THE SHORT HONEYMOON OF PDVSA AND PETROBRAS

Tronco e' loco!

PETROBRAS AND PDVSA: THE ODD COUPLE.

From Washington.
Petroleos de Venezuela, created in 1976, rapidly became a major international petroleum company thanks to good management and a non-politicized work environment. Petrobras, created in 1954, took the ultra nationalistic road. Under the motto “The Oil is ours”, insisted in using only Brazilian materials and technology. Labor unions greatly influenced its operations, its executives rotated with undue frequency and multinationals had no place in its activities. For 20 years PDVSA was a success and Petrobras a failure.
Today the opposite has occurred. Petrobras is partially privatized, Brazilian energy self-sufficiency is within sight, the company is professionally managed and has become a world-class corporation. PDVSA, on the other hand, has been politicized, its management is in inept and corrupt hands and the volume and quality of its operations have decreased dramatically. Its international standing has collapsed.
Two good companies or two mediocre ones could probably get along fine. What is unlikely is a happy association between a good company and a bad one. This is what seems to be happening to the shotgun wedding of Petrobras and PDVSA.
This association started on the wrong foot. It did not obey to a rational program of complementarity between the two companies but was politically induced by Hugo Chavez, the pushy and prodigal Venezuelan autocrat and accepted by Lula da Silva, the more reflexive Brazilian leftist president. Lula saw an opportunity to get access to Venezuelan oil and to significant volumes of Venezuelan money from Chavez, in exchange for his mild support. Therefore, he went along with Chavez’s two huge projects: a gas line from Venezuela all to the way to Argentina, alo supplying cheap natural gas to Brazil and a heavy oil refinery in Pernambuco, to process Venezuelan heavy oil from the Orinoco area, where Chavez has granted Brazil an area for development. Long months after these two projects were announced they have not taken off.
The gas line, of course, is a political fraud. It will probably serve to enrich further those friendly consultants who are doing the so-called “feasibility studies”, including its technical, reserves, financial and environmental aspects. At the end of the several, bulky volumes, the conclusions will probably read something like this:
1. Not enough free gas reserves;
2. Economically unattractive;
3. Financially unviable;
4. Environmentally disastrous.
The Pernambuco refinery was originally designed to process about 200,000 barrels of heavy oil per day, half of which would come from the Venezuelan Orinoco area “assigned” to Petrobras. The cost of this refinery was estimated at some $2.5 billion. A memorandum of understanding was signed between the two companies more than one year ago but the two companies have not done much else.
While Chavez has been busy promising 12 other refineries in different parts of the world, including one in the Fiji islands, Petrobras has been doing its own studies of the refinery. The cost is now estimated at some $4.5 billion and PDVSA has not given any sign that it is seriously thinking about the project. Petrobras management has apparently decided to go ahead without PDVSA, a move that would indicate a victory of common sense over hysterics. The main obstacle to the relationship between these two companies seems to be the lack of professional management in PDVSA. Odd couples survive in Broadway and Hollywood, rarely in the oil industry.