-->Venezuela Buys Oil to Meet Contracts
Dr. Joe Duarte Tuesday, May 02, 2006

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."
The news has so far been very much inside baseball, as it has not made the mainstream, due to competition from more sensational stories such as the illegal alien marches, and the media's obsession with oil company profits.

According to the Times quoting"Under President Hugo Chávez, PDVSA's oil output has declined by about 60 per cent, a trend analysts say has accelerated in the past year because of poor technical management."

Conclusion

The Venezuela oil purchase report is indeed landmark in our opinion, since it offers multiple possible lines of thought, not the least of which is the possibility that it is a sign of the peak oil phenomenon.

To be sure, Venezuela's government is increasingly adroit in the financial markets, as Mr. Chavez has reportedly shown interest in using PDVSA and his government in ways similar to hedge funds, by timing markets and moving assets rapidly from one arena to the other.

Thus, this could be a shrewd business move aimed at cutting transportation costs to some of PDVSA's clients.

That seems to be the party line. According to the Financial Times:"PDVSA would not confirm that it was buying oil from Russia but said a statement would be issued on Friday (April 28). The company said it would be"logical" that the Ruhr refinery was sourcing some of its oil from Russia because it would be cheaper than transporting it from Venezuela."

Yet, the other side of the coin, which must be given a fair airing, is that Venezuela's oil production is rapidly dwindling, or that at least Chavez' gifts to Cuba and other left leaning South American countries, in the form of hundreds of thousands of barrels of oil, are starting to take their toll.

If indeed some 10,000 wells are off line, and Venezuela's technical expertise is near rock bottom, then the latter is more likely.

Somewhere in the midst of those two extremes is the truth. Unfortunately for the oil markets, and perhaps the global economy, we are not likely to find that truth until it is upon us, or more likely, until it has been in progress for months to years.


<ul> ~ Auszüge aus:</ul>