Economy
Financial limitations are leading the Venezuelan oil industry to seek loans to continue funding several projects.

Officials from the state-run oil company Petróleos de Venezuela (Pdvsa) estimated its budget based on a USD 60 price of oil, but the price of the local basket of oil is USD 36.75. Therefore, there is an income gap. Minister of Energy and Petroleum Rafael Ramírez is visiting Japan and, beyond the signing of agreements, Venezuela is starting to negotiate lines of credit, some officials told Reuters.

The Venezuelan oil industry has been granted loans by Japanese banks and Pdvsa is waiting for more loans. Eulogio del Pino, Pdvsa’s vice president for production and exploration, told Dow Jones that the state oil company is evaluating financing between USD 3 billion and USD 4 billion with Chinese and Japanese banks, but it will all depend of what happens with oil prices.

In August 2007, Japanese financial institutions granted a USD 3.5 billion loan, which was paid with the supply of crude oil.

Del Pino gave no further details on the financial plans of Venezuela’s oil company. At the beginning of this quarter, oil industry executives said they were discussing an increase of a credit line with BNP Paribas for USD 1.1 billion. However, officials gave no further details.

The search of funding goes hand in hand with plans to encourage investments. Japan and Venezuela signed an energy cooperation agreement, under which the Asian nations would increase their investments in Venezuela.

During his visit to Tokyo, Rafael Ramírez executed an agreement with Japanese Economy, Trade and Industry Minister Toshihiro Nikai. The memorandum of understanding does not specify the projects, although the Asian country is aiming to participate in the development of oil and gas blocks in Venezuela, including some areas in the Orinoco Oil Belt.

Oil revision
The decrease in revenues is forcing the industry to undertake a comprehensive review of its projects.

Del Pino said that Pdvsa will delay the completion of the Magna Reserva Project (the heavy oil reserve quantification project meant to quantify the crude deposits in the Orinoco Oil Belt). He said that completion of the project could take other six months in 2010. The original completion date was October of 2009.

Other plans of the oil industry are also affected by the fluctuations of oil prices, including the process to open the Carabobo field in the Orinoco Oil Belt. Del Pino stated said that the dimensions of the project could be adjusted. He added that the companies involved in the bidding process have requested deferment of deadlines. "The oil companies have had some problems to obtain loans." However, Del Pino said that the Ministry of Energy had the last word in changing the schedule.

Pdvsa’s obligations
Declining revenues have also undermined Pdvsa’s capacity to honor its obligations. The holding’s financial statements at the end of the third quarter of 2008 showed that the company debt amounts to USD 7.8 billion.

Pdvsa began to repay obligations some weeks ago and, according to oil sources, it has paid 94 percent of the debt to contractors, for a total of USD 1 billion.

Translated by Gerardo Cárdenas