June 30, 2016

Oil & Energy

PDVSA production down 30% in 6 years, oilfields decline, needs US$ 70-80 price for investments

Venezuela’s crude oil production has shrunk around 30% over the past 6 years according to official data from state oil company PDVSA and the Organization of Petroleum Exporting Countries (OPEC). Production fell from 3.12 million barrels per day to an all-time low of 2.18 MBD, some 900,000 barrels, around 30%. In May, PDVSA denied a drop in production this year but did not provide details on pumping. Last week, at a public ceremony, President Nicolas Maduro himself urged Oil Minister Eulogio Del Pino “to start raising the nation’s oil production during next semester”. Eudis Girot, Executive Director of the United Oil Workers Federation, reported the industry is producing only 2.4 MPD, one million barrels less than in 2008. He says “the company has been abandoned, our drills are in broken down deposits, our own fleet is destroyed”. Oil expert Victor Maldonado says “if there are no resources there is no investment, which is key to developing the industry”. ECOANALITICA Director Alejandro Grisanti says “Venezuela is not getting US$ 500 million every month, or US$ 6 billion per year”, due to the drop in production. At a recent meeting Oil Minister Del Pino admitted investments to meet global oil demand require prices between US$ 70-80 per barrel. He says half of the investments scheduled for 2016 were deferred due to low prices, adding “that will obviously impact production”.  He also admitted there is a 20-25% “natural decline” in oilfields which forces them to “replace 600,000 BPD, simply to maintain (current) production”. More in Spanish: (Panorama: http://www.panorama.com.ve/politicayeconomia/En-6-anos-cayo-30-de-produccion-de-crudo-en-Venezuela-20160628-0118.html; http://www.panorama.com.ve/politicayeconomia/Ministro-Eulogio-Del-Pino-Industria-petrolera-requiere-un-barril-de-al-menos-70-dolares-20160629-0074.html)

 

Venezuela’s oil output decline accelerates as drillers go unpaid

Venezuela’s oil output, already the lowest since 2009, is set to slide further this year as contractors scale back drilling after the cash-strapped country fell more than US$1 billion behind in payments. This nation’s oil production, which generates 95% of export revenue, will decline by about 11% to 2.1 million barrels a day by the end of the year, BARCLAYS estimates. Output is falling largely because oil-services companies aren’t being paid, according to the International Energy Agency. (Bloomberg, http://www.bloomberg.com/news/articles/2016-06-27/venezuela-s-oil-output-decline-accelerates-as-drillers-go-unpaid)

 

PDVSA says it has made financing deals with WEATHERFORD, HALLIBURTON

State oil company PDVSA says it has signed financing agreements with services firms HALLIBURTON and WEATHERFORD, PDVSA's president said on Wednesday, following chronic payment difficulties for companies working here. PDVSA has more than US$ 20 billion in outstanding bills to providers, which has led some companies to slow work. The company's access to hard currency has tumbled along with the price of oil, and Venezuela is struggling with triple-digit inflation, a severe recession and heavy bond payments this year and next. "This morning WEATHERFORD signed a financing agreement with us, HALLIBURTON signed yesterday," Eulogio Del Pino, who is also the country's oil minister, said in a speech broadcast on state television. (Reuters, http://www.reuters.com/article/us-venezuela-pdvsa-idUSKCN0ZF2V6)

 

US Supreme Court to hear Venezuela oil rig dispute

The U.S. Supreme Court on Tuesday agreed to weigh Venezuela's bid to block a lawsuit filed by an American oil drilling company that claims this country unlawfully seized 11 drilling rigs six years ago. The high court will review a May 2015 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that allowed one of the claims made by Oklahoma-based HELMERICH & PAYNE International Drilling Company to move forward. The company sued both the Venezuelan government and state-owned oil companies under a U.S. law called the Foreign Sovereign Immunities Act, saying among other things that the property seizure violated international law. (Reuters, http://www.reuters.com/article/us-usa-court-venezuela-idUSKCN0ZE1MV; El Universal, http://www.eluniversal.com/noticias/daily-news/receives-venezuelas-bid-block-helmerichs-lawsuit_317055)

