TAXATION SYSTEM, MACROECONOMIC AND ENERGY · PDF fileEmbassy of the Bolivarian Republic of...

Embassy of the Bolivarian Republic of Venezuela

Venezuela Energy OutlookVenezuela Energy Outlook

TAXATION SYSTEM, MACROECONOMIC AND TAXATION SYSTEM, MACROECONOMIC AND ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE ENERGY OUTLOOK, INDUSTRIAL AND EXCHANGE POLICY IN VENEZUELA POLICY IN VENEZUELA

Bolivarian HallBolivarian HallWashington, DCWashington, DCOctober 31October 31stst, 2006, 2006

Embassy of the BolivarianEmbassy of the BolivarianRepublic of VenezuelaRepublic of Venezuela


0

20,000

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120,000

1985

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Dai

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)

0

20,000

40,000

60,000

80,000

100,000

120,000

Non OPEC Crude Oil Non-OPEC NGL

Non-OPEC Oil Sands 1.1% Growth

1.8% Growth 2.4% Growth

The Growing Differential Between Non-OPEC Supply Capacity and

Global Demand

Growing Gap Between Global Demand and Non-OPEC Supply

Source: PFC Energy, 2006


•• Increase and monetize VenezuelaIncrease and monetize Venezuela’’s reserve bases reserve base

•• Enhance VenezuelaEnhance Venezuela’’s capabilities in Production and Refinings capabilities in Production and Refining

•• Convert the Orinoco Belt into a light crude oil reservoirConvert the Orinoco Belt into a light crude oil reservoir

•• Be the #1 oil products exporter in the Western HemisphereBe the #1 oil products exporter in the Western Hemisphere

•• Use Natural Gas first to satisfy the domestic market and Use Natural Gas first to satisfy the domestic market and second to be an effective tool for energy regional integrationsecond to be an effective tool for energy regional integration

•• Enhance infrastructure capabilities and connectivityEnhance infrastructure capabilities and connectivity

•• Enhance human talent in key core businessesEnhance human talent in key core businesses

•• Speed up market diversification to emerging countriesSpeed up market diversification to emerging countries

•• Diversify supply base of technology, goods & servicesDiversify supply base of technology, goods & services

•• Increase local content and endogenous development in Increase local content and endogenous development in operating areasoperating areas

Venezuela Oil & Gas Business ObjectivesVenezuela Oil & Gas Business Objectives


Oil World Reserves

Source: Oil & Gas Journal, December 2005

Venezuela, including the Orinoco Belt, is the country with the world’s largest liquid hydrocarbon reserves (316 billion bbl)

Latin America (excluding Venezuela) 2%

Middle East & Iran49%

Venezuela21%

Canada 13%

Africa 7%Europa 7%

Asia Pacific 2%

Total World Reserves 1,527 Billion Barrels

80

236

316

Proved

Orinoco Belt (in process of certification)

Venezuelammmbbl

Embassy of the Bolivarian Republic of Venezuela Oil Reserves Variation

Source: PDVSA’s 20-F and Audited Report

Production

New Reserves2001 2004

- 3,300

+ 6,100

77,783 80,582

Million barrels

Reserves have increased a net 3.6%

Heavy22%

X- Heavy48%

Heavy22%

X- Heavy45%

Medium17%

Medium15%

Condensate/Light16%

Condensate/Light15%

-New Discoveries-Revisions-Extension


Natural Gas Reserves

Source: Oil & Gas Journal, December, 2005

Venezuela 35049%

North America 24934%Latin America

116 17%

Western Hemisphere Reserves715 Trillion Cubic Feet (TCF)

Venezuela has the potential to become the 4th largest country in gas reserves and the 1st country

in gas reserves in the western hemisphere

39%

Qatar 91114%

Iran 971 15%

Russia 1680 27% Asia Pacific

West EuropeNorth AmericaAfricaRest of Middle EastLatin America

World Gas Reserves6,312 Trillion Cubit Feet (TCF)

Venezuela6%

151 - 26.1 - Proved 152 - 34.3 - Estimated (Offshore)350 - 60.4

TCF mmmboe

Venezuela


Venezuela’s Total Hydrocarbon Production

Source: 2000-2004 PDVSA’s 20-F, 2005 Est.

