Oil & Gas - Venezuela - Social investments burden on PDVSA performance - analyst

By James Fowler?/?Business News Americas

Vote

0 votes

Related content

Companies / Entities

Keywords

Government pressure to invest in social projects such as housing and healthcare are a burden on Venezuela's state oil company PDVSA, according to Gianna Bern, president of Chicago-based consultancy Brookshire Advisory and Research.

"For many years there has always been competing uses for funds within PDVSA. Social needs [such as] housing and healthcare are almost the albatross that they have to continuously contend with," Bern told BNamericas.

PDVSA has taken on an increasingly important role as cash cow for the Ch?vez regime in recent years. According to the firm's 2Q11 financials, PDVSA's contributions to its non-core business projects reached US$13.2bn in2011 compared to only US$3bn over the same period in 2010.

Expenses included a US$2.3bn contribution to the Gran Vivienda social housing project launched by Venezuela's government, and a US$4.6bn donation to the government administrated fund Fonden, which is used by authorities to finance infrastructure projects.

An additional US$6.2bn is listed simply as social development contributions.

"Rather than invest in production and infrastructure and growing initiatives, social causes, housing and healthcare and social need have always been competing for those same funds. As a result PDVSA has not kept up, not been able to maintain production growth initiatives, and improvements to their refining infrastructure, the way other global oil producers do," Bern said.

Over the last decade the country's oil production has fallen from an average of 3.5Mb/d to present levels of 2.7Mb/d. Experts insist that the government's goal of achieving output in excess of 4Mb/d by 2015 is unlikely unless investment is ramped up considerably.

According to PDVSA's financial statement, income hit US$35bn and US$64.1bn for the 2Q11 and 2H11 periods, up 38.7% and 36.7% respectively compared to the year-ago periods, largely thanks to the increase in international oil prices.

Net income in 2Q11 reached US$1.47bn and US$4.18bn for 1H11, up 17.5% and 33.2% year-on-year.

OPEC

In related news, international oil cartel OPEC decided on Wednesday to up its global production ceiling to 30Mb/d.

The move comes despite protests from Venezuelan energy minister Rafael Ram?rez, who spoke out publicly before the meeting against any increase in production targets.

Why settle for this one story when you can access all our news? Sign up here for your free 15-day trial.

Source: http://www.bnamericas.com/news/oilandgas/social-investments-burden-on-pdvsa-performance-analyst

barbara walters government shutdown sofia vergara jacksonville jaguars jacksonville jaguars iraq war over iraq war over