Embajada de Venezuela ante el Reino Unido de Gran Bretaña e Irlanda del Norte
Energy, Oil and Petrochemicals PDF Print E-mail

Oil politics

The oil politic of the Bolivarian republic of Venezuela has an emancipatory and revolutionary goal; it is based on the exercise of sovereign rights over the main natural resource of the country- oil - as is established in article 302 of the 1999 Constitution and its respective laws. This article establishes that the "The State reserves to itself, through the pertinent organic law, and for reasons of national expediency, the petroleum industry and other industries, operations and goods and services which are in the public interest and of a strategic nature. The State shall promote the domestic manufacture of raw materials deriving from the exploitation of nonrenewable natural resources, with a view to assimilating, creating and inventing technologies, generating employment and economic growth and creating wealth and well-being for the people."

After the oil sabotage that Petroleum of Venezuela (PDVSA) suffered in December 2002, at the hands of its technocratic management of that time, there was a massive shift in the conscience of the country and people were able to witness what the industry was really like on the inside. Once the State was able to recover its control over PDVSA, the people's outlook changed.

Following the constitution, the government of President Hugo Chavez developed a policy of Full Oil Sovereignty, thanks to which the state was able to recover control over its oil resources, with the aim of putting it at the service of the Venezuelan people. With the 'Full Oil Sovereignty' policy, fiscal control was recovered, as well as everything related with the payment of royalties, taxes, and the fair administration of the extraction of this resource.

The new 'Organic Law of Hydrocarbons' dictates that the revenue generated from the oil sector should be set aside for the development of the nation, for infrastructure and healthcare projects, among others.

Following this set of criteria, Pdvsa also directly supports social projects such as the Ribas Mission, the Inside the Neighbourhood Mission, Mercal Mission, as well as other social programmes run by the national government. Likewise, in the Special Development Fund (Fondespa), Pdvsa has 2 billion dollars that are administered through a trust fund in the Economic and Social Development Bank (Bandes), for the implementation of huge transport works, among other investments which will guarantee an important leap forward in the national economy. Pdvsa will also make contributions to the National Development Fund (Fonden).

Harvesting oil

The 'Sowing the Oil Plan' looks to strengthen our industry and guarantee our technological sovereignty, at the same time advancing the parallel development of the national and local economies of the communities in which the industrial projects are being developed. The strategic plans of Pdvsa to conduct this labour can be divided into seven points for development, with an increase in the productive capacity of crude oil, gas, and an increase in the refining process witnessed in the period from 2008 to 2013. In total, the Sowing the Oil Plan is extended up until the year 2030, with this period coinciding with the end of the Bicentenary Bolivarian Cycle.

Mixed enterprises

On the 31st of March 2006, the Venezuelan state signed agreements with 17 national and international oil companies to move towards mixed enterprises, away from the illegal operational agreements that were signed in the 1990s.

Through the opening up to tender of the oil industry, article 1 of the Nationalisation Law (or the Organic Law Reserving the Industry and Commerce of Hydrocarbons to the State) was violated, and the production of nearly 500,000 barrels of oil per day was privatised.

The operational agreements, or contracts for oil exploitation, which were signed in the 90s were never approved by the Legislative Power and were in fact giveaways masked under the guise of public service contracts. This event had dire consequences for the state revenues of the Republic.

Mixed enterprises are grounded solidly on article 12 of the 1999 Constitution, which establishes that: "Mineral and hydrocarbon deposits of any nature that exist within the territory of the nation, beneath the territorial sea bed, within the exclusive economic zone and on the continental shelf, are the property of the Republic, are of public domain, and therefore inalienable and not transferable." This means that the property of oil deposits will not be able to be transferred. The reserves are the exclusive property of the Venezuelan people.
What's more, mixed enterprises respond to what is pointed out in article 22 of the Organic Law for Hydrocarbons which emphasises that activities surrounding the exploration and production of oil and gas will be conducted directly by the Executive, and by "enterprises in control of their own decision making processes, in order to maintain a rate of participation greater than 50% of social capital". These mixed enterprises shall not be able to commercialise oil. Even though the extracted resource will be its property, this will be sold only by the Venezuelan state, through Pdvsa.

Legal Framework

The activities in energy matters in the country are governed by three fundamental organic laws: the Organic Hydrocarbons Law (2001), the Organic Gaseous Hydrocarbons Law (1999) and the Organic National Electrical Service Law (2001).

Achievements: Venezuela as a world energy power

Thanks to the oil policies adopted by the government of President Hugo Chavez, the national oil industry has been consolidated and is a source of revenue propelling the economic and social development of the country. Venezuela is now a proactive player on the international scene and a world recognised leader in the energy sector. Some of the achievements which most stand out in this field include:

Increase in production
The production capacity of crude oil by Pdvsa has increased, reaching 3.330 million barrels a day in 2008 (this figure does not include the liquid from natural gas). Nevertheless, President Hugo Chavez has insisted that "our strategy is orientated towards the defence of fair oil prices", so that, depending on the circumstances, cuts in production that may be necessary can be made, as long as they are in agreement with the Organisation of Oil Exporting Countries (OPEC).

