I'm well out of my depth on this one but it doesn't strike me that there is any great mystery here on the investment numbers. The investment budget of PDVSA is $5.3bn. Minus $1.7bn which has been diverted into the social housing budget gives $3.6bn. The capital expenditure needed to cover depreciation is $2.7bn. So, all parties are fairly near the truth; it doesn't look as if PDVSA is systematically and/or chronically underinvesting and mortgaging the future, but it equally doesn't look as if they're going to be spending enough to seriously ramp up production. I'd add two things: first I would be very sceptical about the assumption of a linear input/output function; the one thing that we do know about oil wells is that they tend to come in big lumps and I would guess it would be pretty difficult to drill half of one (I may well be bum-talking at this point though). And second, it is not obvious to me that PDVSA could have spent the extra money anyway, since Chavez tin-tacked a lot of their senior management during the strike. Most of the people sacked were bourgeois revisionists, etc and all around bad lots, but it's likely that most of them also knew a bit about oil, and experienced oilfolk can't always be replaced in a hurry.
I would be surprised if the distance between government and independent bpd figures was down to omitting the petroleum products. It might be something as simple as the independent analyst having driven past one of the fields on a day when the donkeys weren't nodding and counting it as not yet producing, then PDVSA got it back onstream later in the month. Alternatively, one of the PDVSA managers might have fibbed to the government in order to get a bonus. As you say, though, the figures aren't so massively different as to be worth cutting up rough about; everyone is agreed on the broad historical sweep of things which is that the Venezuelans are doing a surprisingly good job in getting the oilfields back in order after the political purge. In general, oil analysts at stockbroking firms are among the most trustworthy you will find, as they almost always have experience in the oil industry. cheers dd -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of Robert Naiman Sent: 06 August 2004 00:51 To: [EMAIL PROTECTED] Subject: More on Venezuela and oil numbers I'd like our broker colleague -- and others -- to consider the following. In Peter Millard's (Dow Jones) article "Venezuela 's PdVSA Ramps Up Publicity Ahead Of Recall" (July 30), the second-to-last paragraph reads: "The government claims the "new PdVSA" has brought oil production back to the 3.1 million barrels a day Venezuela was producing before the strike, but independent analysts put the figure closer to 2.6 million b/d." I suspect that there is an apples-and-oranges issue here. I think the government is counting 200,000 bpd in petroleum products that the analysts are not counting. If so, the govt and "independent analyst" numbers are closer than usually acknowledged. The last paragraph reads: "Furthermore, oil analysts warn that the focus on social spending has diverted funds from needed investments in exploration and production, making it difficult for PdVSA to increase production in the near term." I have no doubt that *some* oil analysts do say this (especially the ones that used to work for PDVSA!), but I think the numbers tell a different story. On July 16, Millard reported that PdVSA has a total investment budget of $5.3 billion this year, but noted that analysts warn that the company will fall short of this target. On July 12, Matthew Robinson, reporting for Reuters, cited Jan Dehn, emerging markets analyst for Credit Suisse First Boston in London: "I would expect that unless they meet the $2.7 billion capital spending they need every year, production would start to suffer in 2005." Now, if we assume that the numbers here ($2.7b and $5.3b) are apples-and-apples, and we suppose that in the range we're talking about, future production capacity is a roughly linear function of investment, then those numbers would suggest to me that PDVSA could miss its investment target by a country mile and still invest enough to increase production. If this is so, then, unless one takes it as an axiom that any amount of social spending by PDVSA is intrinsically offensive to oil markets -- which I'm sure some people do! -- isn't social spending by PDVSA totally irrelevant to the question of future oil production? Might it be the case that some "independent oil analysts" simply have an ideological bias against the notion of using some of PDVSA's profits for social spending? What am I missing? By the way, in an article on July 24 in the New York Times, Juan Forero reported that many oil analysts and executives of large oil companies doing business in Venezuela say that the government may be able to spend big on social programs and still invest adequately in production. What do you make of all this? -- Robert Naiman Senior Policy Analyst Venezuela Information Office 733 15th Street, NW Suite 932 Washington, DC 20005 t. 202-347-8081 x. 605 f. 202-347-8091 www.veninfo.org ::: ::: ::: ::: ::: ::: ::: The Venezuela Information Office is dedicated to informing the American public about contemporary Venezuela. More information is available from the FARA office of the Department of Justice in Washington, DC.