0.0

1.0

2.0

3.0

4.0

5.0

2000 2001 2002 2003 2004 2005

Natural Gas

LPG & Condensates

Light

Medium

Heavy & XH(include 3rd party)

Third Party Crudes

MMBPDOE

4.1 4.23.8

3.64.0 4.1

16%

5%

19%

24%

25%

11%

Note: 1 barrel of Oil Equivalent (OE) = 5,800 cubic feet of natural gas

Venezuela’s production, including natural gas, exceeds 4 million bpd oil equivalent


Supply & Disposition of Liquid Hydrocarbons (mbd)

2004 2005PDVSA 3rd Parties Vnzla PDVSA 3rd Parties Vnzla

Supply (Production of Liquid Hidrocarbons)PDVSA's Own Production 2,066 - 2,066 2,109 - 2,109 Operating Service Agreements 519 - 519 502 - 502 Extra-heavy Crude (less 8 API) 38 - 38 61 - 61 Sub-total PDVSA's crude 2,623 - 2,623 2,672 - 2,672 Orinoco Belt Associations (% PDVSA's Equity crude):

Petrozuata (49.9%) 62 62 124 60 60 120 PDVSA Cerro Negro (41.67%) 50 70 120 51 71 122 PDVSA Sincor (38%) 66 109 175 73 120 193 Ameriven / Corpoguanipa (30%) 32 74 106 50 117 167

Sub-total Orinoco Belt Association 210 315 525 234 368 602 LPG 166 - 166 165 - 165 Total Production of Liquid Hidrocarbons 2,999 315 3,314 3,071 368 3,439

Disposition (Exports and Local Market)Crude Own Production 1,617 - 1,617 1,641 - 1,641 Bitor (Orimulsion / Fuel Oil) 53 - 53 86 - 86 Refined Products 610 - 610 594 - 594 LPG 49 - 49 56 - 56 Sub-total PDVSA's crude 2,329 - 2,329 2,377 - 2,377 Orinoco Belt Associations:

Petrozuata 40 40 80 45 45 90 PDVSA Cerro Negro 51 71 122 53 76 129 PDVSA Sincor 76 123 199 81 131 212 Ameriven / Corpoguanipa 31 73 104 56 129 185

Sub-total Orinoco Belt Association 198 307 505 235 381 616 Total Exports 2,527 307 2,834 2,612 381 2,993 Local Market Consumption 485 - 485 506 - 506 Total Exports and Local Market 3,012 307 3,319 3,118 381 3,499

Inventory change & volume net gains / (losses) 13 (8) 5 47 13 60


PDVSA’s 2005 Crude's and Products Flow (mbd)

Refined Product

Sales

Crude Sales

Crude & LPG

Production

Refined Product

Purchases (Wholesale)

Crude Spot Purchases

Refineries Abroad

Crude Exports

Local Refineries

Local Market

PDVSA’s Supply Disposition

Product Exports

Consolidated Sales

506

650

1,831

1,204

2,628

1,156

1,472

627

International Activity


Venezuela’s Crude Oil Production

Source: 2000-2005 PODE, 2006-2012 PDVSA

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Risk Sharing Exploration

New JV & Projects

Own Operations

Existing Joint Ventures

Operating Joint Partnerships

3.2 3.33.0

2.83.1

3.3 3.43.8

4.1

4.64.9

5.55.8

MMBPD


CAPEX: 75.735CAPEX: 75.735 OPEX: 48.224OPEX: 48.224

55.928

19.807

39.781

8.443

PDVSA 3rd Parties

Total: 123.959

Business Plan 2006-2012 (billion US$)


CAPEXCAPEX

16,699

609 583

6,932

2,444

14,277615

3,562

93161

8.3961.557

Own Efforts PDVSA GasAssociations Faja Mixed CompaniesNew Businesses Faja Risk AgreementsOffshore ExplorationRefining Distribution VenezuelaDeltaven PDV Marina

OPEXOPEX

3,010 109

6,146

1089595

2,89116,953

680552

9252,194

4637

Own Efforts PDVSA GasAssociations Faja New Businesses FajaMixed Companies Risk AgreementsOffshore ExplorationRefining Distribution VenezuelaDeltaven PDV Marina

Total: 95.709Total: 95.709

55.92855.928 39.78139.781

Expenditures of PDVSA Expenditures of PDVSA (billion US$)(billion US$)


CAPEXCAPEX

1,882

5.703

1.575

8.067

1,496 1.083

Associations Faja New Businesses FajaMixed Companies Risk AgreementsOffshore Refining

19.80719.807OPEXOPEX8.4438.443

Total: 28.250Total: 28.250

3,459

685

8892,892

519

Associations Faja New Businesses FajaMixed Companies Risk AgreementsOffshore

Expenditures Third Parties Expenditures Third Parties (billion US$)(billion US$)


Summary: Capital Investment Plan 2006 - 2012

$MMM Est.

