Chavez reducing oil export share to USA


Richard Moore

Original source URL:

Oil & Gas

Published: Tuesday, April 18, 2006
Bylined to: Dr. Joe Duarte

Chavez taking decisive steps to turn off oil taps to the United States of 
America (Dr. Joe Duarte): Venezuela's President Hugo Chavez is taking 
decisive steps to turn off the oil taps to the United States of America.

    Venezuela's state owned oil company PDVSA has inked a key
    deal with India, taking the first key step away from the
    U.S. as its major oil buyer.

At the same time, PDVSA has announced that it will no longer reveal oil 
statistics to the SEC after paying off its debts.

The India deal and the refusal to disclose information are not just strategic, 
but also send a message to the US about Venezuela's future plans with regard to 
supplying the US with oil.

No More Disclosure

According to the BBC: "Venezuela's state oil firm has said it will no longer 
disclose information to US financial regulators after paying off debts in the 
US.  PDVSA said it was no longer obliged to be regulated by the Securities & 
Exchange Commission (SEC) after buying up $83 million in US-traded bonds."

    At the same time Venezuela has begun to ship two million
    barrels of oil to India per month, making use of India's
    heavy crude refineries, for which Venezuela's sulfur laden
    oil is no problem.

According to "While the new deal with India is relatively small, 
given that Venezuela produces more than 2 million barrels of oil in a single 
day, it nevertheless represents a step down a sustainable path toward 
diversifying Caracas' oil markets."

Venezuela has been working on diversifying its dependence on US oil purchases 
for some time, having nurtured relationships with Iran and China, as well as 
India. But because the US and India are two of the few countries with existing 
refineries able to process heavy crude, the Chavez regime has had a difficult 
time getting beyond the conceptual stage with the strategy.

The India deal is small, considering the fact that Venezuela ships 1.5 million 
barrels of oil to the US per day ... but it is a big signal, nevertheless.

According to Stratfor: "the April 12 deal with India is just one part of a 
nascent multi-tier cooperation between the two nations in which Venezuela is 
helping India develop its own heavy crude fields, and India is in turn 
purchasing Venezuelan heavy crude and investing in the facilities necessary to 
refine heavy crude."

The Chevron Wildcard

The oil world, though, takes strange turns, as Chevron recently announced a 
stake in an Indian refinery that will be processing heavy crude shipped from 
Venezuela, and will provide products to Asia.

According to the BBC: "5% of Reliance Petroleum, a company set up by Indian 
conglomerate Reliance Industries to operate a new export refinery in north-west 
India. The 580,000 barrels-per-day site in Jamnagar will process heavy crude and
is due to open in December 2008."

    There has been no mention of any intention of Chevron's
    intentions to divert any gasoline from its India projects
    toward the US.


There are several key factors in this story, not the least of which is the 
international aspect of the oil market, and the effect of unintended 
consequences of any one party's actions.

PDVSA cuts a deal with an Indian oil company in order to move away from the US 
as its primary source of oil revenues. Yet, Chevron, a US company, slipped into 
the deal through the back door. Chevron is playing it cool, noting that this 
venture will concentrate on providing oil to Asia. Yet, all gasoline looks, 
feels, and smells similarly, which means that while ideologues will try to 
manipulate the markets, money will always win out.

Who's to know where the gasoline we put in our gas tank in 2008 will come from?

    The only thing that is certain is that because of
    geopolitics, it will take a lot more money to take oil out
    of the ground, send it somewhere to get refined, and
    eventually deliver it to gas stations.

Futures markets predict even higher prices ahead

The mainstream press has finally tuned into the fact that crude oil is selling 
above $70 per barrel, but they have yet to note that the December 2006 crude 
contract is now testing the $75 area.

Meanwhile, gasoline and heating oil prices remain above $2 and natural gas has 
made a bottom, and looks to be heading higher as well.

A look ahead in natural gas shows that the December Natural gas contract is 
trading near $11 while the May contract is working on the $8 mark. In other 
words traders are starting to place a significant premium for energy into the 
winter months, as they begin to speculate on potential supply disruptions.

* Dr. Joe Duarte is author of the book "Futures And Options For Dummies," and 
"Successful Energy Sector Investing."


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