Oil & Energy

Hemispheric Implications Of Chavez’s Illness

Published

13 years ago

July 18, 2011

The recent dramatic pronouncement that Venezuelan President, Hugo Chavez, underwent cancer treatment in Cuba reverberated far beyond Venezuela, depressing his allies and elating his enemies.

While the leader of his self-proclaimed “Bolivarian revolution” is second only to his good buddy Fidel Castro in Washington’s black book, the fact remains that Chavez has discreetly deployed Venezuela’s vast oil and cash reserves to assist the struggling economies of a number of his Central American neighbors, which has earned him deep gratitude.

Ever the showman on alert for any opportunity to tweak Uncle Sam’s snout, in March 2006 in the aftermath of Hurricane Katrina, which damaged the U.S. Gulf oil infrastructure sending domestic prices soaring, he offered shivering New England residents discounted heating oil, infuriating the Bush administration.

Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere.

But the reality is that Venezuela remains the United States’ fourth largest oil importer, accounting for roughly 1.5 million barrels a day. Should Chavez ever in a fit of pique turn off the taps, the only option that the US would have to replace lost imports would be to turn to Saudi Arabia, the sole OPEC member, and ask them to ramp up production, as Saudi Arabia is the only OPEC member with the reserve capacity to do so.

This in turn would create political problems for Riyadh with other OPEC members, most notably Iran, as under the OPEC system each member state has a pumping quota, and Tehran has already accused Riyadh of breaching its quotas by stealth.

Chavez certainly has reason to be mightily annoyed with US policy, which has been turning up the pressure on Chavez for years while carefully calculating how to avoid a total rupture.

In 2005 Washington classified Venezuela as a country that does not “cooperate in the fight against drug trafficking,” with government officials stating that the lack of assistance should incur financial penalties. The following year the U.S. upped the ante, labeling Venezuela as a country that “does not cooperate sufficiently with the fight against terrorism” and imposed sanctions prohibiting US arms sales to Venezuela or those from any company in the world using US technology.

Upping the ante, in 2007 Chavez announced the nationalization of the country’s oil industry. The foreign oil companies were forced to sign agreements giving majority control of hydrocarbons projects to Petroleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned petroleum company. Projects owned by companies like ConocoPhillips and ExxonMobil, who failed to sign these agreements, were taken over by PDVSA.

US-Venezuelan relations proceeded to deteriorate rapidly.

Most recently, on 24 June, during the “Sanctionable Activities in Venezuela” hearing in the House of Representatives Foreign Relations Committee, a number of Democratic and Republican House members requested that the Obama administration take more aggressive action against the government of Hugo Chavez. Sub-Committee on Foreign Affairs for the Western Hemisphere head, Connie Mack, a Florida Republican, called the Venezuelan government “terrorist,” adding, “it’s time to act to contain the dangerous influence of Hugo Chavez and his relations with Iran.”

Pandering to the committee members, In testimony before the Committee, the State Department’s Assistant Under-Secretary of State for Latin America, Kevin Whitaker, stated that the administration is “seriously considering” labeling Venezuela a “terrorist state. No option is off the table and the Department will continue to study any further action as may be necessary in the future.”

Washington’s sanctions policy has isolated Cuba and crippled its economy for over fifty years, a relic of a long-gone Cold War.

It appears that Hugo Chaevz’s mortal sin in the eyes of Washington is that he did not come from Venezuela’s traditional white criollo population, less than 25 per cent of the country’s population, which had dominated Venezuela’s politics since the nation achieved independence in 1811. Chavez came instead from the country’s mestizo ethnicity, of mixed European, African, and Amerindian ancestry, which comprises about 65 percent of the country’s population and a working-class background.

Just as Obama smashed the color bar in US politics by being elected to the country’s highest office in 2008, Chavez, elected President in 1998, gave the majority mestizo non-white population not only of Venezuela, but of other nations across Latin and Central America, high hopes that one of their “own” could be elected, who would be more sensitive to their needs than their traditional white criollo elites (of whom his friend Fidel Castro is one), a political seismic shift of historic proportions.

