Category Archives: Economic Crisis

A Santos-Chavez Pipeline: Where’s the demand for Latin America’s oil boom?

President Santos of Colombia recently went to Caracas where he and PresidentChavez signed a letter of commitment  for the “Binational Project on the Venezuela-Colombia Oil Pipeline” to run 3,000 km. from Venezuela’s Faja heavy-oil region, west across Colombia to the Pacific port of Tumaco.  (El Universal and El Universal).  After many disappointments in recent years in collaborations with PDVSA, Latin American presidents haven’t endorsed many joint projects lately.  Nevertheless, Santos was beside himself with enthusiasm after the five-hour meeting on 28 November, declaring “Wherever we’ve mentioned this, people’s eyes open wide.” (Reuters)

Let’s look at some data to see if Santos and Chavez are really onto somehing here. Continue reading

Part III: Venezuelan heavy oil: China’s persistence is finally paying off

First, here is an outline of this and the next three or four blogs on this topic:

I. Changes on the Venezuelan side that are enhancing the Chinese role:

a.  Chavez’ recent interest in increasing national oil production 

b.  The existential crisis Chavismo faces from the slow collapse of dysfunctional state institutions, civil infrastructure, and nationalized enterprises

II. Changes on China’s side that enhance its role in Venezuela:

a.  China has now loaned Venezuela so much money, and Venezuela so badly needs continued Chinese financing (lately it  also feels a need for managerial and technical assistance), that Beijing has been able to insist Caracas not only begin to come through on long-awaited heavy-oil contracts, but that it also comply with certain  geo-political and fiscal-accountability conditions. A couple of these are pretty amazing.

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I. Changes on the Venezuelan side enhancing the Chinese role:   a. Chavez’ new interest in increasing national oil production

One reason for China’s deepening influence in Venezuela is that PDVSA‘s president and energy minister, Rafael Ramirez, is no longer alone in insisting that PDVSA’s level of production has to rise.  President Chavez now seems to have gotten behind the need to increase national production.  If the price of oil falls significantly (many feel six months at an average of $60/barrel would be ruinous) and PDVSA’s exports per day have not risen to compensate, Venezuela will be in real trouble.  Venezuela is extraordinarily dependent on imported goods, from food to machinery for which dollars are needed; and it also must keep up payments to foreign bond holders, for which a steady stream of dollars are also needed.  Chavez and Ramirez have every reason to expect that the world’s economic woes will lead to a decrease in oil demand over the next year or two, and this of course can lead to significantly lower prices.  These fears were not apparent in the recent past. It has been more or less a tenent of Chavista faith at elite-and-professional levels that the price of oil will never again fall significantly.  I have been told this many times.  Continue reading

Part II: Venezuelan heavy oil: China’s persistence is finally paying off

Major Chinese Faja heavy-oil-production contracts had not materialized till now. Why not?

(This is continued from Part I)    On the one hand, technical reasons would be given against closing deals with the Chinese. For example, it was thought by some in PDVSA that Chinese companies lacked the technology to efficiently implement the refineries needed to upgrade Venezuela‘s extra-heavy oil to a grade light enough to enable it to be accepted by foreign refineries. On this excuse, some top PDVSA executives had pressed Chinese firms to focus on making joint proposals together with, say, Total of France.  This was because Total had already proven the quality of its upgrader-refinery technology in one of the four proof-of-principle projects foreign companies had implemented during the previous government’s apertura period. (The apertura was the liberal “opening” of the oil sector to significant Continue reading

Part I: Venezuelan heavy oil: China’s persistence is finally paying off

In my travels and interviews in Venezuela this summer, it became clear that there has been a major advance in the relationship between China and the Bolivarian administration of President Chavez.  China’s dogged persistence and large state-sponsored investments in Venezuela – apparently the largest they’ve made to date in any country – are finally beginning to bear fruit.  The new Chinese influence is being simultaneously extended to both oil and non-oil sectors. 

Partly this development is due to the many crises affecting the Bolivarian state, and decisions it has been forced to take to make increasing national oil production a priority.  To advance this program, President Chavez’ administration has made initial moves to grant Beijing access to Venezuelan oil in major ways it had not previously. 

However, there are two sides to this story: on the other side, increasing Chinese participation is also a product of China having step-by-step put some quite sharp demands on PDVSA and the Venezuelan Bolivarian state for financial transparency and accountability, for geopolitical stabilization, and in particular, for Chinese firms being granted large-scale access to new heavy-oil fields in the Faja of the Orinoco River.  The key ingredient here is that Continue reading

Chavez brings Venezuela’s gold home: Iranian, Libyan and Syrian factors

Why did  President Chavez last week order that Venezuela‘s gold reserves held abroad be repatriated  and that international reserve funds held in banks in the U.S., Switzerland, Britain–the global north–be moved to banks in Brazil, Russia and China–to BRIC countries?  The move is being hailed by Chavistas; but, the generalized anti-imperialist and nationalist rationals being cited are not useful as far as a specific geopolitical analysis.  That is , they do not explain why this takes place right now  as opposed to having been done at any given time during the last 12 years of his presidency.

So, why is this being done now?  The idea is obviously to keep these funds in places where they cannot be seized or frozen.  But, WHAT might trigger seizures or freezing of these funds NOW as they lay in U.S., British or Swiss banks? Continue reading

Watch my interview: The economic crisis & Impact on energy & environment

It would NOT TAKE ROCKET SCIENCE to make huge increases in energy efficiency and reduction of greenhouse gasses in the USA.   Here is an interview I gave, from Caracas in late 2009, to Erica Dingmann., on what needs to be done in transportation infrastructure and energy to REALLY make some big, practical gains in the USA.  It does NOT require big breakthroughs in technology.

Tell me what you think.