 

 

Commodities

Venezuela seeks additional partnering with South Korea’s POSCO

Foreign Trade and Investment Minister Jesús Faría is in South Korea seeking to expand relations with POSCO, that nation’s largest steelmaker and attract investments to Venezuela. POSCO made an US$ 245 million investment in the Puerto La Cruz (Anzoátegui state) refinery’s deep conversion process. More in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/venezuela-busca-ampliar-relaciones-empresa-sider%C3%BArgica-surcoreana)

 

 

Economy & Finance

Central Bank seeks US$ 1 billion from Latin American Reserve Fund

According to sources at the Latin American Reserve Fund (FLAR), Venezuela’s Central Bank (BCV) requested a US$ 1 billion loan, but received only US$ 400 million, drawn against the BCV’s own reserve with the institution. The same source reports that in order to get a billion-dollar loan the agreement would require approval by Venezuela’s National Assembly, in order to comply with FLAR rules which requires clear guarantees. This is not the first time the BCV seeks financial aid from international institutions. For over a year it has been drawing from the International Monetary Fund (IMF), as well as engaging in gold swaps through foreign banks. BCV authorities are concerned about the drop in international reserves, which are now at an all-time low of around US$ 12 billion. More in Spanish: (El Nacional: http://www.el-nacional.com/economia/BCV-millardo-Fondo-Latinoamericana-Reservas_0_875312763.html

 

Companies have reduced operations by 80% due to lack of FOREX

FEDECAMARAS President Francisco Martinez, head of the nation’s largest business federation, reports that scarce foreign exchange has led 90% of all Venezuelan companies to reduce operations by almost 80%, since it is impossible to acquire “raw materials, intermediate goods, machinery and spare parts”. He says political confrontation is hindering economic progress and called for inclusive talks between the government and the private sector, “with measurable, tangible” results for the population. More in Spanish: (El Nacional, http://www.el-nacional.com/economia/Empresas-reducido-operaciones-falta-divisas_0_874712788.html)

 

Venezuela received only US$ 1.591 billion foreign investments out of US$ 167.5 to Latin America

According to the 2015 World Report by the United Nations Conference on Trade and Development (UNCTAD), Venezuela received only US$ 1.591 billion in direct foreign investment during 2015, out of US$ 167.5 billion that was directed to Latin America. Most of the amount reported for Venezuela are funds held back from repatriation due to currency controls. More in Spanish: (El Universal, http://www.eluniversal.com/noticias/economia/venezuela-capto-inversiones-por-1591-millones-dolares-2015_316966; El Nacional, http://www.el-nacional.com/economia/Venezuela-capto-inversiones-America-Latina_0_874712814.html)

 

 

Politics and International Affairs

Obama urges Venezuela to respect democratic process, pursue recall, release prisoners

U.S. President Barack Obama on Wednesday urged the Venezuelan government to respect the democratic process and the rule of law, including allowing the release of political prisoners. "Given the very serious situation in Venezuela and the worsening plight of the Venezuelan people, together we're calling on the government and opposition to engage in meaningful dialogue and urge the Venezuelan government to respect the rule of law and the authority of the national assembly," Obama said at a news conference with the leaders of Canada and Mexico.  "Political prisoners should be released, the democratic process should be respected and that includes legitimate efforts to pursue a recall referendum consistent with Venezuelan law." (Reuters, http://www.reuters.com/article/us-venezuela-usa-obama-idUSKCN0ZF2KV)

 