As Washington remained fixated after 11 September 2001 on invading Iraq and Afghanistan, this political shift began to wash across Latin America, most notably with the 2006 election of Bolivia’s Evo Morales.

More important than the ethnicity of the chief executive, however, is that since the early 2000s left-wing political parties have risen to power in most Latin American countries. Besides Chavez and Morales these include Lula da Silva and Dilma Rousseff in Brazil, Fernando Lugo in Paraguay, Nestor Kirchner and his wife Cristina Fernandez in Argentina, Tabare Vazquez and Jose Mujica in Uruguay, the Ricardo Lagos and Michelle Bachelet governments in Chile, Daniel Ortega in Nicaragua, Manuel Zelaya (later deposed in a coup) in Honduras, Rafael Correa in Ecuador, and Mauricio Funes of El Salvador.

Chavez has been at the forefront of attempting to wean these governments away from Washington’s influence, most notably with the establishment of the Alianza Bolivariana para los Pueblos de Nuestra America (the Bolivarian Alliance for the Peoples of Our America,” or ALBA), which Chavez first proposed in 2004. The initial member states were Venezuela and Cuba, but ALBA now also includes Bolivia, Dominica, Ecuador, Nicarauga and the St. Vincent and the Grenadine islands. In August 2008, shortly before the coup, which overthrew him, Honduran President Manuel Zelaya signed an agreement to join ALBA. Further threatening Washington, in October 2009 ALBA leaders agreed a cereate a regional currency, the sucre, to used used in alliance transaction in lieu of both local currencies and the dollar.

Is it any wonder then why Washington sees Chavez as a threat?

Accordingly, the 64,000 bolivares question, not only for Venezuela but Central America and the U.S. as well is – how serious is Chavez’s illness, and what are the implications for Caracas if he is incapacitated? If Chavez leaves the scene, will a new government continue his policy of providing discounted energy to his poor neighbors, most notably Cuba, which receives 64,000 barrels a day, or the Dominican Republic, which pays Venezuela for the 50,000 oil barrels per day that it receives through Petrocaribe with chicken, lard, sugar and pasta? Nicaraguan businessmen are so concerned with the “precarious health” of President Chavez that they are insisting that the Ortega administration immediately negotiate a Free Trade Agreement with Venezuela. If Chavez leaves office, will these countries become more amenable to foreign investment, having nowhere else to turn?

Will a new administration let foreign oil companies back into Venezuela? These and many more questions hinge on the health of a single man, who whatever happens has had more impact on the Latin American political landscape than any other regional political leader of the last dozen years. Love Chavez or detest him, it is impossible to ignore both the man and his impact and the smart money will be gauging carefully the depth and longevity of the impact of the man and his vision should he leave the stage.

Daly writes for OilPrice.Com.

John Daly

Oil & Energy

NSCDC’s Anti-Vandal Squad Uncovers Artisanal Refinery In Rivers Community

Published

2 weeks ago

April 15, 2024

The Tide

The Anti-Vandal Squad of the Nigeria Security and Civil Defence Corps (NSCDC), Rivers State Command, has uncovered yet another local refinery situated at Adobi-Akwa settlement in Etche Local Government Area of Rivers State.
The State Commandant, Basil Igwebueze, disclosed this while speaking to journalists shortly after the tour of the Illegal site.
Represented by the Head, Anti-Vandal Squad, CSC Peters Ibiso, Igwebueze said the squad made the discovery following a tipp off, expressing regret that no arrest was made as the boys fled the site upon sighting the squad.
The cammandant’s representative took the newsmen across a tick forest of about 6-7 kilometers from the main town.
The team sighted where the pipeline vandals tapped into the Well Head of yet to be ascertained multinational company, connected their galvanised pipes to several cooking pots, heat up the crude to produce Automotive Gas Oil (AGO).
In his words, “Upon receiving a tip-off, the Anti-Vandal operatives swung into action to uncover this illegal oil bunkering site. They were in this forest for two days having cordoned the area, unfortunately, the perpetrators upon sighting our men took to their heels, but investigation is still ongoing to effect the arrests of such defiant elements”.
The Anti-Vandal Unit Head further narrated the operation techniques of the operators of local illegal refineries from the point of extraction of crude through vandalism of oil pipelines to cooking in various ovens where the content is subjected to high temperature and transmitted through pipes to reservoirs for storage and onward trans- loading to buyers.
While insisting that the command would not relent in the fight against illegal dealings in petroleum products, he urged the public to have more trust in the NSCDC by providing actionable intelligence that would enhance possible arrest of economic saboteurs in the State.
“Our commitment to continuously work in tandem with the prosecutorial mandate of the corps in order to rid the State of economic saboteurs remains unchanged. We value our informants and most especially the intelligence driven tip-off received from time to time.
“It is also our duty to ensure that our source of information are not disclosed so as to protect our informants. It is therefore our delight that the public will continue to have confidence and trust in us as we together protect the nation’s critical national assets and infrastructure from dare devil vandals”, he stated.

