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Analysis: Venezuela facing a troubled 2009

disclaimer: image is for illustration purposes only
by Carmen Gentile
Miami (UPI) Jan 7, 2009
Lower oil prices could make for a tough road ahead for Latin America's petroleum-rich countries like Venezuela and those in the region -- as well as in the United States -- that depend on Caracas for discount oil.

Falling oil prices forced Venezuela to cut its 2009 budget and could put countries like Cuba and Nicaragua, both of which depend heavily on discounted oil from Venezuela to meet their daily energy needs, in serious peril in the months to come. Fellow beneficiary of Venezuelan benevolence Bolivia also could soon feel the ill effects of receiving less oil from Venezuelan state-run oil company PDVSA.

Some experts contend, however, that Venezuelan President Hugo Chavez will keep PDVSA oil flowing to his closest friends unless oil prices drop below $30 a barrel.

"Venezuela's commercial relationship with oil in Cuba will be the last one to suffer," said Jorge Pinon, energy fellow at the Center for Hemispheric Policy at the University of Miami.

With 50 percent of Cuba's oil needs being fulfilled by PDVSA largesse on the orders of Chavez, the communist island couldn't function without it.

In the meantime, Chavez already has ordered that another arm of his international petroleum charity be scaled back.

Low-income residents in 23 U.S. states who depended heavily on discounted heating oil from Venezuela to get through the cold winter months will have to find another way to heat their homes this year.

Venezuelan oil company Citgo Petroleum Corp. earlier this week suspended contributions to a Boston non-profit program that provided free heating oil to some 200,000 Americans nationwide over the last several years, according to The Boston Globe.

"It's a financial issue, that's all," said former Massachusetts Rep. Joseph P. Kennedy II, the president of Citizens Energy Corp.

The cutbacks to the U.S. oil aid program, which particularly riled critics in the United States who contended the program was more about embarrassing anti-Chavez Washington than charity, come as the Venezuelan government acknowledged its shrinking oil revenue.

Venezuela's central bank announced that the country's oil sector grew only 3 percent in 2008, down from 6 percent growth last year.

Hoping to stem the tide of Venezuela's falling oil revenue, Chavez and the country's leading energy officials have called for the Organization of Petroleum Exporting Countries to further cut oil production with a goal of bringing prices up. The price of oil is now in the low $40s -- about $100 per barrel less than the all-time highs of last summer.

At home, Venezuela in November told oil customers that production levels would be cut to counter falling oil prices, part of the OPEC agreement to reduce production across the board. The decision could help raise world prices in 2009, though a return to the $150-a-barrel price tag reached in July 2008 is unlikely, analysts contend.

While the outlook for Venezuela's oil sector looks uncertain, neighboring Brazil appears poised for growth, albeit limited, in its oil sector in 2009.

Though Brazil's state-run energy firm, Petrobras, likely will have to put a hold on developing its multibillion-barrel deepwater reserves until 2010 or beyond, a series of offshore finds has Brazilian leaders ready to proclaim their country the new leader in Latin American petroleum.

Last year Petrobras unveiled its discovery of the Tupi oil field, a reserve believed to hold between 5 billion and 8 billion barrels. The Tupi field became the first of a string of discoveries off the shore of Sao Paulo state that energy officials boasted would place Brazil among the ranks of the world's largest petroleum exporters. At the time, Petrobras officials said the discovery of the Tupi oil field could launch Brazil into the Top 10 oil producers in the world.

New finds in 2008 near the Tupi field have oil officials clamoring to explore untapped parcels of the Atlantic, though economic concerns likely will inhibit extraction ambitions in 2009.

Analysts say oil companies hoping to purchase a block of the new discovery should expect higher taxes and other new regulations for new operations in Brazilian waters. But with oil prices far lower than they were just six months ago, the price of extraction likely will be prohibitively expensive until prices rise over the $60-a-barrel mark.

"All those projects are on hold because they are difficult and expensive," said Pinon, noting the extraordinary depths beneath the ocean floor at which the Tupi field and others lie.


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Analysis: Venezuela suspends free oil
Miami (UPI) Jan 6, 2009
Venezuela has suspended its program of providing free heating oil for America's poor following a recent decision to slash its federal budget due to falling global oil prices.

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