2005 2006 2007 2008 2009 2010 2011 2012 Total

E&P Exploration 0.2 0.4 0.4 0.5 0.4 0.3 0.2 0.2 2.4

Production 1.9 2.5 2.6 2.4 2.4 2.5 2.2 2.1 16.7

Operating Joint Partnership's 0.6 0.7 0.7 0.5 0.5 0.4 0.2 0.1 3.1

Orinoco Belt 0.0 0.5 0.3 1.9 4.9 3.9 4.0 3.5 19.0

Profit Sharing Agreements 0.1 0.4 0.3 0.2 0.4 0.4 0.0 0.0 1.7

Gas 0.7 2.3 2.5 2.2 2.5 2.2 2.5 2.0 16.2

E&P Total 3.5 6.7 6.8 7.7 11.1 9.6 9.2 8.0 59.0

Refining 0.2 0.6 3.4 3.7 3.8 3.3 1.2 0.3 16.3

Others 0.4 0.2 0.2 0.2 0.3 0.6 0.5 0.0 2.1

TOTAL 4.1 7.5 10.4 11.6 15.3 13.5 10.8 8.3 77.4

Medium Term Plan 2006-2012


Production Schemes

PDVSA

Pro

duct

ion

Sch

emes

Unconventional oil & gas drilling (fracture stimulationand horizontal drilling).

Secondary recoveryWater & gas injection

Slant drilling/horizontalDrilling, commingle wells

Private participant involvedOn offshore drilling and production by special rigs (jackups, drill ships, semi submersible)

Traditional Areas

Onshore

PDVSA60 – 80%

Private Participation (operates)20 – 40%

Offshore

Third PartiesOperate100%

Own Operations Operating Joint Partnership Private

PDVSA51%

Private Participation (operates)

49%

Traditional Areas Orinoco Belt

Key Drivers:


PDVSA FINANCIAL STATEMENTIncome Statement (US $ million)

Source: PDVSA Audited

Audited

2003 2004 2005

International Sales 44,178 60,972 81,105

Venezuela Sales 961 1,227 1,408

Other Income 1,450 2,558 3,217

Total Income 46,589 64,757 85,730

Crude & Product Purchases 21,016 24,649 32,979

Exploration & Production Expenses 9,400 13,492 14,763

Depreciation & Amortization 3,042 3,082 3,334

Royalties 6,428 9,247 13,318

Interest Expenses 684 456 190

Other Expenses, Net 1,175 1,764 1,937

Total Costs and Expenses 41,745 52,690 66,521

Earnings before Taxes 4,844 12,067 19,209

Social Development Expenses 249 1,242 6,909

Income Taxes 1,318 5,419 5,817

Net Income 3,277 5,406 6,483

Embassy of the Bolivarian Republic of Venezuela Cash Contribution’s to the Nation

11.89.7 10.0

16.5

24.627.5

23.0

32.6

38.9

19.5

0

5

10

15

20

25

30

35

40

45

2001 2002 2003 2004 2005

Foreign Currency Revenues (cash)

FONDENFONDESPASocial ProgramsDividends

Royalties

Income Tax

$ billion

Increase of contributions to the nation has been in proportion to windfall revenues


Source : Lehman Brothers/ PDVSA

% Exploration Succeed (2003 – 2004)

Venezuela 70 %

% Exploration Succeed(1997 – 2003)

World

12 %

Venezuela

46 %

Exploration Indicators

Costs of Exploration per barrel / Discovered Reserves

1.04

1993 1995 1997 1999 2001 20030.0

0.5

1.0

1.5

2.0

2.5

3.0

$/b

l

Incl. revisions

Embassy of the Bolivarian Republic of Venezuela Exploration Objective 2005 - 2012

Production

New Reserves2005 2012

- 12,920

+ 15,847

81,307 84,230

Million barrels

Reserves will increase a net 3.6%

-Exploration (8,600)-Revisions-Extension

X- Heavy48%

Heavy22%Medium

15.5%

Condensate/Light14.5%

Embassy of the Bolivarian Republic of Venezuela Exploration – Capital Investment

Plan 2006 - 2012

216

389

409

505

413

284

228

0

100

200

300

400

500

600

2006 2007 2008 2009 2010 2011 2012

$ Million

-515 Km2 of 2D seismic lines-21,530 Km2 of 3D seismic lines-219 exploratory wells

