Interview to Bernard Mommer, People’s Vice Minister of Hydrocarbons for Energy and Petroleum and director of PDVSA, during the TV show En Confianza. Interview carried out by Ernesto Villegas in the TV channel Venezolana de Television (VTV).
Caracas, February 12, 2008.
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Ernesto Villegas (EV): Good morning to you friends of the Bolivarian Republic of Venezuela, Latin America and the world. Thank you very much for being here with us. Today is Tuesday February 12, 2008 and we are celebrating the 194th anniversary of La Victoria Battle, fought in Aragua state, a historical event that led to the celebration and set the date for the National Youth Day in Venezuela.

We greet and congratulate the young ones, and invite you all to observe the example set by these young people in La Victoria who fought that passionate battle, back then, under the command of the great General Jose Felix Ribas. And it was General Ribas who pronounced that phrase that has become the motto of the Bolivarian Government’s Jose Felix Ribas Mission: “Achieving victory is necessary”.

We will further talk about that topic in this broadcast, but we have to, of course, start by discussing the news about the dispute between the multinational corporation ExxonMobil and Venezuela.

Today we have here in the program a guest who knows that topic very well. I am talking about Bernard Mommer, Vice Minister of Hydrocarbons for Energy and Petroleum and director of PDVSA. Vice Minister Mommer has extensively participated in the conceptual design of Venezuela’s recent oil policy and the Full Oil Sovereignty strategy. Good morning Mr. Mommer.

Bernard Mommer (BM): Good morning Ernesto.

EV: It has been five years since we last interviewed you in this program.

BM: This is the second time in five years.

EV: It has been five years since the oil sabotage.

BM: Exactly.

EV: Now we once again see turmoil in the oil world because of the commercial dispute between Venezuela and the multinational corporation ExxonMobil, and a similar consequence is threatening the nation: halting its oil industry and tying up the hands of the industry that generates 80% of the country’s income. I would like to dissect and analyze this topic to the extent possible with the guest we have here on Tuesday. But let’s quickly take a look at some newspaper headlines.

These headlines read as follows: “PDVSA prepares counterattack” Ultimas Noticias newspaper. “Ramirez: we are evaluating suing Exxon for financial damages”. “This will entail accusing 12 former PDVSA executives and a law firm for the oil opening”. According to the international news agency Reuters “PDVSA moved accounts to Switzerland”. “Crude shoots up”. “Coca-Cola plants and warehouses taken over”. “Mexicans protests against oil privatization”. “Canada and Brazil will substitute Venezuelan oil” El Universal newspaper. “President Hugo Chavez’s threat of cutting supply to the U.S. because of the legal conflict with ExxonMobil pushed oil prices up to 93.49 dollars per barrel in New York”. “The U.S. Administration expects the Venezuelan government to abide by international law regarding PDVSA’s legal battle”.

During this interview we will review and thoroughly analyze the grounds for media outlets to state Canada and Brazil will substitute Venezuela’s oil exports to the U.S. According to analyst John Kildouf “although President Chavez has never materialized his previous threats to cut oil supply to the U.S., his personality and the uncertainty surrounding his subsequent decisions could keep oil operators en garde”. On his part, “Grek Stigham, vice president of the Canadian Association of Petroleum Producers stated that profits from the huge oil deposits located in Alberta, Canada, and a series of findings in the Brazilian coast line foresee a change in the continent”. It seems this headline is related to the body of the news article. It seems this is related to the ongoing dispute. But what the text indicates is that there has been some oil findings in other areas, therefore supply to the U.S. would come from other places”.

“PDVSA asked its clients to make payments in a Swiss bank”. “ExxonMobil accused PDVSA of violating Venezuelan law as well”. “PDVSA assets in Europe at risk of being seized”.

ExxonMobil accuses PDVSA of violating Venezuelan law. But it turns out they are leaving Venezuela because they do not accept a Venezuelan regulation that compels them to follow a particular shareholding structure in Joint Venture Companies. That’s the way things are in a legal battle.

EV: What is your perspective on what is happening right now with the dispute between Venezuela and ExxonMobil?

