Magic realism: Argentina and Venezuela sign a natural gas export agreement

Recent newspaper reports ( El Nacional, June 13, 2013) indicate that  the Argentinian oil company YPF and the Venezuelan oil company PDVSA signed an agreement to develop the gas reserves of de Orinoco Delta region and, eventually, export LNG (Liquefied Natural Gas) to Argentina. The agreement also will involve the U.S. oil company Chevron.  The offshore area is said to hold some 7 trillion cubic feet of gas. An analysis published by The Economist http://viewswire.eiu.com/index.asp?layout=ib3Article&article_id=420653426&pubtypeid=1142462499&country_id=1470000147 is very sceptical about this agreement ever becoming a reality. The title of the analysis is: Argentina- Venezuela gas, gaseous plans. The report says, among other things: “Details of how this would work in practice are conspicuously lacking. Most obviously, Chevron has not yet signed up to the scheme, which is in any case likely to founder on the difficulties of working in Venezuela”.

The deal would have YPF take an interest in the Orinoco Delta area gas deposits, in theory a good idea.  Argentina is greatly dependent from Bolivian gas and domestic gas production is declining. Repsol, says the report by The Economist, was a key gas supplier to Argentina but stopped supply after its shares of YPF were expropriated by the government.

 However, the problem is Venezuelan reliability as a supplier. The country has significant gas resources but currently imports gas from Colombia due to the inept performance of PDVSA in the development of these resources. The development of the Orinoco Delta and the Gulf of Venezuela gas resources have been progressing at a turtle pace, due to lack of investment capital. Still worse, the international companies involved in these developments, Repsol (Gulf) and Chevron (Delta) lack incentives since any gas developed from these areas would probably go to supply the Venezuelan domestic market at subsidized prices. This is why the agreement signed with Argentina might never see the light. The president of PDVSA, Rafael Ramirez, claims that exports to Argentina could start as early as next year. The problem is that Mr Ramirez has proven to be a pathological liar in almost every aspect related to the current or future performance of PDVSA. The Delta gas development is practically stagnant since the rig Aban Pearl sank some three years ago. This rig was contracted by PDVSA to a ghost company owned by Venezuelan contractors with probable links to PDVSA top management, at a gross over-price, a case of probable corruption that remains to be investigated in spite of being denounced by this writer in the Venezuelan press.

The Economist is also sceptical about Chevron’s eventual participation, since the gas, if exported, would probably be at a subsidized price, for political reasons. I add that Chevron’s relations with the government of Argentina are strained, due to the friendly relations of Cristina Fernandez with Ecuador’s President Rafael Correa, who has been trying to extort billions of dollars from Chevron by means of a fraudulent legal action.

There seem to be numerous reasons why Venezuelan LNG might never reach Argentina. This agreement is probably one more component of the world of make believe that the Venezuelan and the Argentinian ineffective governments have built in order to sound busy.