Main Activities


Remaining Estimated Reserves 1,04477%

To Be Quantified 236

17%

Proved 392.9%

Proved Developed 4.00.3%

1,360 Billion Barrels Estimated

MACHETE

R í o O r i n o c oBOYACA JUNIN

CARABOBO

AYACUCHO

Total Area Orinoco Belt 55,314 Km2

Orinoco Belt

Only 0.3% of the Orinoco Belt has been developed

E&P: Quantification of Reserves


Certification of Crude Oil Reserves by Independent Parties

SPAINIRAN

Rio Orinoco

N

5522

33 44

1155 PETROZUATA

San Cristobal

SINCOR

11

8899

1122

AMERIVEN 44

33

55 6677

11OCN

BITOR 44

22

PAR

QU

E N

ACIO

NAL

AGU

AR

O G

UAR

IQU

ITO

33

77

33

66

55

22 4444

11

66 33

77

77

33

44

11

Petrozuata

BRAZIL

INDIA

RUSSIA

RUSSIA

CHINA


0

200

400

600

800

1000

1200

1400

2005 2006 2007 2008 2009 2010 2011 2012

Initial Production

New Development I

New Development II

Optimization637687

807

1,207

MBPD

1,138

Orinoco Belt Production Profile

Norway

France

SINCOR PETROZUATA

USA

HAMACA

USAUK

CERRO NEGRO

Current Production – Strategic Associations


STAGESSTAGES 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T

Data Package Preparation

20052005 20062006 20072007 20082008

- PDVSA stand-aloneCarabobo(3 Blocks)

Ayacucho(5 Blocks)

Junin(6 Blocks)

Quantification and Certification of Reserves

- PDVSA & Companies with Mou´sexecuted between governments

- Service Companies

Boy

acá

(6 B

lock

s)

Carabobo 1Junin sur

Ayacucho 7Junin 33

Junin 77

Ayacucho 3Junin 44

Quantification and Certification ProjectQuantification and Certification Projectof Orinoco Oil Belt Reservesof Orinoco Oil Belt Reserves


Canadian Tar Sands vs. Venezuelan FAJA

Production Process: Surface Mining

Estimated Production Cost

US$ 25 / Barrel*+

Upgrading cost

Estimated Recoverable Reserves

170 Bbls

*Source: Wall Street Journal: As Prices Surge, Oil Giants Turn Sludge Into Gold 03.27.2006

Production Process: Oil Drilling

Estimated Production CostProduction:

< US$ 1 / Barrel

Estimated Recoverable Reserves

236 Bbls

Upgrading:US$ 4 / Barrel

Description: Through a complex state of the art mining and production process, this bituminous sand is

transformed into Heavy Petroleum

Description: 9°API Crude oil produced under available technology, that is

upgraded into 32°API Crude

ROI=10% @ $40/barrelROI=10% @ $40/barrel ROI>200% @ $40/barrelROI>200% @ $40/barrel

Embassy of the Bolivarian Republic of Venezuela Production – Traditional Areas


4.03.8

3.5

3.1

2.72.5

2.32.22.11.9

2.2

2.62.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

MMBPD Business Plan 2006-2012

Embassy of the Bolivarian Republic of Venezuela Own Operations – Capital Investment

Plan 2006-2012


2.12.2

2.52.42.4

2.6

2.4

1.0

1.5

2.0

2.5

3.0

2006 2007 2008 2009 2010 2011 2012

$MMM

Total $16.7Total $16.7

Embassy of the Bolivarian Republic of Venezuela Production – Traditional Areas

0

250

500

750

1000

1250

1500

2006 2007 2008 2009 2010 2011 2012020406080100120140160180200

DRILL Ra/Rc R/Y

# WELLSTOTAL WELLSNew:Ra/Rc:

RIGS/YEAR

65908117

DRILLING – RA/RC - RIGS/YEAR

Embassy of the Bolivarian Republic of Venezuela Infrastructure – Own Operations

Capacity of Installed Infrastructure

● Transportation network: 3,113 Km of crude oil pipeline (28).Throughput Capacity 6,340 mbd

3,781 Km of gas pipelines Throughput Capacity 2,748

● Storage capacity: 30 mmbbl (tank farms and shipping terminals). 50 mmbbl in storage tanks located in the Caribbean (Bonaire, the Bahamas & Curacao)

● Terminal Facilities: 9 maritime ports and 2 river ports

Embassy of the Bolivarian Republic of Venezuela Short Term Annual Training Programs

(Fast Track)AGREEMENTS

•Abalt Solution Inc

•Canadian Petroleum Institute

•Hidroex (Hydrocarbons Specialists)

•Network of Excellent in Training

•T.H. Hill Associates Inc.