By: Lady Godknows Ogbulu

Oil & Energy

Oil Fund Withdrawals Suggest Extended Price Rally

Published

2 weeks ago

April 15, 2024

The Tide

The world’s largest crude oil exchange-traded fund has bled over $2 billion in less than a year. And it i
s not due to investors finding greener pastures elsewhere with other ETFs; it is the siren call of soaring prices that is prompting this mass exodus.
The WisdomTree Brent Crude Oil exchange-traded commodity had assets under management of some $2.5 billion last summer, according to Bloomberg. Now, the publication reports, this is down to $396 million, with withdrawals accelerating over the past few days.
In that, withdrawals seem to be following price trends. Brent earlier this month topped $90 per barrel and, after a short pause earlier this week, is back above that threshold again following the latest Israeli strike on the Gaza Strip amid reports about a possible ceasefire.
While it is true that prices are currently driven higher mainly by geopolitical events, fundamentals are also at play. A growing number of forecasters are updating their predictions for benchmarks this year on expectations of resilient demand and increasingly tighter supply. And investors are following the trend.
Even those who have not sold their ETF holdings in order to invest more directly in the rally are benefitting. That same WisdomTree Brent Crude Oil ETC generated returns of over 13 percent during the first quarter of the year as opposed to an average 8.8% gain in the S&P 500.
The WisdomTree exchange-traded commodity became the world’s largest oil fund at the beginning of last year. The fund saw inflows of over $1 billion, which poured in as the deflation in oil prices that had begun in late 2022 extended into the new year. Now, the trend has reversed and it has reversed strongly.
The WisdomTree Brent Crude Oil ETC is not the only fund seeing outflows. The U.S. Oil Fund, which used to be the world’s biggest oil fund before the WisdomTree inflows last year and is now the world’s biggest oil fund once again, also saw a flurry of investor exits as benchmarks climbed higher.
According to Bloomberg, the fund’s assets under management currently stand at $1.3 billion, down from some $5 billion during the pandemic.
In further evidence that oil makes money, the Middle East is about to become the only region in the world with three trillion-dollar sovereign wealth funds. The Abu Dhabi Investment Authority is worth $993 billion, Bloomberg reported in March, while the Saudi Public Investment Fund and the Kuwait Investment Authority are breathing down its neck.
Meanwhile, investment in transition-related stocks is on the decline, according to data reported by Reuters. The S&P Global Clean Energy Index is down by 10% since the start of the year. In comparison, the S&P 500 Energy Index, which comprises Big Oil names, has gained 16.3%.
The data shows that investors are growing wary of all the promises made by transition advocates as evidence mounts that these were not based on due diligence. Wind and solar stocks suffered a crash last year when this first became clear.
Now, we are witnessing a continued awakening among investors to the challenges and the realistic potential of transition technology and alternative energy sources.
“With conventional energy having its own bull run, I think the alternative funds will struggle for the foreseeable future, and we shall see what the election brings”, the Managing Director of capital markets at Phoenix Capital Group Holdings told Reuters.
The comment summarizes the challenging situation for alternative energy investment and highlights the rebound of interest in oil and gas, much to the chagrin of decision-makers on both sides of the Atlantic.
In both Europe and the U.S., things can get even worse for the transition after the respective elections—in June for European Parliament and in November for U.S. President. It will certainly be an interesting year in energy.
Slav writes for oilprice.

