OIL COST CUTS NEEDED. Oil Minister Rafael Ramirez said Petroleos de Venezuela (PDVSA) is renegotiating service contracts in an effort to reduce costs, due to low crude prices, reports AP (March 7, 2009): Venezuela relies on oil for 94% of exports and nearly half the government's budget, but prices for its heavy oil basket have plummeted more than 70% from last July's average price of US$129.54 a barrel, to an average of US$38.7. Some contractors have been asking for payments based on last year's inflated oil prices, he said. Ramirez warned contractors against trying to halt work to demand payment, saying if they do, "we're going to take over those rigs like we already did with Ensco";

Dallas-based Ensco Intl Inc. said in January that it suspended operations on an oil rig off Venezuela's Caribbean coast because it was owed US$35 million, prompting PDVSA to take over operations. Many service providers have been complaining of delayed payments for months. US contractor Helmerich & Payne Inc. (based in Tulsa, Okla), said in February it had stopped drilling with two of its 11 oil rigs because of a PDVSA debt of nearly US$100 million. Ramirez said PDVSA has recently paid off debts to 94% of its more than 5,700 service contractors, but is still in negotiations with 56 service companies, to which it owes a yet-to-be negotiated amount in backlogged payments. Ramirez said Venezuela has 266 active oil rigs - 51 of which belong to PDVSA and the rest of which are contracted;

A handful of oil companies have promised to help exploit Venezuela's natural gas reserves. Six companies including U.S.- based Chevron Corp. and Portugal's GaIp, agreed to invest US$200 million in the first phase of the project, which is expected to require $12 billion and start producing natural gas by 2013.

IRISH CO. FARM SEIZED. President Hugo Chavez seized a eucalyptus tree farm owned by Ireland's Smurfit Kappa, vowing to clear the trees and use the land for crops as he seeks to tighten state control over food output, reports Reuters (March 7, 2009):

Since winning a referendum vote three weeks earlier that allows him to run again for reelection in 2012, Chavez has made agriculture and food his priority, renewing a drive to nationalize assets and boost production via land reform. Earlier in me week, Chavez nationalized a rice mill owned by giant US food company Cargill Ine and sent troops to other rice mills in a drive to control supplies of the grain;

Smurfit Kappa, a major cardboard packaging company, said it was in talks with Venezuela after authorities took over about 3,700 acres (1,500 hectares) of forestry land with a value of about 500,000 euros. Chavez said the government plans to use the land for otiier unspecified crops. Minister of Agriculture & Lands Elias Jaua Milano gave no assurances Venezuela would compensate the company, saying Smurfit would have to prove that it was the real owner of the farm.

CHINA, VENEZUELA ACCORDS. Venezuela and China signed 12 cooperation agreements and doubled their joint investment fund US$12 billion dollars, as Vice President Xi Jinping's wound up his visit before heading to Brazil, reports AFP (Feb. 20, 2009):

The fund, set up in 2007 with a starting capital of US$6 billion, was boosted to US$12 billion, with China contributing US$8 billion and Venezuela the rest. President Hugo Chavez said the joint fund would be invested in education, health and infrastructure programs in Venezuela. The 12 cooperation agreements include one calling for Venezuela's state-run oil company PDVSA to sell China's National Oil Co. between 80,000-200,000 barrels of oil per day to pay off a debt between development banks in both nations;

Another agreement calls for building an oil refinery in China to handle some 400,000 barrels of Venezuelan crude from the oil-rich Orinoco basin. China currently imports about 364,000 barrels of crude oil per day from OPEC member Venezuela, a figure expected to rise to 500,000 barrels in late 2009. Other agreements involve technology transfer, building in Venezuela a mobile phone factory and an assembly plant for household appliances, as well as farming ventures and a deal between state-run Venezuelan and Chinese televisions networks Telesur and CCTV. Caracas recently purchased a fleet of 18 K-8 reconnaissance and training aircraft from Beijing with delivery expected in January 2010.

Copyright Caribbean Update Apr 2009

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