•Houston University

•Well Control School de Venezuela

2005 - 2008

IFP MSc in Geosciences & Integrated Studies 117

Instituto Superior de Energía: MSc in E&P 78

Houston University: MSc in Petroleum Engineering 85

Robert Gordon University: MSc in O&G 180

University of Burgos & Complutense: Exec – MBA 333

TOTAL 793


Refining Assets

PDVSA has a total refining capacity of 3.2 MMBPD (Dec 2005)

Chalmette (50%)92 MBPD

Paulsboro (100%)84 MBPD

Saint Croix (50%)248 MBPD

(**) Isla335 MBPD

(*) Sweeny

Lake Charles (100%)425 MBPD

Corpus Christi (100%)157 MBPD

Lyondell (41%)109 MBPD

Savannah (100%)28 MBPD

Nynäs (50%)Sweden (2 refineries)UK (2 refineries)29 MBPD

Rühr Oel (50%)Germany (4 refineries)230 MBPD

Puerto La Cruz203 MBPD

El Palito140 MBPD

San Roque5 MBPD

Refining Capacity in Venezuela 1,303 MBPD

Lemont (100%)167 MBPD

Paraguaná Refining Complex-CRP 940 MBPD

Bajo Grande15 MBPD

Refining Capacity in USA: 1,310 MBPD Refining Capacity in Europe: 259 MBPD

(# % ) are PDVSA net interest(*) 50% Equity interest in a coker and vacuum crude distillation unit(**) Under lease


6

5

4

32

1

Domestic Refining

NEW REFINERIES

4- Caripito Refinery – 50 MBPDAsphalt production

5- Cabruta Refinery- 400 MBPDConversion of extra-heavy crudesinto distillates

6- Santa Inés Refinery - 50 MBPDFuel supply for the domestic market

EXISTING REFINERIES

3- RPLC 200 MBPD- Conversion of residuals into distillates- Merey new desalting unit- Ethanol Fuel Project:

Lead elimination from gasolines and gradual substitution of MTBE/ TAME with Ethanol

2- RELP 140 MBPDProject for converting residuals into distillates- Conversion capacity increase- HDT Diesel – HDS VGO- New CCR

1- CRP 940 MBPD- Adapt the refinery to meet future quality

demands- Residuals to distillates conversion project- Downstream industrialization


Refining - International

Jamaica (50) 25

Brazil (200) 100

Uruguay (50)

Cabruta 400Santa Inés 50Caripito 50

Capacity in Venezuela MMBD

2005 1.3

2012 1.8

International Capacity MMBD

2005 2.0

2012 2.3

Cienfuegos 70

Total Investment: 16.3 US$ bnInvestment in Venezuela 14,2 (87%)Investment in Petroamerica 2,1 (13%)

Total : 3.3 4.1


More than 500,000 km² of OffshoreMore than 500,000 km² of Offshore

VENEZUELAN GULFLos Monjes

NE FALCON CARIBEAN FRONT ATLANTIC FRONT

DELTANA PLATFORM

Offshore Natural Gas

Proved Reserves: 151 Trillion Cubic Feet (TCF)Potential: 196 TCF (50% Offshore)Gas Production: 6,300 Million CF/DForecast 2010: 11,500 Million CF/D

Proved Reserves: 151 Trillion Cubic Feet (TCF)Potential: 196 TCF (50% Offshore)Gas Production: 6,300 Million CF/DForecast 2010: 11,500 Million CF/D


Delta Caribe Project - Eastern Venezuela

CARUPANOCARUPANO RRíío Caribeo Caribe

Mariscal Sucre Project 14 TCF

CIGMA

LNG

Gas / Condensate

TUCUPITA

CUM

ANA

CUM

ANA

Export: 1000 MMCF

Plataforma DeltanaProject 15 TCF

Corocoro 450 MMB3TCF

Punta Pescador

Guarapiche

Punta Pescador

Delta Centro

ORINOCO BELT

ORINOCO BELT

Great South Gas Pipeline

•B-1

•B-2

•B-3

•B-4

•B-5 En estudio


Delta Caribe West – Rafael UrdanetaProject

Assigned Blocks under Exploration Licensing

Future Exploration Licenses

3 TCF0,5 mmmbls

27 TCF7 mmmbls

Assigned Blocks


PHASE I

PHASE II

PHASE III

PHASE IV

PROTECTEDAREASAFETYAREA

22 3200 8 57I - IV

PHASES

2004 - 2035

PERIOD LAND LOTSIN USE NET AREA (ha) SERVICE

LAND LOTSSERVICE

CORRIDORS (KM)

GASTREATMENT

CRUDEREFINING

CRUDE ANDPRODUCTSSTORAGE

LNG PLANTS

PETROCHEMICALPRODUCTS

PETROCHEMICAL PRODUCTS

GAS

G.T.L.