Development of gas
Venezuela has recovered its presence at sea, through the development of the project Mariscal Sucre. In 2008 the drilling campaign for the development of the proven reserves using the drillship Neptune Discoverer. The production will be used to supply, as a priority, the internal market and support the project of conversion to natural gas in the totality of the thermoelectric plants in the country, the Vehicular Natural Gas (GNV) project and the national plan for domestic gas, as well as Line 2 of the Natural Gas Liquefaction (GNL) project.

Development of the petrochemical sector
Thanks to the stimulus of the petrochemical industry through Pequiven, the national Petrochemical Company of Venezuela, the country has notably developed the production of fertilisers and urea. In 2008, a historic record was reached, with 303m tons produced -the level in 2007 was 44m tons. Production increased 689%. The production of urea increased 220% between 2007 and 2008, when 457m tons were produced.

Increase in the net financial contribution to the nation
The contribution that Pdvsa administers to the state has increased significantly. In 2008, payments made totalled the sum of 39.5 billion dollars between inversions, cost and expenditure, without taking into account the impact in the secondary sectors needed in oil production. As for productive investment, the amounts increased to US $14.4 billion, including in the oil sector (US $12.570 billion), in food, naval and communal gas, while in 2007 the sum totalled US $11 billion dollars. It is estimated that in real terms, this increase in investment represented a stimulus for internal demand in the region of 3.3%, meaning a stimulus of 0.3% in the increase of GDP not related to oil.

Promoting cooperation and integration in the hemisphere
The Bolivarian Republic of Venezuela has promoted a regional initiative known as Petroamerica, based on the principles of solidarity and sovereignty, with direct negotiations between states and state-controlled companies. Petroamerica was conceived as a geopolitical tool with focus towards the establishment of cooperation and integration, using the energy resources of the regions of the Caribbean, Central America and South America as the basis for an improvement in the socio-economic conditions of our peoples. This initiative is comprised of Petrosur, Petroandina and Petrocaribe.

Petrosur is made up of Argentina, Brasil, Uruguay and Venezuela.

Petrocaribe is made up of Antigua and Barbuda, Bahamas, Belize, Cuba, Dominica, Granada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Dominican Republic, San Kitts and Nevis, St Vincent and the Grenadines, Saint Lucia, Suriname and Venezuela.

Petroandina includes Bolivia, Ecuador, Colombia, Peru and Venezuela.

Advances in the 'Sowing the Oil Plan'
The 'Sowing the Oil Plan' extends until 2030 and includes investments by 56 billion dollars. It is divided into 6 fundamental axes: quantity study and certification of the reserves (Magna Reserva Project), the Orinoco Project (development of the oil belt), the Delta-Caribe Project, refinery, infrastructure and integration.

Orinoco Oil Belt Project

The Orinoco Oil Belt, otherwise known as the "Hugo Chavez Frias" oil belt, is the territory which makes up the southern strip of the Eastern Basin of Venezuela, to the south of the states of Guarico, Anzoategui, Monagas and Delta Amacuro, which is parallel to the course of the Orinoco River. It covers a surface area of 600km from east to west and 70km from the north to the south, with an approximate area of 55,314km2. This area is divided into four fields of exploration and production: Boyaca, Junin, Ayacucho and Carabobo. The present area undergoing exploration is 11,593km2.

The Orinoco Oil Project consists in the exploitation of 27 blocks of the fields of Boyaca, Junin, Ayacucho and Carabobo. Once the improvement and exploitation of crude oil is underway, this project looks to impact positively on the communities where the project is developed, through the creation of employment, construction of different types of infrastructure, improvements in education, housing and healthcare in the area. President Hugo Chavez said that this 'is a project of comprehensive development- it's the Bolivarian Oil Belt of the Orinoco; the Socialist Orinoco Project; this is the future, where we will build the cities of the future.'

Magna Reserva Project: This project is directed towards the quantification and certification of the reserves contained within Venezuela in the Orinoco Oil Belt. For this purpose, a comprehensive study of its geology and production is being undertaken at present, in conjunction with private oil companies. Of the total area in the belt (55,314 km2) only 11,593 km2 is being exploited, whilst the area that is to be studied through the project is 18, 220km2, divided into 27 blocks, with which it is hoped 235 billion barrels of heavy crude will be certified. This certification of oil shall place Venezuela as the leading country in reserves of hydrocarbons in the world, with a total of 316 billion barrels of petrol.

Delta-Caribe Project: This project has the function of developing gas in the coastal regions, which make up the east and west of Venezuela. This project seeks to consolidate Venezuela's position as the country with the 8th biggest proven reserves of Natural Gas and the first in Latin America, with 180 billion cubic feet of gas (180 BCF), and an additional volume in the region of 100 BCF. The objective is to increase the production of gas from a daily rate of 6.9 BCF to 11.5 BCF at the end of 2014.

