Oil & Energy

Hemispheric Implications Of Chavez’s Illness

Published

14 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

Reps Launches Probe Into N200bn CBN Loan To DISCOs

Published

19 mins ago

May 12, 2025

The Tide

The House of Representatives has launched an investigation into the disbursement and utilisation of the N200billion Central Bank of Nigeria (CBN) loan allocated for the National Mass Metering Programme (NMMP) to Electricity Distribution Companies (DISCOs).
Chairman, House Committee on Public Assets, Rep. Uchenna Okonkwo, disclosed this in a statement in Abuja.
He confirmed that a 19-member sub-committee had been inaugurated to probe the matter thoroughly.
Okonkwo recalled that the NMMP, initiated in 2020, was designed to provide free electricity meters to Nigerian consumers through the Licensed Electricity Distribution Companies (DISCOs).
He said the programme was a joint initiative of the CBN, the Nigerian Electricity Regulatory Commission (NERC), and other stakeholders in the Nigerian Electricity Supply Industry (NESI), aimed at eliminating estimated billing, improve transparency in energy usage, and enhance customer satisfaction.
Speaking on the launch of the NMMP, the Rep said the programme was to be implemented in three phases to ensure the reduction of collection losses and improve market remittances in the industry.
“Under the pilot phase of the programme’s implementation, CBN commenced with the sum of N59.280 billion for procurement and installation of one million meters in 2020 at an interest rate of 9 per cent after a two year moratorium.
“Preliminary research on the NMMP has shown that instead of the pronounced amount of N59.280 billion naira for the phase 0, what was released was N55.4 billion for procurement and installation of 962,832 meters instead of one million meters pronounced by CBN”, he noted.
Okonkwo stated futher that concerns have been raised regarding repayment, with the committee noting discrepancies in the repayment of the funds by the DISCOs.
According to Okonkwo, “Research has also shown that the eleven Electricity Distribution Companies who received the loan have paid back to CBN as refund for the N54.4 billion they received in 2020 without mentioning the 9 per cent interest on the loan.”
The lawmaker, however, said the subsequent phases of the programme, which were expected to significantly expand metering across the country, have stalled, explaining that Phase 1, which was to be funded by the CBN and Deposit Money Banks (DMBs) for 1.5 million meters, and Phase 2, expected to be financed by the World Bank for four million meters, are yet to take off.
He said the House, exercising its constitutional powers under Sections 88(1) and (2) of the 1999 Constitution, resolved to investigate the matter with a view to safeguarding public interest.
According to him, the sub-committee is expected to scrutinise all aspects of the NMMP funding, from disbursement and meter procurement to distribution and repayment mechanisms.
The 19-member committee comprises Reps. Obed Shehu, Ali Shettima, Abel Fuah, Salisu Koko, Ahmed Munir, Sani Umar Bala, Gbefwi Jonathan, Abdulmaleek Danga, Chinedu Obika, and Okunlola Lanre.
Others include Reps. Abass Adekunle, Akinosi Akanni, Obuzor Victor, Peter Akpanke, Ngozi Lawrence, Ogah Amobi Godwin and Ikeagwuonu Onyinye.
It would be noted that the NMMP was expected to be a game-changer in Nigeria’s power sector by reducing estimated billing, enhancing energy accountability, and restoring consumer trust.
However, the current revelations point to implementation failures and possible mismanagement of public funds.
Analysts believe that the outcome of the House probe could lead to reforms in electricity metering policy and strengthen regulatory oversight of loan disbursements to DISCOs.

Oil & Energy

“Renaissance Energy, NNPC JV Donate ICU Equipment To RSUTH

Published

19 mins ago

May 12, 2025

The Tide

Renaissance Africa Energy Company Limited and its joint venture partners, including the Nigerian National Petroleum Company Limited (NNPC), have donated vital medical equipment and essential drugs to the Intensive Care Unit (ICU) of the Rivers State University Teaching Hospital (RSUTH).
Among the equipment are three ventilators, a laser therapy machine, as well as significant supply of seed stock drugs targeted at enhancing the hospital’s capacity to provide critical care and ensuring consistent drug availability.
Speaking at the Handover Ceremony at Renaissance Energy Headquarters, in Port Harcourt, the General Manager, Relations and Sustainable Development, Renaissance Africa Energy, Igo Weli, said, “The gesture by Renaissance and our partners is to enhance the capacity of the hospital to provide critical care to patients in need; improve the training of upcoming healthcare personnel; and provide support to dedicated healthcare professionals in their mission to save lives and improve patient outcomes.”
The Chief Upstream Investment Officer, NNPC, Oluwaseyi Omotowa, noted that the donations were part of a broader social intervention strategy of the Renaissance-operated joint venture.
Omotowa, who was represented by the Lead, Stakeholder Relations, NNPC Upstream Investment Management Services, Mrs. Uzo Ejidoh, further said “the JV has a deliberate corporate social responsibility strategy to serve the people.
“This is an unchanging commitment, hence our steadfast support and investment in social impact projects for the healthcare sector to continue to transform lives”.
Recieving the donations, the Chief Medical Director, RSUTH, Professor Chizindu Alikor, stated that the hospital was committed to the delivery of excellent healthcare along with research and training.
Alikor said, “The teaching hospital is on an upward trajectory. The ICU facilities were over stretched, and we are excited that our request to Renaissance and its partners for assistance was granted.
The CMD expressed the hospital’s confidence in Renaissance’s capacity and people-centric interventions, especially as it concerns Corporate Social Responsibility (CSR) in the health space.