CRUDEPROCESSING

CRUDEUPGRADING

SOLIDSHANDLING

FERTILIZERS

ADMINISTRATIVE ANDSERVICE BUILDINGS

CONTAINERS

RESERVES

POWERGENERATION

PORTSERVICES

SERVICEDOCK

INDUSTRIALPARK

ACCOMMODATIONSCONSTRUCTION

RESIDENTIALAREA

LNGTERMINALS

CONTAINERDOCK

PRODUCTTERMINAL

PETROCHEMICALDOCK

CIGMA Project Master PlanCIGMA Project Master Plan

GÜIRIAGÜIRIA


13901443

931

2006 2009 2012

177137121

2006 2009 2012

965710

469

2006 2009 2012

North America

Latin America

Europe

Asia

CRUDE OIL EXPORTS BY DESTINATION (MBD)

765290

150

2006 2009 2012

Total ExportsInternationalization

Spot SalesOrinoco Belt/New Agreements

16711041630

-

258012541206120

329713441168785

2006 2009 2012

MBD: Thousands Barrels per Day


11727650

119

46

125

20

2006 2012

12 4050

31

2006 2012

43 112121

31025

30

45

32

2006 2012

North America

Latin America

Europe

Asia

PRODUCTS EXPORTS BY DESTINATION (MBD)

Fuel OilJet

DieselGasoline

158102183160

2006 2012

233

520

234

484

43 90

5093

2006 2012

93 50

82205469388MBD: Thousands Barrels per Day


Regional Energy Integration

Name: Cien Fuegos RefineryCapacity: 70 MbpdPartners: PDVSA (100%)

Name: Abreu de Lima RefineryCapacity: 200 MbpdPartners: PETROBRAS (50%) –PDVSA (50%)

Name: La Teja RefineryCapacity: 100 MbpdPartners: ANCAP (50%) – PDVSA (50%)

Name: Great South American Gas PipelinePAÍSES: ARGENTINA, BOLIVIA, BRASIL, PARAGUAY, URUGUAY Y VENEZUELA

NOMBRE: Antonio Ricaurter Gas PipelinePAÍSES: COLOMBIA, PANAMÁ, VENEZUELA

Name: Jamaica RefineryCapacity: 50 MbpdPartners: PETROJAM (50%) –PDVSA (50%)

Energy Agreements

1. SAN JOSÉ (80,0 Mbpd)2. CARACAS (146,5 Mbpd)3. PETROCARIBE (23,7 Mbpd)


Venezuelan – Colombian Gas Pipeline

Execution up to 2006:• Jobs: 902 (Direct: 243 / Indirect: 659)• Executed: 28 %• Engineering & Environmental licenses:

Completed • Construction: Initiated July 06 installed 10 kms of

pipelines and 150 kms already manufactured

VenezuelaVenezuela

Golfo de VenezuelaGolfo de Venezuela

Fuerte Mara

CUATRO VÍASMARAUASAHU

CARRAIPIA

EL CERRO

RIO LIMÓN

SILOÉTULÉ

LOS CORTIJOS

BALLENA

MAJAYURA

EMR RL

BAJO GRANDEEMR

RU

La Concepción

El Tigre

• Completion date: May 2007• Total Investment: $ 335 Million• Total Job creation: 31,060 (4,490 direct /

26,570 indirect)

TRANSCARIBEAN GAS PIPELINE ANTONIO

RICAURTE

End Procurement Start Construction Start of the ProjectEnd Engineering


Initial Start of Operations: 2012 (50 M m3/day)

Designed Operational Capacity: 2017 (150 M m3/day)

Estimated Investment (Class V):20 Billion US$

Integration to the South


SUPPLY STRATEGY FOR THE CARIBBEAN The PETROCARIBE Initiative

Estimated Investment 2006-2012: $24 Million

• Minimize Supply Disruption Risk

• Provide Affordable Access to Energy

• Minimize Transaction Costs

• Ensure Minimum Level of Infrastructure

• Foster Economic and Social Development

• Minimize Supply Disruption Risk

• Provide Affordable Access to Energy

• Minimize Transaction Costs

• Ensure Minimum Level of Infrastructure

• Foster Economic and Social Development

Embassy of the Bolivarian Republic of Venezuela Beyond Social ResponsibilityBeyond Social Responsibility

