Thursday, June 01, 2006

Venezuelan Crude: An Update

Hugo ChávezReader L.A. writes us with the following observations about the Prince of Caracas:

One item that no one mentions, and I don’t know why, is that U.S. refineries are the only ones that are capable of handling the heavy sour crude this nutcase exports.

If the St. Croix and Martinique refineries refused to process the crude he could send it to Europe for processing, at 1/10th the capacity.

I spent 25 years in the gas processing industry and never could figure why Venezuela never built their own processing equipment for their type of crude. Amazing.

And commenter Fluffy reminded us of the following, which was reported early last month in Rigzone (among other places):

A Sudden Plunge In Production?

Is Venezuela’s oil production rapidly waning? One source reports that the world’s fifth largest oil producer is showing signs of a rapid decrease in production, one of the key tenets of the peak oil theory.

Venezuela is buying oil from Russia in order to avoid defaulting on deliveries to clients. The situation raises serious questions about the country’s oil production and the future of PDVSA as a major oil producer, and increases the risk to the U.S. oil supply should the country’s oil production suddenly plummet.

According to the Financial Times: “Venezuela, the world’s fifth-largest oil exporter, has struck a $2bn deal to buy about 100,000 barrels a day of crude oil from Russia until the end of the year. Venezuela has been forced to turn to an outside source to avoid defaulting on contracts with “clients” and “third parties” as it faces a shortfall in production, according to a person familiar with the deal. Venezuela could incur penalties if it fails to meet its supply contracts.”

This is further evidence that the magnificent Venezuelan edifice built by Hugo Chávez is an oil-based Potemkin village.

If the price of oil falls significantly, expect Chávez’ mischief to become even more malicious. There is nothing more dangerous than a dictator with a rapidly emptying piggy bank.


Fat Man said...

Chavez is such an idiot. I can see him reving up this plan based on oil prices and not executing it because his oil company run by political hacks as a socialist enterprise cannot ship oil. I wouldn't worry about Venezuala manufacturing anything. They never have before and they won't start under socialism. Brazil you could worry about.

Anonymous said...

I remember reading several articles about how many of the most qualified engineers are leaving Venezuala to work in Alberta - specifically, the Tar Sands.

Evan said...

@john b:

Ronald Bailey at Reason says that the primary thing restraining global oil production is not reserves exhaustion but the increasing proportion of remaining reserves under government control, with all of its associated inefficiencies. He cites Venezuela in particular as a case in which centrally planned oil extraction is increasingly failing miserably.

airforcewife said...

This is tremendously petty, but someone honestly needs to tell Hugo that the revolutionary beret and scarf look is sooooo last century.

And it doesn't do much to minimize his block head. Also, the red draws attention to his pockmarks.

I much prefer my South American dictators in Panama shirts and hats.

X said...

Thansk to my brother I now have family ties of a sort in south america. Paraguay, to be exact. Now, in one sense they're quite safe, as a large mountain range, dense forests and most of Brazil and Bolivia seperates Paraguay and Venezuala from each other. But... that didn't stop them taking part in a war in the 19th century. Anyway, despite the distances invovled, I now have a very personal reason to worry about the spread of communism on that continent. The worst part of it is, people who should know better are supporting thugs like Chavez, helping them to repeat the mistakes of communism and, eventually, the slaughters those mistakes brought upon the world.

hank_F_M said...

I read an article about a year ago.

The Capacity to produce oil in Venezuala is decreasing because the equipment is not getting proper maintenance. The technitions who know how to do are finding employement in other countries, Chevez is happy to let them go because it gets rid of people who are not inclined to support him. There was a nice side bar article about a Venezualan who was learning to enjoy Alberta winters.