Embassy of the Bolivarian Republic of Venezuela Venezuela: a key player Venezuela: a key player for the hemisphere for the hemisphere energy equilibrium and energy equilibrium and security security 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: a key player Venezuela: a key player for the hemisphere for the hemisphere energy equilibrium and energy equilibrium and securitysecurity
Embassy of the BolivarianEmbassy of the BolivarianRepublic of VenezuelaRepublic of Venezuela
Embassy of the Bolivarian Republic of Venezuela
•• Market fundamentalsMarket fundamentals
•• Venezuela strategic position in energyVenezuela strategic position in energy
•• Venezuela Venezuela –– U.S. bilateral energy U.S. bilateral energy
relationshiprelationship
•• Energy security in the western Energy security in the western
Hemisphere Hemisphere
Guidelines
Embassy of the Bolivarian Republic of Venezuela
Current Market Fundamentals
• Slow recovery of Iraq and few hope for the short term• The Iran and North Korea crisis• Instability in the Middle East and Africa• Speculation of the Financial Market• Oil addiction in developed countries - no sign for changes in consumption
patterns
• End of cheap oil – no new discovery of mayor reservoirs• Production decline and lack of spare capacity• Very tight refining capacity• New unforeseeable demand in Asia – supply lock-in by China • High taxes in consuming countries, specially in Europe• Lack of investment – Majors are investing less than 10% of the investment
needed to meet oil demand
Political ElementsPolitical Elements
Technical ElementsTechnical Elements
The world is unsustainable under the current consumption pattern of the developed world and
under the current geopolitics of oil
Embassy of the Bolivarian Republic of Venezuela
Venezuela Position Venezuela Position on Energyon Energy
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
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
1. SAN JOSÉ (80,0 Mbpd)2. CARACAS (146,5 Mbpd)3. PETROCARIBE (23,7 Mbpd)
Embassy of the Bolivarian Republic of Venezuela
Venezuelan – Colombian Gas Pipeline
Execution up to 2006:• Jobs: 902 (Direct: 243 / Indirect: 659)• Executed: 28 %• Engineering & Environmental licenses:
Completed • Construction: Initiated July 06 installed 10 kms of
pipelines and 150 kms already manufactured
VenezuelaVenezuela
Golfo de VenezuelaGolfo de Venezuela
Fuerte Mara
CUATRO VÍASMARAUASAHU
CARRAIPIA
EL CERRO
RIO LIMÓN
SILOÉTULÉ
LOS CORTIJOS
BALLENA
MAJAYURA
EMR RL
BAJO GRANDEEMR
RU
La Concepción
El Tigre
• Completion date: May 2007• Total Investment: $ 335 Million• Total Job creation: 31,060 (4,490 direct /
26,570 indirect)
TRANSCARIBEAN GAS PIPELINE ANTONIO
RICAURTE
End Procurement Start Construction Start of the ProjectEnd Engineering
Embassy of the Bolivarian Republic of Venezuela
Initial Start of Operations: 2012 (50 M m3/day)
Designed Operational Capacity: 2017 (150 M m3/day)
Estimated Investment (Class V):20 Billion US$
Integration to the South
Embassy of the Bolivarian Republic of Venezuela
SUPPLY STRATEGY FOR THE CARIBBEAN The PETROCARIBE Initiative
Estimated Investment 2006-2012: $24 Million
• Minimize Supply Disruption Risk
• Provide Affordable Access to Energy
• Minimize Transaction Costs
• Ensure Minimum Level of Infrastructure
• Foster Economic and Social Development
• Minimize Supply Disruption Risk
• Provide Affordable Access to Energy
• Minimize Transaction Costs
• Ensure Minimum Level of Infrastructure
• Foster Economic and Social Development
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
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 $2 billions per yearbillions per year of good & services from of good & services from 800 U.S. companies800 U.S. companies
●● Venezuela is one of the largest foreign Venezuela is one of the largest foreign investor in the US through its CITGO investor in the US through its CITGO refining circuitrefining circuit
