Mobile Edition
Print
Get the Mag
Weekly UpdatesThe stoppage and sabotage that Petroleos de Venezuela (PDVSA) faced in December 2002 and January 2003 was unprecedented in the world oil industry in terms of its political motivations and its serious socio-economic consequences. Since then, PDVSA has successfully overcome that crisis in an effort that is regarded as epic both at home and abroad. The company is now concentrating its efforts on consolidating the achievements attained, with the purpose of strengthening its national and international image as an ethical, competitive, and sustainable enterprise. The aim of its Business Plan for 20042009 is to add value to the blessing of the country's oil and gas reserves, and to support the development of Venezuela with a $37-billion medium term investment plan. With firm steps, PDVSA is assuming the challenges of fulfilling the hydrocarbon needs of the 21st century.
Ali Rodriguez Araque, president of PDVSA, points out in this interview how the strengthened Venezuelan corporation regains its position in the international energy markets.
The operations of PDVSA were seriously affected a year and a half ago. What is the current situation? It's normal. Yes, the company's production fell from 2.9 million barrels per day in November 2002 to only 25,000 barrels a day by the end of December--but then recovered quickly to normal production levels of around 3.3 million barrels a day at the close of 2003. The effort made in the refining area also resulted in restoring operations, in terms of quality, safety and volumes of production: 1 million barrels a day in Venezuela and 1.7 million barrels a day in the international system in 2003.
Today we can tell the world that we have a company that is strengthened, optimistic and with challenging plans to consolidate its renewed business objectives. This is not just an internal opinion, it has been validated officially and unofficially by the diverse organizations interested in Venezuela as a reliable and secure supplier of energy, and in PDVSA as a company of unquestionable solvency.
What has happened with PDVSA's exports?
The average for oil exports in 2003 was 2.1 million barrels a day. Currently crude and products are being exported normally to traditional markets, fulfilling our commitments to international clients. Likewise, the partners and subsidiaries of PDVSA in the United States and other parts of the world are receiving the volumes agreed to.
How was the company's financial performance in 2003?
Despite the adverse and anti-institutional context, last year PDVSA had global sales of $46 billion, with a preliminary net profit of $3.8 billion. Our total dividend to shareholders was $10 billion. The outlay for investments was almost $3 billion, going mainly to the oil and gas areas. From an operational point of view, the country's proven oil reserves were around 78 billion barrels, while production capacity reached 3.582 million barrels a day and processing capacity of derivatives was held at 3.3 million barrels a day. Exports reached 2.1 million barrels a day of crude and products (73% of that in crude). Important progress was made in core projects in the areas of natural gas and oil, as well as in terms of Venezuela's social development.
Is PDVSA's production level sustainable? Will you remain tied to the OPEC production quota scheme?
Within the framework of the Business Plan for 2004-2009, PDVSA is taking steps aimed at guaranteeing the capacity and adequate production levels to fulfill our production quota with the market at all times. In line with the policy of the Government of the Bolivarian Republic of Venezuela, PDVSA reiterates its commitment to remain within the quota set for the country by OPEC. Our policy is to contribute to the equilibrium of the international market and to the stability of prices, to benefit both producer and consumer nations. Speaking of sustainability, it is important to point out that reinsurance field leaders American International Group (AIG) of the United States, together with British AON and Willis Limited, recently judged PDVSA's operations in the country as being undertaken with a high degree of safety.
Does PDVSA have the qualified personnel needed to carry out this Business Plan?
We know that one of the things that might concern those interested in Venezuela and PDVSA is the subject of human resources. Let me take this opportunity to emphasize that PDVSA, after almost half of its workforce abandoned the job, still has enough intellectual capital to carry out its activities in the value chain of the industry in an efficient and effective manner. Nevertheless, conscious of the challenges and growing demands, right now we are still putting emphasis on building up the profile of our personnel and restructuring some processes to guarantee even more transparency, productivity, and value added in general.
Where is PDVSA headed in the medium term?