• Additional Resources Fabricio Ojeda Plant – CADAFE• José Antonio Páez Highway – Propatria2000 Foundation

Additional Resources PalavecinoPlant - CADAFE

• Termoelectric & Gas Plants – CADAFE• Agronindustrial development• Highway José Antonio Páez

Additional Resources TermozuliaCombined Cycle - ENELVEN

• Ezequiel Zamora Railraod (Caracas Middle Tuy) – IAFE • Guaire River Bassin Cleaing – SAMARN• Development of the Agro-industrial and Metal-Mechanic Industries – CORPOCENTRO

Cement Plant - CVG

• Guaire River Bassin Cleaing – SAMARN• Ezequiel Zamora Railraod (Caracas Middle Tuy) - IAFE

Development of the Agro-industrial and Metal-Mechanic Industries – CORPOCENTRO

• Development of the Agro-Industrial and Metal-Mechanic Industries – CORPOCENTRO• José Antonio Páez Highway – Propatria 2000 Foundation

José Antonio Páez Highway –Propatria 2000 Foundation



• José Antonio Páez Highway – Propatria 2000 Foundation• Masparro Hydroelectric Plan

• Pulp and Paper Plant• National Iron and Steel Plant• Pipes Plant

• Additonal Resources Ezequiel Zamora Thermoelectric Plant – CADAFE• José Antonio Páez Highway – Propatria2000 Foundation


Venezuela View on Venezuela View on Natural Resource Natural Resource

ManagementManagement


Venezuela Political Approach on Energy

• Restore the sovereign right of the resource owner

• Reach equilibrium with fair return to investors and sustainable development to the resource owner

• Enhance affordability, specially to those countries and communities most in need

• Reduce and eliminate asymmetries in consumption

• Promote energy integration

• Restore Discipline to Supply Management

• Foster a Dialogue Between Producers, Consumers and the Industry

• Explore Ways to Assess and Achieve Fair Price

• Enhance energy conservation and environmentalism


0%

10%

20%

30%

40%

50%

60%

70%

76 78 80 82 84 86 88 90 92 94 96 98 00

ROYALTIES

INCOME TAX

FISCAL EXPORT VALUE

DIV.

66%

45%

Public Revenues Public Revenues -- Gross Domestic Product RatioGross Domestic Product Ratio

The governance of the Venezuelan oil was unsustainable, domestically and internationally

Collapse of the Fiscal Regime


Extent of US Companies’ Ability to Enter Market

ChinaChina

KuwaitKuwait

MexicoMexico NO NO NO YES

Saudi ArabiaSaudi Arabia

VenezuelaVenezuela YES YES YES YES

Can US purchase Can US purchase local oil local oil

companies?companies?

Can a US Can a US company obtain company obtain

equity oil?equity oil?

Can US Can US company invest company invest

in Refining/ in Refining/ PetrochemicalsPetrochemicals

Can a US company Can a US company market petroleum market petroleum

products?products?

Only if Joint Venture Uncertain YES YES

NO NO YES YES

NO NO YES YES

Source: US Department of Energy; National Security Review of International Energy Requirements - February 2006

Embassy of the Bolivarian Republic of Venezuela Foreign Investment Rules of the Game

TERMS

Bolivia • In May, it nationalized its natural-gas industry, ordering foreign companies to give up control of fields and accept much more strict operating terms in 6 months or leave. • It declared that the state owns the gas after it has been extracted and that companies at the country's two largest fields would get 18% of the production. • In 2005, it had increased the state's take to 50% of production by raising taxes and royalties (WSJ).

Libya • In 2005, the 2nd EPSA IV bidding round was fiercely competitive, with winning biddersforced to slash their production percentages as low as 6.8%.• In addition, oilfield developers initially bear 100% of costs (exploration, appraisal, training) for a minimum of 5 years, while Libya’s NOC retains exclusive ownership (DOE).

U.K. •A special charge on profit was recently raised to 20%, from 10%. It comes on top of a 30% tax applied to all U.K. corporate profits (WSJ).

Nigeria • An increase of taxes from 50% to 85% has been proposed (DOE).

Russia • National participation of 51% in strategic projects; 90% taxes/royalties/duties on earnings above $25/bl (DOE).

Venezuela • The new terms of the operating joint partnership (empresas mixtas) include a minimum 60%equity ownership by PDVSA, 33.3% royalty and 50% corporate tax.