Source: EIA 2006
The U.S. - Venezuela Energy Relationship
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2000 2001 2002 2003 2004 2005
Venezuela Canada Mexico Saudi Arabia
Main Oil Suppliers to the USA (Crude + Products)
Embassy of the Bolivarian Republic of Venezuela
2005Country Imports Exports Balance Total Trade
Mexico 169.216 101.667 -67.549 270.883
Venezuela 32.750 6.035 -26.715 38.785
Brazil 24.346 13.554 -10.792 37.900
Colombia 8.770 4.962 -3.808 13.732
Chile 6.745 4.668 -2.077 11.413
Total Trade Total Trade -- EEUU main trade partners in EEUU main trade partners in latinoamericalatinoamerica (MM US$) (MM US$)
Venezuela is the second USA Trade Partner in Latin America in 2005
Source: United States International Trade Commission
Embassy of the Bolivarian Republic of Venezuela
Energy Security in Energy Security in the Western the Western HemisphereHemisphere
Embassy of the Bolivarian Republic of Venezuela
OilNatural GasCoalNuclear EnergyHydro Electricity
MTOE
Source: BP Statistical Review 2006
317.5 MTOE317.5 MTOE10%
2,336.6 MTOE2,336.6 MTOE71%
147.2 MTOE147.2 MTOE4%
194.5 MTOE194.5 MTOE6%
69.2 MTOE69.2 MTOE2%
66.8 MTOE66.8 MTOE2%
27 MTOE27 MTOE0.8%
12.8 MTOE12.8 MTOE0.4%
8.4 MTOE8.4 MTOE0.3%
27.8 MTOE27.8 MTOE0.8%
Total Primary Energy Consumption in the Western Hemisphere
Embassy of the Bolivarian Republic of Venezuela
U.S. Energy Security?U.S. Energy Security?
PopulationPopulation Energy ConsumptionEnergy Consumption
U.S.
RESTOF
HEM.
U.S.
66 %66 %
33 %33 %
29 %29 %
71 %71 %
RES
T O
F TH
E H
EMIS
PHER
E
Closing the Gap
Embassy of the Bolivarian Republic of Venezuela
$$$$ High Oil Price $$$$
$$$$ High Oil Price $$$$
40%
60%
82% of Population
• Use of Natural Resources• Domestic Economic & Social Development• Fair Returns for Investors
$$ Fair Oil Price $$
$$ Fair Oil Price $$
Sovereign Right over Natural Resources
Determine Determine
Consumption Gap
• Increase accessibility to oil for developing countries
• Reasonable and sustainable consumption patterns by OECD countries
PressureIncrease
production by all means
Oil Exporting Countries
Pres
sure
Pres
sure
Pres
sure
Pres
sure
Pres
sure
Pres
sure
18% of Population OECD
Low Oil Price
Closing the Gap
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 Venezuela
•• Energy security in the hemisphere is not feasible without an eneEnergy security in the hemisphere is not feasible without an energy rgy integration that leads to development of infrastructure and sociintegration that leads to development of infrastructure and social al welfare.welfare.
•• There is an urgent need for governments to There is an urgent need for governments to reengagereengage to support to support and introduce advanced public policies towards energy integratioand introduce advanced public policies towards energy integration in n in the hemisphere. Leaving this role to the private sector doesnthe hemisphere. Leaving this role to the private sector doesn’’t work.t work.
•• Keep the sanctions out. This is harmful to U.S. businesses and tKeep the sanctions out. This is harmful to U.S. businesses and to the o the energy security in the whole hemisphere.energy security in the whole hemisphere.
•• Understand and respect political differences and manage them witUnderstand and respect political differences and manage them within hin the diplomatic arena.the diplomatic arena.
•• Enhance cooperation in area of technology and know how sharing, Enhance cooperation in area of technology and know how sharing, human talent, social development and fair trade.human talent, social development and fair trade.
Preventing a Crisis in the Energy Security
Embassy of the Bolivarian Republic of VenezuelaEmbassy of the Bolivarian
Republic of VenezuelaEmbassy of the Bolivarian Republic of Venezuela