Another political firestorm has flared over Venezuelan petroleum sector investment.
Statements by Venezuela's President Carlos Andres Perez have embarrassed state oil company Petroleos de Venezuela SA (Pdvsa) and provoked anew political debate over oil affairs in Venezuela.
Commenting on Pdvsa's overseas interests, Perez said he ordered the state oil company to sell part of its shares in Citgo Petroleum Corp., Tulsa, and Ruhr Oel GmbH, a joint venture with Veba Oel AG, Gelsenkirchen.
Meantime, a Caracas newspaper reported Unocal Corp. and Pdvsa are studying the sale of as much as 100% of their 50-50 Uno-Ven joint venture that owns and operates the former Unocal refinery at Lemont, Ill. Diario de Caracas quoted Pdvsa Pres. Gustavo Roosen as saying Unocal let Pdvsa know some months ago it was studying the sale of the 153,000 b/d refinery. Plans reportedly call for either company to buy the other's 50% interest, the newspaper reported.
However, Unocal's campaign to shed assets and Pdvsa's current financial and political difficulties make it improbable either would be a buyer. Unocal declined to comment.
CITGO, VEBA RESPONSES
Shortly after speaking with Roosen, Citgo Pres. Ron Hall said Pdvsa had given no instructions to sell all or part of Citgo.
However, Reuters subsequently reported Perez, after talks with Secretary of the Presidency Celestino Armas, reiterated the government's intention to sell a half interest in Citgo.
Armas, a frequent adversary of Pdvsa, was replaced as minister of mines and energy with Alirio Parra and shifted to his current position earlier this year in a government reorganization that also saw the presidency of Pdvsa change with Andres Sosa Pietri's resignation.
In elaborating on his earlier comments, Perez said he wants to ensure Citgo does not experience future commercial or political discrimination in the U.S. as an oil company wholly owned by a foreign power, in this case a founding member of the Organization of Petroleum Exporting Countries. A Veba official said the company had no information on a proposed sale of shares in Ruhr Oel, a 50-50 venture in Germany of Veba and Pdvsa in refining, marketing, and petrochemicals.
PDVSA REGISTERS SHOCK
Shortly after Perez made his comments, Pdvsa officials, generally opposed to selling the state company's stake in Citgo, said they were shocked by Perez' comments.
One Pdvsa executive said, "The president should sell government owned companies that are losing money, not successful companies like Citgo."
After Pdvsa acquired full control of Citgo in January 1990, Perez announced that Venezuela would keep only 50% of the U.S. company. He later changed his mind but apparently has reactivated the issue.
Citgo, with 1991 revenues of $8.9 billion, is Pdvsa's largest, most important overseas holding.
Industry observers say despite the president's statements, they do not expect Pdvsa to sell shares in Citgo or Ruhr Oel soon. Those observers criticized Perez' blanket announcement as weakening Pdvsa's bargaining position by making it appear the company is being forced to sell foreign assets in a hurry.
Roosen later told the press in Caracas Pdvsa will sell 50% of its Citgo stake at some future date when conditions in oil and financial markets are right. In an effort to clarify Perez's statements, Roosen said the idea is to find a U.S. oil company that would be a 50-50 partner with Pdvsa in Citgo. He contends the search for a buyer is not urgent.
OIL LAW LIBERALIZATION
Separately, Perez, in an effort to speed the opening of Venezuela's petroleum sector to foreign investment, said Article 5 of the 1975 Oil Industry Nationalization Law permitting Pdvsa to have associations and partnerships with private companies probably will have to be liberalized.
The president's comments ignited a political firestorm in Venezuela, with oil nationalists crying foul and privatization proponents siding with Perez. Even leaders of Perez' Democratic Action party warned, "The party that nationalized the oil industry will not allow it to be denationalized."
What's evident is that there is no political consensus to change the nationalization law under the current government, scheduled to leave office in February 1994.
NEW HEADACHES
The current flap over Citgo and national oil policy accompanies other new headaches for Pdvsa.
A Venezuelan congressional committee revealed it will begin investigating Pdvsa's borrowing plans and administrative activities. Pdvsa ended 1991 with $3.2 billion in long term debt. It had no long term debt a few years ago.
Late last month, Perez ordered Pdvsa to cut its personnel and other operating expenses by 25 billion bolivars ($373 million) as of Jan. 1 as part of an overall government austerity program. Earlier this year, Pdvsa announced substantial cuts in its capital and operating budgets for 1992 (OGJ, July 27, Newsletter).
The austerity program stems largely from a big fall expected in revenues resulting from weaker than expected oil prices this year. The government relies on taxes and royalties from Pdvsa for most of its income.
Pdvsa paid the Venezuelan treasury $10.5 billion in taxes in 1991 and is expected to pay $7 billion this year. For 1993, Pdvsa's tax contribution is expected to be about $6.5 billion.
The government to date has not been able to find new revenue sources to offset the decline in petroleum tax revenues.
PEQUIVEN CHANGES
Meantime, Perez said Pdvsa petrochemical unit Pequiven will be open to international investment through sale of shares on foreign stock exchanges. Although he didn't disclose details, the government apparently could sell shares in Pequiven directly, in Pequiven's equity participation in a variety of existing joint venture projects, or a combination of the two.
Pequiven currently holds as much as a 49% interest in 12 petrochemical plants and is a partner in several other projects under construction.
Perez also said Pequiven will not invest in new projects but instead will turn to private capital from Venezuela and abroad for all future ventures, acting only as a promoter of projects rather than taking direct equity.
The company is in the midst of a $7.6 billion capital investment program for 1992-97.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
