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Cablegate: Venezuela: Insights Into Recent Pdvsa Activity From

VZCZCXRO6396
RR RUEHAO RUEHCD RUEHHO RUEHNG RUEHRS
DE RUEHCV #0147/01 0351750
ZNY CCCCC ZZH
R 041750Z FEB 10
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 0414
INFO OPEC COLLECTIVE
WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFISS/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 0001
RUEHKO/AMEMBASSY TOKYO 0001
RUEHMO/AMEMBASSY MOSCOW 0001

Thursday, 04 February 2010, 17:50
C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000147
SIPDIS
ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE
HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MKACZMAREK
COMMERCE FOR 4332/MAC/WH/JLAO
NSC FOR DRESTREPO AND LROSSELLO
OPIC FOR BSIMONEN-MORENO
AMEMBASSY BRIDGETOWN PASS TO AMEMBASSY GRENADA
AMEMBASSY OTTAWA PASS TO AMCONSUL QUEBEC
AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE
EO 12958 DECL: 2020/02/04
TAGS EPET, EINV, ENRG, ECON, VE
SUBJECT: Venezuela: Insights into Recent PDVSA Activity from
Mitsubishi
REF: CARACAS 11; 09 CARACAS 495
CLASSIFIED BY: Darnall Steuart, Economic Counselor, DOS, Econ; REASON: 1.4(B), (D)
1. (C) SUMMARY: According to a source in Mitsubishi XXXXXXXXXXXX, PDVSA is seeking to close at least $13 billion in finance deals. Senior PDVSA officials are reportedly upset over the failure to solicit bids from international companies for the Mariscal Sucre offshore natural gas project; PDVSA announced it would develop the resources on its own. Energy Minister Ramirez is traveling to Moscow, Beijing, and Japan in an attempt to move other projects forward. Shortage of natural gas is forcing PDVSA to prioritize projects and slow-down or cancel projects in the pipeline. The Vice Minister of Energy and Petroleum for Petrochemicals reportedly is not honoring any natural gas commitments made prior to his assumption of the post. Petrochemical projects in the Jose condominium are working to secure an electricity generation capacity in the face of the current crisis. END SUMMARY.
2. (C) PDVSA Finance: Petroleum AttachC) met with Mitsubishi XXXXXXXXXXXX on XXXXXXXXXXXX. XXXXXXXXXXXX spoke freely on a range of issues impacting the energy sector. His comments on the bids in the extra heavy crude Carabobo Round are reported in septel. With respect to PDVSA’s financing needs, XXXXXXXXXXXX shared that PDVSA is seeking to close several international financing deals, including an $8 billion offer from the “Icc Consortium,” a $1.5 billion loan from Deutsche Bank for a power plant, and a $1.5 billion corporate line of credit from Banco Espirito Santo (BES).
3. (C) Mariscal Sucre: On Wednesday, January 20, in a signing ceremony for the petroleum workers’ new collective bargaining agreement, President Chavez announced that PDVSA would develop the Mariscal Sucre offshore natural gas fields independently. The bid round failed to attract any international interest. [NOTE: During the ceremony, Minister of Energy and Petroleum Rafael Ramirez also announced that PDVSA would develop the Junin 10 block of the Faja on its own, effectively eliminating Statoil and Total from continued participation. The range of costs involved in other Junin projects with international oil companies are between $16 billion and $25 billion. Chevron XXXXXXXXXXXX suggested to PetAtt on January 29 that neither company was willing to pay PDVSA a bonus to be awarded the block and that PDVSA “kicked” them out as a temporary negotiating measure. END NOTE] XXXXXXXXXXXX stated that privately, senior PDVSA leadership is extremely upset with the failure of international companies to register bids. XXXXXXXXXXXX added that Mitsubishi sent a letter to PDVSA explaining why the conditions offered by Venezuela were insufficient and what would need to be changed to make a bid commercially viable. XXXXXXXXXXXX suggested the obstacle to Mitsubishi’s bid was the expected price for natural gas that participating companies would receive from the GBRV (GBRV wants to buy natural gas for $1.25/million cubic foot and international companies are looking for a price above $3/million cubic feet). Estimates published in local media put Mariscal Sucre development costs at over $8 billion.
4. (C) Ramirez Travel: After receiving last second permission from President Chavez to add a stop in Tokyo onto his current travel plans, Energy and Petroleum Minister Ramirez is currently in Moscow and will be in Beijing through February 3. He is scheduled to meet with private sector and Japanese government officials in Tokyo on February 4 and 5. XXXXXXXXXXXX speculated that Ramirez’s goal in Moscow would be to advance the Russian petroleum consortium’s Junin
CARACAS 00000147 002 OF 002
project. In Beijing, XXXXXXXXXXXX expected Ramirez to focus on “bringing CNPC” back in line and advancing the various Chinese heavy oil projects in the Faja. XXXXXXXXXXXX believed Ramirez’s stop in Tokyo would be designed to seek additional financing for PDVSA, to advance the Junin 11 reserve certification study (Ref B), and to reprimand the Japanese companies for not submitting bids in the Mariscal Sucre bid round.
5. (C) Jose Petroleum and Petrochemical Condominium: XXXXXXXXXXXX mentioned that the private sector petrochemical tenants have all been given contradictory information regarding possible electricity rationing measures that Pequiven will execute. None of his interlocutors had heard of possible electricity rationing in Jose’s petroleum upgraders. XXXXXXXXXXXX shared that Mitsubishi is organizing a joint lease of a 25-30 MW electricity barge that could be brought in on a 2-3 year contract. Mitsubishi believes this size generator could satisfy all of the petrochemical company electricity requirements.
6. (C) XXXXXXXXXXXX noted that Mitsubishi is also trying to confirm the supply of natural gas from PDSVA to Pequiven and its mixed company enterprises in Jose. Mitsubishi financed a methane plant whose construction is expected to be completed within two months. The Japanese firm has a contract with Pequiven and an additional “back-to-back” contract with PDVSA to supply natural gas to Pequiven for the mixed company. According to XXXXXXXXXXXX, Vice Minister for Petrochemicals (and PDVSA Vice President for Refining, Trade, and Supply) Asdrubal Chavez reportedly told another Japanese firm recently that any natural gas supply deal signed before he assumed his current position at the Ministry is invalid and that it was not in PDVSA’s interests. The other Japanese firm has been working for several years to finalize an olefins project in Jose.
7. (C) COMMENT: PDVSA’s reported search for loans, lines of credit, and bonus payments for new production companies suggests it continues to suffer from a lack of liquidity. The failed Mariscal Sucre natural gas bid round represents a significant setback for PDVSA. That Russian and Chinese national oil companies did not submit bids in Carabobo suggests the Minister’s travel is to ensure support from “like-minded” countries and to avoid new public setbacks. PDVSA’s search for financing and credit, a failed natural gas bid round, a (to date) inconclusive Carabobo round signal, as well as the company’s 2009 expropriations of petroleum service companies and on-going service company arrears (estimated to exceed $8 billion), signal that PDVSA has much work to do to turn its fortunes around. Unfortunately, it appears that its management may not be up to the task. END COMMENT. DUDDY

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