Easwaran Kanason

Co - founder of NrgEdge
Last Updated: December 12, 2017
1 view
Business Trends
image

“In 2006, Rafael Ramírez, the energy minister, gave PDVSA workers a choice: Support President Hugo Chávez, or lose their jobs. The minister also said: "PDVSA is red [the color identified with Chávez's political party], red from top to bottom". Chávez defended Ramírez, saying that public workers should back the "revolution". He added that "PDVSA's workers are with this revolution, and those who aren't should go somewhere else. Go to Miami".

On paper, Venezuela has the largest proven oil reserves in the world, dwarfing even Saudi Arabia. That, however, hasn’t proven to be any blessing given the way that the country has been imploding since the death of Hugo Chavez. Facing financial meltdown and a plunging currency, the government of Nicolas Maduro is desperately holding on to power. State oil firm PDVSA (Petróleos de Venezuela, S.A. or Petroleum of Venezuela) used to be the country’s cash cow; now it is the main player in the ongoing Venezuelan drama.

That corruption is endemic to PDVSA is unsurprising, but the company was also once one of the better-run national oil companies, ranking alongside Petronas, Saudi Aramco and China’s CNPC in a 2007 Financial Times article titled ‘The New Seven Sisters’. This was largely because the company was allowed to operate independently, with the government content with a state-patronage arrangement. PDVSA flourished; establishing an American downstream arm Citgo, creating a Caribbean refining industry in Aruba and Curacao and shipping much of the heavy, sour crudes the US Gulf refining industry was based around.

Last week, Nicolas Maduro had the former heads of the oil ministry and PDVSA arrested on charges on corruption, installing Major General Manuel Quevedo – an energy neophyte – at the top of PDVSA. He then had Congress rubber stamp authority for him to review all oil contracts, service agreements and executive positions at PDVSA. Scores of PDVSA executives have been arrested – some on legitimate charges – and now Maduro wants to replace the plunging bolivar and circumvent US sanctions with a cryptocurrency called ‘petro’, backed by its vast oil reserves. Signs that the government is backed into a corner.

For the last year, PDVSA has been approaching international friends to seek lifelines from mounting debts. From Russia’s Rosneft, it gained some US$6 billion in cash for shares in Citgo and crude volumes, which allowed PDVSA to narrowly avoid default. From India to China, PDVSA is offering up its only asset – crude oil – in a desperate attempt to seek oil-for-cash loans. But there are more dangerous signs. Output is down to a 28-year low.  Key indicators – active rigs, exports, crude quality – are declining at an ‘alarming rate’. Venezuela’s crude imports – light crude used to dilute its heavy domestic crude like that in the Orinoco Belt – have plunged from a usual average of 100 kb/d to 40 kb/d in 1H17 to almost zero in November. Forget about selling oil, PDVSA can’t even produce oil at the moment. And it is fast running out of friends. Sinopec is suing over unpaid debts. Curacao is cutting PDVSA off from access to its refinery, turning to the Chinese. Even Russia is losing patience. The implosion of Venezuela and PDVSA would be a major shock to the market, and sadly, one that is looking more and more certain by the day.

Infographic: Venezuela’s oil industry at a glance 

  • Proven oil reserves: 297 billion barrels (as of Jan 2014) vs Saudi Arabia’s 268 billion barrels (unchanged since 1988)
  • Oil production: 2.3 mmb/d (October 2014) vs 1.85 mmb/d (October 2017)
  • Oil imports: 120 kb/d (October 2014) vs 25 kb/d (October 2017)
  • Oil exports: 2 mmb/d (October 2014) vs 1.5 mmb/d (October 2017)
  • Exports by destination: USA (40%), Caribbean (31%), China (10%), Other Asia (9%), Other World (10%)
  • Inflation rate: 5% (October 2014) vs 2000% (October 2017)
  • GDP growth: 2.5% (2014) vs -7.4% (est. 2017)

Read more:
PDVSA Venezuela Russia China America Hugo Chavez Nicolas Maduro
3
2 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

After 2020 decline, EIA expects energy-related CO2 emissions to increase in 2021 and 2022

In its January 2021 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) expects that energy-related carbon dioxide (CO2) emissions in the United States will increase in 2021. Economic growth and the lessening of pandemic-related restrictions result in more energy consumption and associated CO2 emissions. EIA expects total energy-related CO2 emissions to increase to 4.8 billion metric tons in 2021 and 4.9 billion metric tons in 2022.

U.S. energy-related CO2 emissions fell by an estimated 11% in 2020, largely because of reduced travel and other factors that have led to less energy consumption during the COVID-19 pandemic. In the short term, EIA forecasts rising CO2 emissions as a result of economic recovery from the COVID-19 pandemic, changes in fuel mix, and greater demand for residential electricity as colder winter weather leads to more heating demand in 2021.

EIA expects petroleum to account for about 46% of total U.S. energy-related CO2 emissions in 2021 and 47% of total energy-related CO2 emissions in 2022. Most of these emissions come from the transportation sector as a result of increased travel as the economy recovers from the effects of the COVID-19 pandemic.

EIA expects natural gas, which accounted for about 36% of total energy-related CO2 emissions in 2020, to decline to about 34% of total emissions in 2021. Emissions from natural gas are declining mainly because natural gas consumption is declining as natural gas prices increase relative to coal prices. EIA expects natural gas prices to increase by 98 cents per million British thermal units (MMBtu) in 2021 while prices for coal increase by 12 cents/MMBtu. As a result, EIA forecasts that natural gas’s share of total energy-related CO2 emissions will decline to 32% in 2022 as natural gas prices rise.

