -- as opposed to creating LNG for the export market. "It is a question of economics. Gas prices have fallen a lot, and very high levels of investment are needed."  The decision affects the giant offshore Mariscal Sucre project, estimated at 14.7 tcf and being developed by PDVSA, and the Plataforma Deltana field, where Chevron (CVX.N) was given the go-ahead last year to begin gas extraction by 2013. (Reuters, 09-28-2011;

Gas imports from Colombia expected to stop in 2014, according to PDVSA director Orlando Chacín. He says the state oil company is seeking partners for its Mariscal Sucre Project, a process that is almost two decades in the making but several invitations to bids have failed. Most of Venezuelan off-shore gas projects present considerable delays which has forced PDVSA to import some 200 million cubic feet of gas daily from Colombia since 2007. (Veneconomy, 09-28-2011;

Venezuela delays Amuay refinery stoppage to Jan '12
Venezuela will delay a planned 70-day maintenance stoppage of key units at its 645,000-barrels-per-day Amuay refinery until January, a top official at the state oil company said on Wednesday.
The repairs at Amuay, which will include the facility's catalytic cracker and several smaller units, had originally been scheduled to take place later this year. (TD Waterhouse,

Opposition says power sector requires U$D 40 billion investment in six years
The opposition High-Level Commission on the Electricity Sector has presented guidelines for a national unity government platform which calls for domestic and foreign private investors to implement projects, which they intend to again decentralize and regionalize. (El Universal, 09-28-2011;

Logistics & Transport

Forty-eight aircraft incidents reported this year in Venezuela
Forty-eight aircrafts events or incidents have been reported so far this year in Venezuela, according to the Minister of Transport and Communications, Francisco Garcés, who said the number includes landing and take-off incidents as well as problems with routes and maneuvers. He reported that 22 out of the 48 incidents occurred on landing, and added that causes have yet to be determined in 23% of the accidents. (El Universal, 09-29-2011;


Chavez moves to put a stop to health rumors
President Hugo Chavez moved to put a stop to rumors circulating about his being hospitalized due to a health crisis by placing a telephone call to state television to assure the public that his recovery from cancer is "going well" and to ask Venezuelans not to pay any attention to rumors about the state of his health. He made his remarks after El Nuevo Herald, a U.S. Spanish-language newspaper, reported that he had been rushed to the Caracas Military Hospital on Tuesday and that his doctors were assessing whether to transport him to another facility to treat problems associated with insufficient kidney function."I would be the first, everyone knows me, I would be the first of all Venezuelans to come out and say, to explain or communicate any difficulty in the process. Nothing out of the ordinary has arisen," Chavez said Thursday. (Fox News, 09-29-2011;

Maduro to meet Guyanese Foreign Minister in Port of Spain
During his meeting with journalists, President Chavez announced Foreign Minister Maduro would meet shortly with his Guyanese counterpart, Carolyne Rodrigues, in Port of Spain (Trinidad), and UN mediator Norman Girvan, to discuss the boundary dispute over the Essequibo territory. He said both nations have agreed to handle their border dispute at the highest level and in a very responsible manner. He added that they are conducting very intensive work and will not let "some sectors there (Guyana) or here (Venezuela) create internal conflicts. We will not let that happen." (El Universal, 09-29-2011;

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

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