Embassy of the Bolivarian Republic of Venezuela Venezuela Energy Outlook Venezuela Energy Outlook TAXATION SYSTEM, MACROECONOMIC AND TAXATION SYSTEM, MACROECONOMIC AND ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE POLICY IN VENEZUELA POLICY IN VENEZUELA Bolivarian Hall Bolivarian Hall Washington, DC Washington, DC October 31 October 31 st st , 2006 , 2006 Embassy of the Bolivarian Embassy of the Bolivarian Republic of Venezuela Republic of Venezuela
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Embassy of the Bolivarian Republic of Venezuela
Venezuela Energy OutlookVenezuela Energy Outlook
TAXATION SYSTEM, MACROECONOMIC AND TAXATION SYSTEM, MACROECONOMIC AND ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE POLICY IN VENEZUELA POLICY IN VENEZUELA
Embassy of the BolivarianEmbassy of the BolivarianRepublic of VenezuelaRepublic of Venezuela
Embassy of the Bolivarian Republic of Venezuela
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2013
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Non OPEC Crude Oil Non-OPEC NGL
Non-OPEC Oil Sands 1.1% Growth
1.8% Growth 2.4% Growth
The Growing Differential Between Non-OPEC Supply Capacity and
Global Demand
Growing Gap Between Global Demand and Non-OPEC Supply
Source: PFC Energy, 2006
Embassy of the Bolivarian Republic of Venezuela
•• Increase and monetize VenezuelaIncrease and monetize Venezuela’’s reserve bases reserve base
•• Enhance VenezuelaEnhance Venezuela’’s capabilities in Production and Refinings capabilities in Production and Refining
•• Convert the Orinoco Belt into a light crude oil reservoirConvert the Orinoco Belt into a light crude oil reservoir
•• Be the #1 oil products exporter in the Western HemisphereBe the #1 oil products exporter in the Western Hemisphere
•• Use Natural Gas first to satisfy the domestic market and Use Natural Gas first to satisfy the domestic market and second to be an effective tool for energy regional integrationsecond to be an effective tool for energy regional integration
•• Enhance infrastructure capabilities and connectivityEnhance infrastructure capabilities and connectivity
•• Enhance human talent in key core businessesEnhance human talent in key core businesses
•• Speed up market diversification to emerging countriesSpeed up market diversification to emerging countries
•• Diversify supply base of technology, goods & servicesDiversify supply base of technology, goods & services
•• Increase local content and endogenous development in Increase local content and endogenous development in operating areasoperating areas
Venezuela Oil & Gas Business ObjectivesVenezuela Oil & Gas Business Objectives
Embassy of the Bolivarian Republic of Venezuela
Oil World Reserves
Source: Oil & Gas Journal, December 2005
Venezuela, including the Orinoco Belt, is the country with the world’s largest liquid hydrocarbon reserves (316 billion bbl)
Latin America (excluding Venezuela) 2%
Middle East & Iran49%
Venezuela21%
Canada 13%
Africa 7%Europa 7%
Asia Pacific 2%
Total World Reserves 1,527 Billion Barrels
80
236
316
Proved
Orinoco Belt (in process of certification)
Venezuelammmbbl
Embassy of the Bolivarian Republic of Venezuela Oil Reserves Variation
Source: PDVSA’s 20-F and Audited Report
Production
New Reserves2001 2004
- 3,300
+ 6,100
77,783 80,582
Million barrels
Reserves have increased a net 3.6%
Heavy22%
X- Heavy48%
Heavy22%
X- Heavy45%
Medium17%
Medium15%
Condensate/Light16%
Condensate/Light15%
-New Discoveries-Revisions-Extension
Embassy of the Bolivarian Republic of Venezuela
Natural Gas Reserves
Source: Oil & Gas Journal, December, 2005
Venezuela 35049%
North America 24934%Latin America
116 17%
Western Hemisphere Reserves715 Trillion Cubic Feet (TCF)
Venezuela has the potential to become the 4th largest country in gas reserves and the 1st country
in gas reserves in the western hemisphere
39%
Qatar 91114%
Iran 971 15%
Russia 1680 27% Asia Pacific