China invites opposition parliamentary leader Julio Borges to talk

Julio Borges, head of the opposition majority coalition in Venezuela’s National Assembly is in China to talk about the economic crisis and challenges of change in Venezuela. The five-day visit will allow him to brief Chinese experts on the country’s current situation. He is a guest of the Chinese Association for International Understanding (CAFIU), an organization attached to the Chinese ruling party. He arrived in China on Monday, to share his vision over the economic crisis and take part in high-level meetings over, among other things, the future in Venezuela. Members of opposition umbrella group Unified Democratic Panel (MUD) backed the visit and regarded it as an open path and a clear signal of the world’s expectations around the country’s situation. Borges is a leader within the Primero Justicia party, along with former Presidential candidate Henrique Capriles Radonski. (El Universal, http://www.eluniversal.com/noticias/daily-news/julio-borges-global-community-must-know-venezuelas-visions_317078)

 

Pro-government forces threaten to abolish Parliament, Cardinal calls idea “desperate”, and a “coup d’etat”

Didalco Bolivar, a former governor of Aragua state, announced that a coalition of all pro government parties called “Great Patriotic Pole”, is considering a motion requesting that the Supreme Tribunal “abolish this National Assembly….and call for new parliamentary elections”. He claimed the legislature is violating the Constitution, betraying the Fatherland, usurping duties, and abusing its authority in foreign policy. Previously, President Nicolas Maduro had also accused Parliament of usurping duties and treason. Bolivar also said the recall referendum could not be called this year, claiming it has been called ahead of time, and accused the opposition of fraud. Venezuela’s Cardinal Jorge Urosa called the move “desperate”, and said “I think this has no head or tail, it would be a coup d’etat against the will of the people expressed on December 6, when an overwhelming majority of the Venezuelan people voted in the direction the National Assembly is now taking. More in Spanish: (Infolatam: http://www.infolatam.com/2016/06/28/chavismo-estudia-como-abolir-el-parlamento-venezolano/; El Universal, http://www.eluniversal.com/noticias/politica/iglesia-catolica-rechaza-idea-abolir-parlamento_317185)

 

….and regime then appears to backtrack

Ombudsman Tarek William Saab, a member of the pro-government PSUV party, then said “isolated voices, such as those calling for the abolition of public powers, will not have any kind of support nationally, because they are individuals----what Venezuela now needs is cooperation between public powers”. He added that “radical and extremist voices will have no success in Venezuela at this time…success will come to consensus proposals that lead to an effective solution”. The leader of the pro-government faction within the National Assembly, Hector Rodríguez, said they are not shirking the possibility of a recall referendum since it is a part of the Constitution and said the opposition has the right to use all means possible. He added that the population is more concerned with scarcity and inflation than it is with the proposed referendum. Speaking later, President Maduro called on his supporters to make it a priority to “defeat” and “denounce” the National Assembly during the second semester this year, and called the legislature “a hindrance to development, and we must all take it on as such”. He made reference to the proposal for abolition. More in Spanish: (Infolatam: http://www.infolatam.com/2016/06/29/ombudsman-venezolano-afirma-propuesta-de-abolir-parlamento-no-tendra-apoyo/; http://www.infolatam.com/2016/06/30/maduro-pide-que-derrotar-al-parlamento-sea-la-linea-del-proximo-semestre/; Noticiero Venevision: http://www.noticierovenevision.net/nacionales/2016/junio/28/161036=hector-rodriguez-aclaro-que-no-se-estan-negando-a-la-posibilidad-de-la-realizacion-del-rr-)

 

Ramos Allup slams regime for clinging to High Command, announces review of TSJ justices

