US government reviews oil supply relationship with Venezuela

VOLUME 83 / NUMBER 9 / THURSDAY, JANUARY 13, 2005 | Caracas - General Accountability Office preparing study on reliability. The US is currently reviewing Venezuela’s position as a leading oil provider following damage to its reputation as a reliable supplier during the presidency of Hugo Chavez, according to documents obtained by Platts.

Sen. Richard Lugar (Republican-Indiana), chairman of the Committee on Foreign Relations, has ordered the Government Accountability Office (GAO) to prepare a study on all aspects of the Venezuelan oil industry and the impact any supply interruption may have on the US. He also called for alternative oil supplies to be investigated as part of a contingency plan.

In a letter dated Nov 29, 2004, and addressed to the comptroller general, Lugar stated: “The prospects of achieving the reliable energy relationship with Venezuela that this country has had for decades has diminished, particularly over the last two years.” He added contingency plans should be in place in case of a supply disruption from Venezuela, “as this could have serious consequences for our nation’s security.”

I thought that this subsection was interesting:

US oil majors are also disgruntled over Venezuela’s surprise decision last October to raise royalties on four extra-heavy crude upgrading projects. Populist Chavez caused a stir last year when he vowed “not one drop” of Venezuelan oil would reach the US in the event of military aggression against him. Venezuela, the world’s fifth-largest oil exporter and a key member of OPEC, has since sought to diversify its client base. Chavez has offered discounted oil to several countries in Latin America and the Caribbean, and promised to help meet China’s growing energy needs during an official visit to Beijing over Christmas.
China competition

Venezuela is now studying a pipeline across Panama that would give it access to Pacific ports. However, foreign minister Ali Rodriguez said last week any increase in shipments to countries like China would not affect supplies to the US, as Venezuela plans to increase output by 1.5-mil b/d over the next five years.
State-owned PDVSA says it is currently pumping 3.1-mil b/d, of which 2.7-mil b/d is exported. Industry observers doubt these figures and put total output closer to 2.6-mil b/d.
Michael Gavin, head of Latin American Research at UBS Warburg, said he doubted anything would come from the GAO review. “There’s not much they can do to replace the country’s third- or fourth-largest oil supplier. There aren’t many plausible alternatives,” Gavin said in an interview. News of the study comes the same week as a visit to Venezuela by three US senators, who included a meeting with Chavez in their timetable.
Sen. Christopher Dodd (Democrat-Connecticut), also a member of the Foreign Relations Committee, stressed the mutual dependence of the relationship with Caracas Jan 10. He said he was optimistic a new page could be turned in US-Venezuelan relations, pointing out the US receives 13% of its oil imports from Venezuela, while Venezuela counts on the US for most of its exports.

Time to promote exploration in our own territories and developing the one we have more fully. Time to look into Mexican oil and strengthening our ties with that country.

The Mexicans will only supply us oil as long as we continue to ignore the illegal immigration of their Aztlan marxists.

We need to seriously focus more on energy independence and self-reliance, period.
That includes development of ALL of our own energy natural resource: oil, coal, nuclear, hydro, tar sands, and yes, even wind and solar where practical.
We also need to reduce petro-dependency in the sector where we have the greatest consumption: transportation. The most expedient means of accomplishing this is by constructing electricly powered mass-transit systems in our nation's most densely populated regions and urban areas.

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