Venezuela imports oil despite having largest reserves

Posted on Thursday, 08.23.12

Venezuela imports oil despite having largest reserves

As Venezuela becomes an importer of petroleum despite its large
reserves, some are concerned that the country is losing a sizable amount
of petroleum to smugglers along the border with Colombia.
By Antonio Maria Delgado
adelgado@elnuevoherald.com

Venezuela, a country that boasts of having the largest oil reserves in
the world, is facing an acute scarcity of gasoline due to deterioration
of its refinery system, and the huge volume of fuel being smuggled out
of the country.

Experts said that Venezuela has shifted from exporter to importer of
gasoline under the Hugo Chávez administration, which is forced to import
fuel and components to process it from the United States, not only for
internal consumption but to allow the state enterprise Petróleos de
Venezuela, S.A. (PDVSA) to fulfill contractual commitments.

The experts fear that the government will choose to ration the fuel
because of its inability to contain the contraband and increase production.

In a way, they have already started to do just that, said Juan
Fernández, former PDVSA's executive planning director, referring to a
government measure forcing motorists in border states to place a chip in
their vehicles to count the amount of gasoline they put in their tanks.

The measure, which generated protests in the state of Zulia, also limits
the amount of fuel residents can buy to only 41 liters (10.8 gallons)
every two days, to control the massive contraband of gasoline to Colombia.

And even though the measure does not seem to be drastic at this point,
Fernández said that it could be only the beginning.

"As in every economy where everything ends up deteriorating, the way
they fix it is by imposing quotas and controlling the people," Fernández
said in a telephone interview. "That is what we are seeing with this
alleged chip, which is nothing but a way to introduce a rationing quota
system using contraband as an excuse.

"This is a wrinkle the government will start running, first in order
states, then a little further out to reach other states close to the
border and, since there is a deficit in the system, we will end up
seeing the wrinkle growing until everybody is under controlled
consumption," he said.

The deficit in the system is caused by a combination of factors ranging
from an abrupt plunge in production, an increase in the number of
vehicles and the flight of thousands of barrels of the extremely cheap
Venezuelan gasoline to Colombia, Brazil and Guyana.

"It's a perfect combination," said Horacio Medina, former manager of
PDVSA. "As long as these factors are in play, it will be very difficult
to solve this problem."

The fact that Venezuela is lacking refinery capacity is a paradox for a
country that boasts of having the largest reserves of crude oil on the
planet, estimated at 316,000 millions of barrels, and that only 10 years
ago exported gasoline to other countries, including the United States.

Today, it's the United States that sells large volumes of crude oil to
Venezuela.

According to the Department of Energy, Venezuela imported 1 million
barrels of processed gasoline only in December 2011, which, added to the
its purchases from the United States of crude oil and oil derivatives
reached a total of 2.21 million of barrels.

Experts said that the refinery capacity in Venezuela has been dismantled
in the last 10 years, first by a Chávez administration decision to sell
the PDVSA refineries abroad, and later due to a chain of accidents and
maintenance problems in the country's main refineries.

Meanwhile, Venezuela has not built a refinery since Chávez took power,
despite promising to build dozens of them inside the country and abroad.
On Tuesday, he again promised two new facilities.

Only one of those promises seems to be materializing for now — the one
that forced the Castro brothers to build a refinery in Matanzas, Cuba.

On the other hand, the national fuel supply is being affected as well by
the massive contraband, which has turned into a gigantic source of
corruption.

These types of operations are very lucrative because of the enormous
subsidies the government grants to the consumption of gasoline produced
in Venezuela, where one gallon of gasoline can be purchased for $0.12.

"If in Venezuela the price is two cents a liter and in Cúcuta, Colombia,
on the other side of the border, is $1.30, you have a difference in
price of 60 times that should be able to cover everything," Fernández said.

Yet, the volumes involved demonstrate that the flight is not carried out
mainly through individuals who fill up the tank and then cross the
border to sell it in the neighbor country.

Medina said that there are tank trucks and river barges transporting
thousands of gallons of gasoline every day across the border to sell
them in Colombia, a type of operation that undoubtedly could not be
carried out without some degree of complicity by the authorities in
charge of watching the border.

"We're talking billions of dollars lost this way," he said. "It's too
much money, and it's money not being transported by taxi drivers in the
gas tanks of their vehicles."

http://www.miamiherald.com/2012/08/23/2965352/venezuela-imports-oil-despite.html