By: Lady Godknows Ogbulu

Oil & Energy

Tight Now, Loose Later: Oil Futures Flash Warning

Published

20 mins ago

May 12, 2025

The Tide

Last week, OPEC+ announced it will once again accelerate the pace of unwinding of production cuts, with output targets for June increasing by 411,000 barrels per day, equivalent to three monthly increments.
This follows a similar move in April, with the organization appearing willing to stay the course amid low oil prices and fears of weakening demand.
We reported that global crude inventories remain low enough, thus giving OPEC+ a window to scale back its voluntary cuts until the market surplus finally arrives.
Saudi Arabia appears intent on “punishing” OPEC+ rascals such as Kazakhstan and Iran for repeatedly violating their quotas.
Commodity analysts at Standard Chartered have reported that the latest OPEC survey of secondary sources reveals that Kazakhstan’s crude oil output clocked in at 1.852 mb/d in March, 384 kb/d above its OPEC+ quota.
Further, the country also failed to keep its promise to cut 38 kb/d in compensation for overproduction in March, bringing its total overproduction to 422 kb/d.
The same scenario is expected to unfold in the coming months. Kazakhstan produced 240 kb/d more y/y in March, a sharp contrast from the other eight OPEC+ members who produced a combined 612 kb/d less.
And now, the oil futures markets are sending a dire warning that oil bulls could find themselves in trouble quite soon due to a combination of the OPEC+ output hike and Trump’s tariffs.
Oil futures curve has formed a rare “smile” shape, a structure Morgan Stanley says was last seen briefly in February 2020 just before the infamous oil price crash.
On Wednesday, Brent futures’ July contract was trading at a premium of 74 cents to the October contract, a market structure known as backwardation, foreshadowing immediate tight supply.
However, prompt prices from November have formed a contango, with forward prices flipping to a discount, indicating oversupply as traders predict Trump’s tariffs will eventually weaken oil demand. Having backwardation and contango together leads to the rare “smile” shaped curve.
According to the latest available data by the International Energy Agency (IEA), global oil inventories stood at 7.647 billion barrels in February, down from 7.709 billion barrels for last year’s corresponding period and close to the bottom of their historical five-year range.
Meanwhile, refiners’ appetite for crude is climbing ahead of the peak driving season in July and August, “Refinery maintenance in the Atlantic basin will start to taper off, increasing oil demand (for refining)… Summer driving should provide some support,” BNP Paribas analyst told Reuters.
Global oil demand is expected to rise by 1.3 million barrels per day in the third quarter of the current year, up from an average of 104.51 million bpd in the second quarter, the IEA has predicted.
The 1 million bpd output increases announced by OPEC+ so far, coupled with another 400 kb/d increase in July, almost matches the predicted demand increase, implying oil markets will not face a surplus till late in the year.
Meanwhile, oil prices jumped in Thursday’s session after the Trump administration announced it has struck a trade deal with the UK. Brent crude for July delivery was up 2.7% to trade at $62.75/bbl at 12.50 pm ET while WTI crude contract for June delivery added 3.0% to change hands at $59.86 per barrel. However, terms of the deal appear to fall well short of the “comprehensive” package Trump earlier touted.
According to Trump, UK Prime Minister, Keir Starmer, will further reduce non-tariff barriers and fast-track U.S. goods into his country.
Meanwhile, another solid week of jobless claims underscored the Federal Reserve’s ongoing unwillingness to cut rates. U.S. jobless claims fell 13,000 to 228,000 for the period ending on May 3.
Continued claims, however, clocked in at just over 1.9 million, near the highest levels since 2021, suggesting workers are still finding it difficult to secure new jobs as the economy stalls.
That said, commodity analysts at Standard Chartered have predicted that path of least resistance for oil prices is lower in the coming months, with oil prices to remain low before beginning a gradual recovery later in the year as U.S. oil output declines.
StanChart, however, says there’s some technical support in the short-term, with fundamentals remaining fairly positive. Recently, StanChart cut its 2025 oil price forecast to $61/bbl from $76 and also lowered its 2026 forecast to USD 78/bbl from $85 citing Trump’s tariffs.