By: Irina Slav

Oil & Energy

CNG Initiative: FG Targets 25,000 Jobs, $2.5bn Investment

Published

2 weeks ago

April 15, 2024

The Tide

The Programme Director and Chief Executive, Presidential Compressed Natural Gas Initiatives, Michael Oluwagbemi, has announced the Federal Government’s plan to target over 25,000 jobs and $2.5 billion worth of investment by 2027.
Oluwagbemi made this known during the Presidential CNG stakeholders’ engagement workshop held at BOVAS Auto-Gas Filling Stations, Ajibode Bus-Stop, in Ibadan, Oyo State capital, at the weekend.
He stated that the initiative, which was part of palliative measures to ease the burden of the removal of fuel subsidy, would attract enormous investment and job creation as well as impact positively on the lives of Nigerians.
Meanwhile, he called on Nigerians to embrace the new initiatives by the Federal Government as part of palliatives to cushion the effect of the removal of fuel subsidy in the country.
“On October 1, 2023, when the President gave his speech, he announced that the Presidential CNG initiatives are going to be rolled out as part of palliatives on the removal of fuel subsidy.
“One of our major concerns is to make sure that the transition for the transportation sector is a cheaper, safer, and more reliable source of energy.
“In the coming weeks, we are going to be announcing the conversion incentives programme which will enable Nigerians currently using PMS and Diesel fuel vehicles to be able to convert their vehicles at designated places across the country at a discounted price based on certain pre-qualification under the palliative programme of the Federal Government”, he said.
On the value chain of the initiative, Oluwagbemi explained that the Federal Ministry of Finance is acquiring tricycles and buses that would be assembled and manufactured in Nigeria, with more than five automobile firms being activated.
“The value chain of the programme starts with every one of us. From the point of converting your vehicle, you have created the demand for natural gas.
“If your vehicle is converted by technicians and refuelled by autogas workshops across the country, then you are creating jobs for civil engineers and technicians. You’re creating jobs for the upstream in terms of upstream activities associated with oil and gas.
“And in line with the programme, the Federal Ministry of Finance is acquiring a number of tricycles and buses that will be assembled and manufactured in Nigeria. More than five of our automobile firms have been activated. So, you can see that in terms of job creation, the opportunities for Nigerians are enormous.
“The President has said we need to convert one million vehicles by 2027. We need 1,000 conversion shops and we need over 3,000 filing stations just like this. You can imagine the level of investment required for this.
“In order to sustain one million vehicle conversions by 2027, we need 25,000 technicians. So, the job creation potential is an opportunity for job creation in addition to our gross domestic product, $2.5 billion worth of investment to be mobilised in the next four years and of course more than $25 billion added to our GDP”, he said.
Oluwagbemi further called on Nigerians to embrace the new initiatives by the Federal Government as part of palliatives to cushion the effect of the removal of fuel subsidy in the country.
The representative of BOVAS Filling Station, a private investor in the Presidential CNG Initiatives, Temitope Samson, said, “We have worked with the regulators, we are also working with the Presidential Initiatives on CNG to make sure that standard safety is adhered to. We have also worked with the Standard Organisation of Nigeria to ensure that we have a standard accepted internationally.
“Our role is to ensure that there is availability of CNG across the nation, and to also ensure we have enough kits and tanks that are converted for people to use as many as possible, and to ensure safety and to train others so that anywhere they get to, they have very safe conversion”.
Recall that last year, President Bola Tinubu approved the Presidential Compressed Natural Gas initiative(PCNG-i)
This initiative aims to not only introduce more than 11,500 new CNG-enabled vehicles and provide 55,000 CNG conversion kits for existing vehicles that depend on Premium Motor Spirit but also promote local manufacturing, assembly, and job creation.