The Business Plan 2004-2009 is oriented toward empowering and giving cohesion to the company's human talent. Also, our aim is to consolidate the accomplishments obtained during 2003 and to maximize the value of our natural resources of oil and gas, promoting Venezuela's endogenous development, and reaffirming its role as an ethical, competitive, and sustainable supplier.
The estimated investments, of about $37 billion, are focused on exploration and production of crude oil and gas. We have special interest in channeling the enthusiasm of small and medium sized foreign companies so, in association with Venezuelan companies, they can become part of the supply chain of goods and services that support the hydrocarbons industry in Venezuela and the rest of the world.
What role does PDVSA have, as a company, within the Venezuelan State?
Our aim in PDVSA is to give value to our resources; that is, use all our capacity to produce and multiply wealth to make the oil industry an instrument of sustained development and welfare for the country, and for the world markets--where we reaffirm our spirit of cooperation and energy complementation. For Venezuela, as a producer country, it is crucial to strengthen our contribution to the efforts to satisfy the world's growing demand for fuel.
PLENTY OF FINANCIAL HEALTH
What was the company's greatest financial accomplishment last year?
A year and a half ago, PDVSA lost about 85% of its staff in the area of Finance. Limited by that circumstance, we were given the goal of completely rebuilding the financial health of the corporation with a team headed by Jose Gregorio Morales, Chief Financial Officer of PDVSA. Without doubt, the main achievement has been to reach that goal, within the guidelines set by the Ministry of Energy and Mines and with the synergy and participation of the Ministry of Finance, the Central Bank of Venezuela, and other institutions of the national and international financial community--which have given us, furthermore, valuable recognition.
How would you define PDVSA's financial health today?
PDVSA has an extremely solid financial structure that compares favorably with the leading companies in the sector. In 2003 the company reduced its debt significantly by paying off $2.2 billion, of which $1.8 billion was amortization. The rest was interest. This is the highest level of amortization ever achieved in the history of PDVSA. The generation of liquidity is so high that we have more than $1.6 billion in cash in the Central Bank of Venezuela, after having honored all our commitments. This cash has been the base of the current social programs, without affecting the operations and investments of the Corporation. Additionally, PDVSA has a wide base of assets around the world, oil reserves that will last more than 81 years, and a strong cash flow that gives the company autonomy to grow on its own. As of 31 December 2003, our total debt was about $6.9 billion, with estimated payments of about $725 million due in 2004. As of 31 March 2004, we had paid $334 million, of which $210 million was amortization, 29% of the total estimated in 2004. Definitely, PDVSA has plenty of financial health.
What are the headline numbers and targets for the Plan 2004-2009 in financial terms?
The production goal is 5 million barrels per day by 2009 and investment of $37 billion. Of that, third-party financing will total about $10 billion--bringing new challenges such as obtaining financing under terms that reflect the financial strength of the Company. To that end, we are working with the ratings agencies so that the opinions they render will be in line with what we consider to he the strengths of PDVSA. As a matter of fact, Moody's Investor Services, one of the leading US credit rating agencies, recognized in a report released in April 2004 that PDVSA had again reached the production levels averaged prior to the institutional crisis. This sends a positive signal to the world's financial markets, while once again confirming PDVSA's financial health and standing, as well as the Corporation's sustainability.
Does PDVSA have good access to the financial markets?
The financial markets currently have a strong appetite for high-yield paper, and investors have told us that in recent rounds of business meetings. The main attraction of PDVSA is its solid financial structure (low level of debt and high generation of liquidity) and a broad asset base, which guarantees access to any international financial markets. In 2003 PDVSA raised $133 million in financing at highly favorable rates. Additionally, in 2004 we have received 122 million dollars in loans from the Japan Bank for International Cooperation (JBIC) for our VALCOR project in the Puerto La Cruz Refinery, located in Eastern Venezuela. The Corporation recognizes and values the interest of financial institutions from Venezuela and also the United States, Japan and Europe in helping maximize the use of funding and to guarantee, overall, the financial validity of the Business Plan.
FEED