Promotion of energy efficiency

As well as the works being developed in order to progressively increase the capacity for production and distribution of electrical energy, the government has emphasised the development of an energy consumption model that is environmentally sustainable.
In terms of the Energy Revolution Mission, during 2008 more than 10.9 million energy efficient light bulbs were installed, which allowed the initial goal of 10 million light bulbs to be reached. This was in addition to the 68.5 million light bulbs installed previously in phase 1 and 2 of the mission.

The Energy Revolution Mission has resulted in savings of 2000 megawatts per day, or 5 million KWh each year – the equivalent to savings of 24.7 million barrels of oil. This translates into monthly savings of 4.6 dollars per household.

You may consult the official documents of the Ministry of Popular Power for Energy and Oil regarding contributions to the nations or for facts about the refinement processes, exportation, transports, reserves, production, statistics and other data of interest about the oil industry in Venezuela.

Refinery Portfolio

Refineries in Venezuela and in the world
The Bolivarian Republic of Venezuela boasts three refineries within its territory, through Pdvsa. The Paraguana Refining Complex (CRP) is considered the biggest refinery in the world, located in the state of Falcon, to the west of the country, and is comprised of the plants of Amuay, Cardon and Bajo Grande. This complex has a refining capacity of 940 thousand barrels per day (MBPD). In the east of the country can be found the Puerto La Cruz refinery, with a capacity for processing 200 MBPD. In the north-central region of the country can be found El Palito refinery, which is capable of 130 MBPD.
Pdvsa also controls 5 refineries in the United States: Corpus Christi (Texas); Lemont (Illinois); Saint Croix (US Virgin Islands), in collaboration with America Hess; Lake Charles and Chalmette (Louisiana), in conjunction with Exxon. The refining capacity on US soil is approximately 1089 MBPD.
In Europe Pdvsa processes 259 MBPD, thanks to ITS association with AB Nynas and through refineries in Nynassham, Sweden, and Amberes, Belgium, as well as refineries located in the United Kingdom. In addition, Pdvsa's refineries in the Caribbean have a processing capacity of 632 MBPD.

Citgo is a subsidiary of Pdvsa, registered under United States law. It has created more than 4000 direct jobs in the US and approximately 75,000 secondary, knock-on jobs. Citgo is comprised of a circuit of three refineries with a productive capacity of 749 MBPD, with the Lake Charles refinery in Louisiana producing 425 MBPD, Corpus Christi (Texas) with 157 MBPD, and Lemont (Illinois) with 167 MBPD. Additionally, it controls more than 7000 petrol stations in the United States.

Petrochemical industry

Pequiven, or Petrochemicals of Venezuela, is a corporation which belongs to the Venezuelan State in charge of producing and marketing vital petrochemical products, with priority given to the national market, and with a capacity for export. It was created in 1977, engulfing the operations of the Venezuelan Petrochemical Institute (IVO), which in turn was founded in 1955. Since its conception, Pequiven has undergone successive stages of reorganisation, in which it has expanded its field of operations, developing an important internal and external market for its products. From 2005, Pequiven is independent of Pdvsa and is now attached to the Ministry of Popular Power for Energy and Petroleum.

Pequiven boasts three important petrochemical complexes: The Moron Petrochemical Complex, located in Carabobo State (in the west-central part of the country); the Ana Maria Campos Petrochemical Complex, in Zulia State (west); and the Jose Antonio Anzoátegui Petrochemical Complex, located in Anzoátegui State (east).

Electrical Energy

70% of electrical energy in Venezuela is generated through hydroelectricity. The hydro-electrical potential of the country reaches 84,433 MW. The installed capacity at any given moment of is 57,580 GW per hour, with a rational consumption of 46,828 GW per hour. In spite of the high investments that are required for hydro-electrical production, its development has been taken up as an important national project and has given rise to, among other things, the freedom to export a significant volume of liquid fuel (i.e. oil).

With the aim of strengthening the national electrical sector, in 2009 the Ministry of Popular Power for Electrical Energy was created.

National institutions and other organisations

• Ministry of Popular Power for Energy and Petroleum (Menpet)
• Ministry of Popular Power for Electrical Energy
• Venezuelan Petroleum (Pdvsa)
• The Organisation of Petroleum Exporting Countries (OPEC)*
*OPEC is an international economic organisation with its headquarters in Vienna, Austria. It was created in 1960 as a response to the fixing of official oil prices agreed unilaterally by the big oil exporting foreign companies. It had as its objective the unification and coordination of the oil policies of its 13 member countries, defending its interests as national producers of this resource. Currently, OPEC is made up of 5 founding countries, Saudi Arabia, Iraq, Iran, Kuwait and Venezuela, with seven other member countries joining subsequently: Algeria (which joined in July 2007), Angola (joining in January 2007), Nigeria (July 1971), United Arab Emirates (November 1967), Libya (December 1962), Qatar (December 1961) and Ecuador (which was a member from 1973-1993, joining once again in November 2007).

OPEC controls approximately 43% of the world oil production and 75% of the world's oil reserves. It controls approximately 51% of the world's crude exports.