Caracas Daily Journal (Jeremy Morgan): While Finance Minister Ali Rodriguez Araque looks to Petroleos de Venezuela (PDVSA) to finance a large slice of increased state spending under his 2009 budget, signs are that a sense of austerity has broken through at the state oil corporation.
PDVSA has put on hold refinery plans in Nicaragua, Ecuador and the Dominican Republic. In the process, PDVSA will avoid, at least for now, footing the bulk of a bill running into billions of dollars.
Officials at PDVSA say priority will instead go to refineries in Venezuela. This makes sense, given that, for all its oil wealth, Venezuela imports large quantities of petroleum products it doesn't produce.
The long shadow cast by global financial turmoil appears to have nudged PDVSA into an exercise in good housekeeping at a time of mounting uncertainty. Even as its earnings outlook dims with falling world oil prices, President Hugo Chavez will likely go on using PDVSA for off-budget funding of his pet welfare programs or "missions." Given that these are sacred cows, PDVSA had to look elsewhere to cut spending. The biggest casualty of the cuts seems to be Nicaragua, even though President Daniel Ortega is one of Chavez' closest chums in the region.
PDVSA was going to invest $4.419 billion on 'The Supreme Dream of Simon Bolivar' -- a refinery in Nicaragua to process 150,000 barrels a day (bpd) of oil supplied by Venezuela. The project was officially inaugurated by Chavez earlier this year but is now on indefinite hold.
So, too, is the Manabi project in Ecuador, where President Rafael Correa is also a Chavez ally. However, in this case, plans hadn't even got to feasibility studies -- a key stage in deciding how much, and if, PDVSA would invest.
Third on the hit list was a refinery acquired by the Dominican Republic from Shell, although talk was of bringing in PDVSA as part payment for that country's debts for low-cost oil imports from Venezuela under the Chavez-driven Petrocaribe accord.
Senior officials at PDVSA say no plans are afoot to cut deliveries to Petrocaribe countries, currently running at a modest 80,000 bpd, a little over the amount set when the agreement took effect in 2005. Petrocaribe is deemed to have saved customer countries $921 million on their oil imports. Total billing under the discount system up to June this year is put at $4.7 billion, of which around $2 billion is said to have been "financed" -- posing questions about the rest.
Hard-headedness at PDVSA doesn't apply to Cuba, where ailing Fidel Castro has looked for years like a mentor of father figure proportions for Chavez. The Cienfuegos plan for a refinery with capacity of 65,000 bpd rising to an eventual 150,000 ploughs on at a cost to PDVSA of $3.662 billion.
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