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José Toro Hardy: PDVSA can regain strength thanks to eight years of investment on the agenda

Photo: José Félix Lara

Photo: José Félix Lara

Ivonne Ayala Perdomo

José Toro Hardy, an economist and renowned expert in the field of hydrocarbons, integrates with other 80 experts in the oil industry and the basic and strategic industries, a team responsible for analyzing guidelines to revive the industry in the national plan.

Based on this scenario and with full knowledge of the most serious problems affecting the most important industry in the country, this is estimated it requires a very significant private capital investment to rescue the sector in a large-scale catastrophe

What is the amount of investment needed to make the domestic oil industry again productive?
A very serious calculation showed that between 25 to 30 billion dollars a year between investments and expenses is required for eight years, thus regaining the level of production from 20 years ago, when it was 3 million 500 thousand barrels of oil a day. We are currently living in a huge disaster. Only by saving the industry can we move forward.

Income from oil is essential, accounting for 96% of all dollars that enter the country, of which 70% came from business with the United States. This income is mainly due to two variables: how much oil is produced and at what price it is sold. It is impossible to counterbalance public spending based on prices, because it would require them to be close to USD 250 per barrel. Making it balance on the basis of production is a task that would take many years. In the accelerated growth scenario, it would take Venezuela for around 5 years to achieve production of 2.5 million barrels per day. For this purpose, it would be necessary to re-activate about 7,470 sealed wells (category 2), drill 3 803 new wells, perform 2,700 renovations, inject steam into 5 209 wells and increase the number of operational drills from 27 to now.

When designing these numbers, we need 9 years to re-achieve the 3.5 million b / d production we had in 1998. Almost ten years to regain the level of production we had 20 years ago. This tells us about the level of massive destruction that our oil industry has undergone.

It looks like there is no financial strength.

The fact is that the Venezuelan state has no means to face this titanic task. If it had, the priority should be a humanitarian crisis and a huge effort to face the problems of education, health, security and justice that plague ordinary Venezuelans, which is why it will be a private, domestic and foreign sector, an important role in reviving our oil industry. The more that the service life of the oil as an energy factor is shortened. The main forecasters around the world estimate that the share of oil in the energy matrix will significantly decrease. It should be noted that the International Energy Agency warns that global demand for oil will continue to grow for the next two decades, but from 2040 it will gradually give way to other less polluting energy entities. We therefore have a "window of opportunity" that forces us to act immediately at the risk that our hydrocarbon reserves will remain forever in the subsoil.

Given that neither price nor volume can solve the problem of oil revenues, in the short-term the variable that can most affect the recovery of the economy is the multiplier effect of huge investments required not only in oil, but also in other sectors of the economy.

All countries that have oil are also aware of the "choice" problem. Everyone is trying to attract investments. Without sacrificing sovereignty, we must apply an oil policy that allows us to be competitive. This is one of the objectives of the national plan in oil matters.

What are the conditions to increase the interest of transnationals again?
In order to attract private capital that is needed, much bolder oil opening will be needed than the previous one (program developed during the second presidency of Carlos Andrés Pérez, 90). Current Act on Hydrocarbons envisages that companies participating in the oil sector have to pay 50% of income tax and 30% royalties. So you can not attract new investors, it's unattractive. All countries that know oil know about the problem of the 'window of opportunity'. Everyone is trying to attract investments. Without sacrificing sovereignty, we must apply an oil policy that allows us to be competitive.

This is one of the objectives of the national plan in oil matters: we must be competitive in relation to other countries that are also looking for new and larger capital in their oil industry, offering much better conditions.

It is also important to present a credible, transparent and solid scenario that dispels the doubts of the companies concerned. This means that each contract is concluded under a transparent bidding process. The assignment of contracts to your finger must be eliminated. It is important to emphasize that we do not take into account exclusions in which everyone with technical potential can participate. All contracts signed in accordance with the law will be respected, adding is required. The first thing to understand is that without a political change, it is not possible to implement the necessary measures. We must move from the economy of control to the economics of incentives.

The only thing that the Venezuelan economy will recover is huge investments in all sectors when we talk about the multiplying effect of investments, because if resources are introduced into the oil industry, the construction industry is activated, if it does, trade and services increase.

Is there a possibility that if the required changes occur, the recovery in the industry will take place earlier than expected?
It all depends on the size of achievable investments and the quality of financial leverage. At the moment, the conditions are the least prepared. There were important contacts at the diplomatic level. Contacts have been made with representatives of Russia and China regarding contracts, and there are some things that are very clear. There are two issues to be addressed, investments and new technologies. We have outdated technology that needs to be modernized and which must also be well cared for.

There are concerns about the extent of the mega blackout that has covered the entire country for five consecutive days in the oil industry.
The outlook is catastrophic, the data is already being ventilated, which means that the drop in oil production is currently about 460,000 barrels a day, considering that according to tertiary sources Opec, it is information from the six largest companies and the world market in hydrocarbons, domestic production was 1 million 08 barrels a day at the end of February, i.e. before darkening, and then pumping in the dark days of March fell to 540 thousand barrels per day, If it is an addition to the company McQuilling Partners Inc. based in the USA, which provided Pdvsa with four contracted tankers, joined the German ship operator Bernhard Schulte Shipmanagement (BSM) in connection with the withdrawal of the provision of forwarding services. from petroleum to oil companies, remember that this company has a fleet of 15 PDVSA vessels and has worked in Venezuela for almost 25 years; this additional heavy oil refinery in India, Reliance Industries Limited, suspended the purchase of crude oil from this country. Freezing Pdvsy bills in the Russian bank Gazprombank and so many other announcements motivated by the sanctions of Donald Trump's government for Nicolás Maduro, we have this when he states that if they do not have US interests, he can put oil in another place, he does not know what he says with the announcement of Reliance and the situation of Citgo, which processed part of our very heavy oil, there is no refinery in the world that would take Venezuelan oil. The situation is getting harder and the world is much smaller.

Is it true that April is much darker than March?
Undoubtedly, April will be a black month because the economy will be affected directly because it will no longer introduce 70% of the currencies that were introduced as a result of negotiations with the United States. and other mentioned aspects. The government is talking about signing new business deals with China, Russia and other allies, but the truth is that the investments of contracts are not being implemented. The oil industry receives a decisive blow with the announcement of McQuilling Partners Inc and Bernhard Schulte Shipmanagement (BSM), as it also undermines the ability of Petróleos de Venezuela to supply oil to world markets.

It is very difficult to recognize, but after it became PDVSA, the company that has contributed most to the improvement of Venezuelans, now contributes most to its development. The cash flow deficit is so huge that the Central Bank of Venezuela must spend inorganic money to help him. Because there is no production in the country, everything is directed to buying dollars and everything is imported. Almost 90% of the increase in liquidity, money on the street, corresponds to the financing of BCV to public companies, but 80% correspond to PDVSA, that is, that makes Venezuelan inorganic money. generates a central bank with a small machine that does not exist, causes inflation. The consequence of issuing inorganic money is the increase in prices. People who have more money try to get more goods and services. Demand is increasing, and with it prices


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