West EuropeNorth AmericaAfricaRest of Middle EastLatin America
• Ezequiel Zamora Railraod (Caracas Middle Tuy) – IAFE • Guaire River Bassin Cleaing – SAMARN• Development of the Agro-industrial and Metal-Mechanic Industries – CORPOCENTRO
Development of the Agro-industrial and Metal-Mechanic Industries – CORPOCENTRO
• Development of the Agro-Industrial and Metal-Mechanic Industries – CORPOCENTRO• José Antonio Páez Highway – Propatria 2000 Foundation
José Antonio Páez Highway –Propatria 2000 Foundation
José Antonio Páez Highway –Propatria 2000 Foundation
José Antonio Páez Highway –Propatria 2000 Foundation
• José Antonio Páez Highway – Propatria 2000 Foundation• Masparro Hydroelectric Plan
• Pulp and Paper Plant• National Iron and Steel Plant• Pipes Plant
• Additonal Resources Ezequiel Zamora Thermoelectric Plant – CADAFE• José Antonio Páez Highway – Propatria2000 Foundation
Embassy of the Bolivarian Republic of Venezuela
Venezuela View on Venezuela View on Natural Resource Natural Resource
ManagementManagement
Embassy of the Bolivarian Republic of Venezuela
Venezuela Political Approach on Energy
• Restore the sovereign right of the resource owner
• Reach equilibrium with fair return to investors and sustainable development to the resource owner
• Enhance affordability, specially to those countries and communities most in need
• Reduce and eliminate asymmetries in consumption
• Promote energy integration
• Restore Discipline to Supply Management
• Foster a Dialogue Between Producers, Consumers and the Industry
• Explore Ways to Assess and Achieve Fair Price
• Enhance energy conservation and environmentalism
Embassy of the Bolivarian Republic of Venezuela
0%
10%
20%
30%
40%
50%
60%
70%
76 78 80 82 84 86 88 90 92 94 96 98 00
ROYALTIES
INCOME TAX
FISCAL EXPORT VALUE
DIV.
66%
45%
Public Revenues Public Revenues -- Gross Domestic Product RatioGross Domestic Product Ratio
The governance of the Venezuelan oil was unsustainable, domestically and internationally
Collapse of the Fiscal Regime
Embassy of the Bolivarian Republic of Venezuela
Extent of US Companies’ Ability to Enter Market
ChinaChina
KuwaitKuwait
MexicoMexico NO NO NO YES
Saudi ArabiaSaudi Arabia
VenezuelaVenezuela YES YES YES YES
Can US purchase Can US purchase local oil local oil
companies?companies?
Can a US Can a US company obtain company obtain
equity oil?equity oil?
Can US Can US company invest company invest
in Refining/ in Refining/ PetrochemicalsPetrochemicals
Can a US company Can a US company market petroleum market petroleum
products?products?
Only if Joint Venture Uncertain YES YES
NO NO YES YES
NO NO YES YES
Source: US Department of Energy; National Security Review of International Energy Requirements - February 2006
Embassy of the Bolivarian Republic of Venezuela Foreign Investment Rules of the Game
TERMS
Bolivia • In May, it nationalized its natural-gas industry, ordering foreign companies to give up control of fields and accept much more strict operating terms in 6 months or leave. • It declared that the state owns the gas after it has been extracted and that companies at the country's two largest fields would get 18% of the production. • In 2005, it had increased the state's take to 50% of production by raising taxes and royalties (WSJ).
Libya • In 2005, the 2nd EPSA IV bidding round was fiercely competitive, with winning biddersforced to slash their production percentages as low as 6.8%.• In addition, oilfield developers initially bear 100% of costs (exploration, appraisal, training) for a minimum of 5 years, while Libya’s NOC retains exclusive ownership (DOE).
U.K. •A special charge on profit was recently raised to 20%, from 10%. It comes on top of a 30% tax applied to all U.K. corporate profits (WSJ).
Nigeria • An increase of taxes from 50% to 85% has been proposed (DOE).
Russia • National participation of 51% in strategic projects; 90% taxes/royalties/duties on earnings above $25/bl (DOE).