Ecuador • In April, it imposed a tax of 50% on the “extraordinary profits” earned by foreign investors in the oil sector. Prior to this, the rate was 20% (BBC, DOE).

Embassy of the Bolivarian Republic of Venezuela Government Take around the World

Source: Wood Mackenzie


Bilateral Energy Bilateral Energy RelationRelation

Venezuela Venezuela –– U.S.U.S.


●● Venezuela accounts of Venezuela accounts of 12% to 15%12% to 15% of of total US importstotal US imports

●● Venezuela is the Venezuela is the 44thth largestlargest supplier of supplier of crude oil to the UScrude oil to the US

●● Including exports to Virgin Islands, Including exports to Virgin Islands, Venezuela was the Venezuela was the 11stst largest largest foreign foreign supplier to the USsupplier to the US

●● Venezuela is the Venezuela is the 22ndnd largest exporter of largest exporter of oil productsoil products to the USto the US

●● Venezuela is Venezuela is 4 to 5 days4 to 5 days shipping time to shipping time to the USthe US

●● Venezuela purchases more than Venezuela purchases more than $2 $2 billions per yearbillions per year of good & services from of good & services from 800 U.S. companies800 U.S. companies

●● Venezuela is one of the largest foreign Venezuela is one of the largest foreign investor in the US through its CITGO investor in the US through its CITGO refining circuitrefining circuit

Source: EIA 2006

The U.S. - Venezuela Energy Relationship

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2000 2001 2002 2003 2004 2005

Venezuela Canada Mexico Saudi Arabia

Main Oil Suppliers to the USA (Crude + Products)


Place: Volume (gallons): Households:

Washington, DC (2) 328.303 1.721Alaska (2) 769.346 4.033Maryland (2) 2.901.501 15.210Virginia (2) 3.808.959 19.967New Jersey (2) 5.600.527 29.359Indiana (2) 639.739 3.354Michigan (2) 2.235.471 11.719Wisconsin (2) 1.909.034 10.007Contingencia 10.000.000 20.000

Total: 100.000.000 459.370

Massachusetts 11.445.763 60.000New York City 23.845.340 125.000Maine 7.630.509 40.000Rhode Island 1.907.627 10.000Pennsylvania 9.538.136 50.000Vermont 1.907.627 10.000Delaware 953.814 5.000Connecticut 4.578.305 24.000Tribus Indigenas (1) 10.000.000 20.000

(1) More than 220 tribes from Alaska, Minnesota, New York, Connecticut y Maine.(2) New States and Cities.

Venezuela – CITGO Heating Oil Program2006-2007


•• The U.S. is under tremendous pressure to access secure and reliaThe U.S. is under tremendous pressure to access secure and reliable supply of ble supply of oiloil

•• The U.S. energy independence is a myth and cannot be achieved unThe U.S. energy independence is a myth and cannot be achieved under current der current consumption patterns, as the U.S. addiction to oil is highly relconsumption patterns, as the U.S. addiction to oil is highly related to qualityated to quality--ofof--life perception, and it is less likely to change that patternlife perception, and it is less likely to change that pattern

•• The U.S. SPR proved not to be sufficiently efficient in times ofThe U.S. SPR proved not to be sufficiently efficient in times of crisiscrisis

•• Alternative energy (Alternative energy (biofuelbiofuel and ethanol) is a good sign, but will not be enough and ethanol) is a good sign, but will not be enough to offset the increase in consumptionto offset the increase in consumption

•• Sources of oil in the Middle East will at the end and naturally Sources of oil in the Middle East will at the end and naturally be directed to be directed to satisfy the demand growth in Asia satisfy the demand growth in Asia –– Current geopolitics in this region proved Current geopolitics in this region proved not to be efficient to pop up more secure oilnot to be efficient to pop up more secure oil

•• The U.S. will have to rely on sustainable supply from within theThe U.S. will have to rely on sustainable supply from within the hemispherehemisphere

•• Mexico is declining, Canada is not sufficient and Venezuela has Mexico is declining, Canada is not sufficient and Venezuela has the biggest the biggest reserves of oil in the worldreserves of oil in the world

A cooperative approach between the U.S. and Latin America and specially Venezuela is indeed a sole guarantee for a sustainable

energy security in the Hemisphere

The U.S. Oil Crisis and its approach to Venezuela

Embassy of the Bolivarian Republic of VenezuelaEmbassy of the Bolivarian

Republic of VenezuelaEmbassy of the Bolivarian Republic of Venezuela

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