Coal accounted for 19% of total U.S. energy-related CO2 emissions in 2020. EIA expects this share of total emissions to rise to 21% in 2021 and 2022 as coal becomes more economical for use in electricity generation amid higher natural gas prices.

More information on EIA’s forecasts is available in the January Short-Term Energy Outlook.

January, 28 2021
LG XBOOM GO PL2 Review


The LG XBOOM Go PL2 is the smallest and least expensive offering in LG's latest speaker trio including larger PL7 and PL5 models. All three models share the same design language and all have Meridian-tuned audio.

LG XBOOM PL2 is portable, small and light enough to be transported easily and offers 10 hours of battery life so it can run almost for a full day without being plugged in.


Ratings: 7.2

+ IPX5 water resistant

+ Easy to setup and use

+ Meridian tuned sound

- No integrated voice assistant

- No EQ adjustments


The LG XBOOM PL2 has IPX5 splash proof rating, which means it can withstand being sprayed with water but should not be submerged. We ran it under a faucet for a few seconds and the speaker kept working as it should.


The PL2 is based on version 5.0 of the Bluetooth standard and the range is quite similar to that of other speakers in the same price range. It can remain connected to more than 25 feet indoors from the audio source.

January, 26 2021
The Growing Divergence In Energy

Two acquisitions in the energy sector were announced in the last week that illustrate the growing divergence in approaching the future of oil and gas between Europe and the USA. In France, Total announced that it had bought Fonroche Biogaz, the market leader in the production of renewable gas in France. In North America, ConocoPhillips completed its acquisition of Concho Resources, deepening the upstream major’s foothold into the lucrative Permian Basin and its shale riches. One is heading towards renewables, and the other is doubling down on conventional oil and gas.

What does this say about the direction of the energy industry?

Total’s move is unsurprising. Like almost all of its European peers operating in the oil and gas sector, Total has announced ambitious targets to become carbon-neutral by 2050. It is an ambition supported by the European population and pushed for by European governments, so in that sense, Total is following the wishes of its investors and stakeholders – just like BP, Shell, Repsol, Eni and others are doing. Fonroche Biogaz is therefore a canny acquisition. The company designs, builds and operates anaerobic digestion units that convert organic waste such as farming manure into biomethane to serve a gas feedstock for power generation. Fonroche Biogaz already has close to 500 GWh of installed capacity through seven power generation units with four in the pipeline. This feeds into Total’s recent moves to expand its renewable power generation capacity, with the stated intention of increasing the group’s biomethane capacity to 1.5 terawatts per hour (TWh) by 2025. Through this, Total vaults into a leading position within the renewable gas market in Europe, which is already active through affiliates such as Méthanergy, PitPoint and Clean Energy.

In parallel to this move, Total also announced that it has decided not to renew its membership in the American Petroleum Institute for 2021. Citing that it is only ‘partially aligned’ with the API on climate change issues in the past, Total has now decided that those positions have now ‘diverged’ particularly on rolling back methane emission regulations, carbon pricing and decarbonising transport. The French supermajor is not alone in its stance. BP, which has ditched the supermajor moniker in favour of turning itself into a clean energy giant, has also expressed reservations over the API’s stance over climate issues, and may very well choose to resign from the trade group as well. Other European upstream players might follow suit.

However, the core of the API will remain American energy firms. And the stance among these companies remains pro-oil and gas, despite shareholder pressure to bring climate issues and clean energy to the forefront. While the likes of ExxonMobil and Chevron have balanced significant investments into prolific shale patches in North America with public overtures to embrace renewables, no major US firm has made a public commitment to a carbon-neutral future as their European counterparts have. And so ConocoPhillips acquisition of Concho Resources, which boosts its value to some US$60 billion is not an outlier, but a preview of the ongoing consolidation happening in US shale as the free-for-all days give way to big boy acquisitions following the price-upheaval there since 2019.

That could change. In fact, it will change. The incoming Biden administration marks a significant break from the Trump administration’s embrace of oil and gas. Instead of opening of protected federal lands to exploration, especially in Alaska and sensitive coastal areas and loosening environmental regulations, the US will now pivot to putting climate change at the top of the agenda. Although political realities may water it down, the progressive faction of the Democrats are pushing for a Green New Deal embracing sustainability as the future for the US. Biden has already hinted that he may cancel the controversial and long-running Keystone XL pipeline via executive order on his first day in the office. His nominees for key positions including the Department of the Interior, Department of Energy, Environmental Protection Agency and Council on Environmental Quality suggest that there will be a major push on low-carbon and renewable initiatives, at least for the next 4 years. A pledge to reach net zero fossil fuel emissions from the power sector by 2035 has been mooted. More will come.

The landscape is changing. But the two approaches still apply, the aggressive acceleration adopted by European majors, and the slower movement favoured by US firms. Political changes in the USA might hasten the change, but it is unlikely that convergence will happen anytime soon. There is room in the world for both approaches for now, but the future seems inevitable. It just depends on how energy companies want to get there.

Market Outlook:

  • Crude price trading range: Brent – US$54-56/b, WTI – US$51-53/b
  • Global crude oil benchmarks retreated slightly, as concerns of rising supplies and coronavirus spread impact consumption anticipations; in particular, new Covid-19 outbreaks in key countries such as Japan and China are menacing demand
  • Mapped against the new OPEC+ supply quotas, there is a risk that demand will retreat more than anticipated, weakening prices; however, a leaking pipeline in Libya has reduced oil output there by about 200,000 b/d, which could provide some price support
  • However, the longer-term prognosis remains healthier for oil prices factoring out these short-term concerns; the US EIA has raised its predicted average prices for Brent and WTI to US$52.70 and US$49.70 for the whole of 2021

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free.

No alt text provided for this image

Submit Your Details to Download Your Copy Today!

January, 22 2021