Opportunities and Challenges of the Venezuelan Hydrocarbons Industry: Prospects for Private Producers

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1 Opportunities and Challenges of the Venezuelan Hydrocarbons Industry: Prospects for Private Producers Luis Xavier Grisanti, Executive President Conference on: VENEZUELA, A RELIABLE PARTNER: Securing US Energy Needs, Enhancing Business Opportunities Washington, D.C., July 17-18, 2003

2 Index:! AVHI S SOCIAL AND ECONOMIC SIGNIFICANCE! A DECALOG OF PRINCIPLES: AVHI S MISSION, VISION AND VALUES! PDVSA S INVESTMENT PLAN ! EXPECTED INVESTMENT FROM AVHI S MEMBERS! CHALLENGES: GOVERNMENT, INDUSTRY AND CIVIL SOCIETY

3 La Asociación Venezolana de los Hidrocarburos: what we are and what is our mission The AVHI is the institution that represents the private national and international companies that explore, produce, transport, and distribute crude oil, refined products, and natural gas in Venezuela Mission To promote a competitive business and investment climate in Venezuela by contributing to the formulation and implementation of public policies aimed at the development of a robust and efficient hydrocarbons industry

4 Vision and Values: representation, credibility, and legitimacy Vision A strong institution that commands the respect of government, industry, and civil society for its contribution to the improvement ent of the investment climate in Venezuela and its positive impact on the sustainable development of the Nation Values Honesty Responsibility Commitment Professionalism Human talent Sound judgement Teamwork Service culture Positive activism Reliability Philosophy The development of a highly product- ive hydrocarbons industry rests on three criteria: economic efficiency and profit- ability, social responsibility, and presevation of the environment We seek to add value to the industry and to the Nation by working hand in and with government, business, labor, and civil society

5 The AVHI: A Decalog of Principles: economic efficiency for sustainable development Legal Entity Mission Sustainable Development Professional Independent Association Strategic Plan Spokesman Resources Presidential Communications Plan

6 AVHI S MEMBERS INGENIERIA DE CALIDAD

7 AVHI S SOCIAL AND ECONOMIC SIGNIFICANCE: A LONG TERM COMMITMENT TO VENEZUELA Association members (21) have become the largest private investors in Venezuela Investments to 2001 amount to $20 billion. GDP contribution: 6% Crude output is 950 mbd, rising to 1200 mbd Direct employment (11.000), indirect (32.000) One of the largest taxpayers in the nation: $2,5 billion Overall multiplier effect: national and regional

8 PDVSA S BUSINESS PLAN : TOTAL INVESTMENT PROFILE 43 BILLIONS OF US$ FINANCING/ASSOCIAT IONS CASH FLOW 11% PDVSA'S OWN INVESTMENT 54% EXISTING ASSOCIATIONS 9% FROM PARTNERS 26% SOURCE: PDVSA

9 PROPOSED INVESTMENT BY PRIVATE COMPANIES : 19 BILLIONS OF US$ $6.9 $3.0 OPERATING AGREEMENTS ORINOCO BELT $3.9 $8.2 $5.2 SUPPLY & REFINING NATURAL GAS REPRESENTING 44.2% OF PDVSA S BUSINESS PLAN OF US$ 43 BILLIONS SOURCE: PDVSA

10 INCREASE IN CRUDE PRODUCTION (MBD) PDVSA PRIVATE SECTOR OPERATING AGREEMENTS ORINOCO BELT PROFIT SHARING TOTAL SOURCE: PDVSA

11 OFFSHORE NATURAL GAS RESOURCES TCF SHELL MITSUBISHI PDVSA 12% CHEVRONTEXACO STATOIL/OTHERS 25% 63% PLATAFORMA DELTANA 31,3 TCF MARISCAL SUCRE 12,8 TCF FALCON NORTE 6,2 TCF SOURCE: PDVSA

12 CHALLENGES: Government, Industry and Civil Society " INTERNATIONAL ENERGY SUPPLY/DEMAND OUTLOOK. " NATIONAL BUSINESS CLIMATE/COUNTRY RISK. " HYDROCARBONS LAW FLEXIBILITY. " SUSTAINABLE LEGAL FRAMEWORK/JURIDICAL SECURITY. " INSTITUTIONS: ENERGY MINISTRY AND PDVSA " COMPETITIVE NATIONAL INDUSTRY. " SYSTEMATIC INTERACTION OF GOVERNMENT, BUSINESS AND CIVIL SOCIETY. " SUSTAINABLE DEVELOPMENT AND SOCIAL RESPONSABILITY

13 AVHI S MEMBERS: America, Asia, Europe, and Venezuela ExxonMobil de Venezuela S.A. BP Venezuela Limited Inelectra S.A.C.A. Benton Vinccler C.A. ChevronTexaco Global Technology Services Company Conoco Venezuela LTD China National Petroleum Company Eni Dación B.V. Mitsubishi Venezolana C.A. Nimir Petroleum Otepi Phoenix International C.A. Repsol YPF Venezuela S.A. Shell Venezuela Productos C.A. Statoil Venezuela S.A. Tecnoconsult Ingenieros Consultores S.A. Tecpetrol de Venezuela S.A. Teikoku Oil de Venezuela C.A. Total Petrocanada de Venezuela Petrobras Energía