Venezuela • The new terms of the operating joint partnership (empresas mixtas) include a minimum 60%equity ownership by PDVSA, 33.3% royalty and 50% corporate tax.
Ecuador • In April, it imposed a tax of 50% on the “extraordinary profits” earned by foreign investors in the oil sector. Prior to this, the rate was 20% (BBC, DOE).
Embassy of the Bolivarian Republic of Venezuela Government Take around the World
Source: Wood Mackenzie
Embassy of the Bolivarian Republic of Venezuela
Bilateral Energy Bilateral Energy RelationRelation
Venezuela Venezuela –– U.S.U.S.
Embassy of the Bolivarian Republic of Venezuela
●● Venezuela accounts of Venezuela accounts of 12% to 15%12% to 15% of of total US importstotal US imports
●● Venezuela is the Venezuela is the 44thth largestlargest supplier of supplier of crude oil to the UScrude oil to the US
●● Including exports to Virgin Islands, Including exports to Virgin Islands, Venezuela was the Venezuela was the 11stst largest largest foreign foreign supplier to the USsupplier to the US
●● Venezuela is the Venezuela is the 22ndnd largest exporter of largest exporter of oil productsoil products to the USto the US
●● Venezuela is Venezuela is 4 to 5 days4 to 5 days shipping time to shipping time to the USthe US
●● Venezuela purchases more than Venezuela purchases more than $2 $2 billions per yearbillions per year of good & services from of good & services from 800 U.S. companies800 U.S. companies
●● Venezuela is one of the largest foreign Venezuela is one of the largest foreign investor in the US through its CITGO investor in the US through its CITGO refining circuitrefining circuit
Massachusetts 11.445.763 60.000New York City 23.845.340 125.000Maine 7.630.509 40.000Rhode Island 1.907.627 10.000Pennsylvania 9.538.136 50.000Vermont 1.907.627 10.000Delaware 953.814 5.000Connecticut 4.578.305 24.000Tribus Indigenas (1) 10.000.000 20.000
(1) More than 220 tribes from Alaska, Minnesota, New York, Connecticut y Maine.(2) New States and Cities.
Venezuela – CITGO Heating Oil Program2006-2007
Embassy of the Bolivarian Republic of Venezuela
•• The U.S. is under tremendous pressure to access secure and reliaThe U.S. is under tremendous pressure to access secure and reliable supply of ble supply of oiloil
•• The U.S. energy independence is a myth and cannot be achieved unThe U.S. energy independence is a myth and cannot be achieved under current der current consumption patterns, as the U.S. addiction to oil is highly relconsumption patterns, as the U.S. addiction to oil is highly related to qualityated to quality--ofof--life perception, and it is less likely to change that patternlife perception, and it is less likely to change that pattern
•• The U.S. SPR proved not to be sufficiently efficient in times ofThe U.S. SPR proved not to be sufficiently efficient in times of crisiscrisis
•• Alternative energy (Alternative energy (biofuelbiofuel and ethanol) is a good sign, but will not be enough and ethanol) is a good sign, but will not be enough to offset the increase in consumptionto offset the increase in consumption
•• Sources of oil in the Middle East will at the end and naturally Sources of oil in the Middle East will at the end and naturally be directed to be directed to satisfy the demand growth in Asia satisfy the demand growth in Asia –– Current geopolitics in this region proved Current geopolitics in this region proved not to be efficient to pop up more secure oilnot to be efficient to pop up more secure oil
•• The U.S. will have to rely on sustainable supply from within theThe U.S. will have to rely on sustainable supply from within the hemispherehemisphere
•• Mexico is declining, Canada is not sufficient and Venezuela has Mexico is declining, Canada is not sufficient and Venezuela has the biggest the biggest reserves of oil in the worldreserves of oil in the world
A cooperative approach between the U.S. and Latin America and specially Venezuela is indeed a sole guarantee for a sustainable
energy security in the Hemisphere
The U.S. Oil Crisis and its approach to Venezuela
Embassy of the Bolivarian Republic of VenezuelaEmbassy of the Bolivarian
Republic of VenezuelaEmbassy of the Bolivarian Republic of Venezuela