National Assembly President Henry Ramos Allup says it is “worrisome” that the Maduro regime should depend on the military High Command and the Supreme Tribunal’s Constitutional Chamber to cling on to power. He rejected military coups and repeated that the democratic system has been altered here. He said the Maduro regime had been “given notice” that he is being fired; and added: “They know they’re in their final days, and they’re going to pay, whether they’re civilians or soldiers,” he said, adding that “when this comes about, which will be soon, they are going to have to answer to the courts for their evil deeds”. He also announced that the legislature will revoke the decision – which he termed unconstitutional – through which current justices of the Supreme Tribunal were appointed. He said that if this happens they will call for a new nomination process. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2415166&CategoryId=10717; and more in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/junio/28/161055=ramos-allup-critica-que-el-gobierno-se-aferre-al-alto-mando-militar-para-permanecer-en-el-poder)

 

PSUV says managers who do not fire employees who petitioned for Maduro’s recall must be fired

Lieutenant Diosdado Cabello, vice president of the pro-government PSUV party has announced that his party will demand that all those who hold management positions within government and do not fire employees who have signed a petition for a recall referendum against President Nicolas Maduro, must also be fired. He also said the opposition must be forced to collect 4 million signatures in one day and with 20% of all polling machines. “We are not going to make it easy for them. No. I swear we won’t. And we will do whatever we have to do”. More in Spanish:

 (El Nacional, http://www.el-nacional.com/politica/PSUV-destitucion-despidan-firmaron-revocatorio_0_875312804.html; http://www.el-nacional.com/politica/Solicitaran-CNE-firmas-recoja-maquinas_0_875312787.html)

 

Workers fired, students deprived of scholarships, for signing recall petition

200 employees of the SENIAT tax authority reported to the National Assembly that they were fired for having signed the petition for a recall referendum against President Nicolas Maduro. The pro-government Zulia state has suspended scholarship benefits of 200 students, according to reports confirmed by authorities at four public and private universities there. (El Nacional, http://www.el-nacional.com/politica/Despiden-trabajadores-quitan-estudiantes-firmar_0_875312785.html; El Universal, http://www.eluniversal.com/noticias/venezuela/fundalossada-niega-que-retiro-becas-sea-represalia-por-revocatorio_317162)

 

Maduro’s nationality discussed at the National Assembly

Pro government legislator Victor Clark claims the Colombian government has reported “no information was found relating to a birth certificate or identification card” that could indicate that President Nicolas Maduro is a Colombian national. Clark read out a response by Colombian Foreign Minister María Angela Holguin to a request by National Assembly President Henry Ramos Allup. Ramos Allup retorted that Clark had read an incomplete response since that first notice was followed by another document sent to the Colombian National Registry requesting information on the nationality of Maduro’s parents, which would raise the issue of dual citizenship. (El Universal, http://www.eluniversal.com/noticias/daily-news/colombian-govt-speaks-about-nationality-venezuelas-maduro_317073; http://www.eluniversal.com/noticias/daily-news/colombian-govt-support-requested-clarify-maduros-nationality_317050)

 

Foreign Minister Rodriguez and Ernesto Samper visited Surinam’s Bouterse

UNASUR’s pro tem president, Foreign Minister Delcy Rodríguez, and Ernesto Samper, Secretary General of the Union of South American Nations, have travelled to Surinam to meet with that nation’s President Dési Bouterse, and said they would call a meeting of the organization to discuss the situation there within the next few days. More in Spanish: (Noticiero Venevision: http://www.noticierovenevision.net/politica/2016/junio/28/161040=canciller-rodriguez-y-ernesto-samper-visitaron-surinam-para-reunirse-con-el-primer-mandatario-desi-bouterse)

 

Paraguay regrets MERCOSUR the union’s chair may go to Venezuela

Paraguay’s Foreign Minister Eladio Loizaga has said his nation regrets that the Foreign Ministers of Argentina and Uruguay announced that the pro tem chair of MERCOSUR would go to Venezuela, as scheduled, without consulting Paraguay or Brazil. “I deeply regret this information has been put out unilaterally by two fellow foreign ministers”, he said. More in Spanish: (El Nacional, http://www.el-nacional.com/politica/Paraguay-presidencia-Mercosur-Venezuela-consultar_0_875312757.html)

 

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.