BM: It is part of a sequence of events that are part of developing the Venezuelan oil policy implemented since President Chavez got to power. This development process includes several stages. The oil sabotage was a very hard stage, and it entailed moving forward with the oil opening, the Orinoco Oil Belt businesses and the coup d’etat. All of these processes aimed at continuing with the oil opening. Then, the coup d’etat and the oil sabotage were defeated, and at that point we started implementing actions to promote oil sovereignty.

EV: Were the sabotage and coup d’etat mechanisms to defend and prolong the oil opening process?

BM: Obviously. Without a doubt. The perpetrators of the coup d’etat and the old PDVSA stated so. They were trying to defend a policy. We have broken that policy down. What ExxonMobil is currently doing is the last chapter of the history of oil opening, of an entire program to nationalize oil, a natural product, and to globalize it. This is exactly the last chapter because in the past few years we have been working and renegotiating all contracts.

ExxonMobil has had several operating agreements that were disguised as a couple of operating agreements and then as a single Joint Venture Company, which was subsequently dissolved in a friendly way. Then strategic associations came along and about 12 companies became part of such process. Of those 12 companies, we did not reach agreements with two of them and they were both American companies: ExxonMobil and ConocoPhillips. We are currently holding conversations with the latter as we did with ExxonMobil, except that ExxonMobil chose the aggressive path.

EV: But what is the different between operating agreements and strategic associations?

BM: It is important to mention that PDVSA signed the operating agreements on its own, without going to the National Assembly that existed at that point in time. The rationale behind that was that these were allegedly operating agreements and not oil producing companies. Actually, they were oil producers, and for that reason we declared them illegal during Chavez’s government and we eliminated them.

The extinct National Congress approved strategic associations but they are full of illegalities, specially the Cerro Negro agreement. However, they were legally stronger than operating agreements. The latter were a complete fraud from beginning to end.

EV: Were agreements and strategic association methods to privatize the oil industry?

BM: Exactly. The idea was to privatize the oil industry and decrease the earnings derived from our natural resources. For that reason royalty payments were 1%. This means our natural resource is assigned a nominal value of 1%, and this is really privatizing production and globalizing such natural resource. It also means the natural product is not ours, it is not Venezuelan, but rather it belongs to world consumers who receive it without paying for it.

EV: Was the Venezuelan State giving away its authority to levy taxes on this resource by signing these agreements and associations?

BM: The easiest thing to do was to charge royalties. What is the production percentage I am entitled to? 1%. Nowadays, with the Full Oil Sovereignty policy, it is 33.3%

EV: What can you tell us about the argument that oil prices were really low back then?

BM: Not necessarily because we had shared profits and taxes. One argument was that it is not worth it to pay for this natural resource. This is a result of the oil opening process, and it is a mechanism to debilitate the strength of the natural resource in Venezuela and the rest of the world.

EV: Back then people were arguing that you needed gigantic investments to produce the heavy oil located in the Orinoco Oil Belt; that the investment was too high for the State to undertake it all by itself.

BM: With regards to the quantitative aspect of oil prices, this argument can be somewhat valid in the Orinoco Oil Belt during the 90’s because of the upgraders, in general. Production was never a problem. Also, it didn’t matter because they always used the most expensive oil barrel to demonstrate that royalties had to go down. They were basically arguing that if you don’t raise the price of the oil barrel they will not produce it. But it worked as an argument. Actually, in general the decrease was independent from the profitability. There was a project in 1999 in PDVSA that decreased and little by little eliminated royalties. It was the El Araguaney Project which reduced royalties to 5% in general. But there was some confusion there because it was expensive. No, we will not pay royalties. Why? Because consumers don’t want to.

With regards to the qualitative aspect, one of the things we eliminated from all Joint Venture Companies was the figure of arbitration against PDVSA. In other words, private partners cannot bring a lawsuit against PDVSA.

EV: We are still with Bernard Mommer, Vice Minister of Hydrocarbons of the People’s Ministry for Energy and Petroleum. Where were you born? You seem to have a European accent?

BM: I was born in France but I came to Venezuela in 1970 and my entire professional life has taken place in this country. My family is Venezuelan. I have officially been a Venezuelan citizen since 1986.

EV: Well, you have been in this country for as long as I have.

BM: Possibly, most of my life.

EV: Was minimizing the State’s participation in the oil industry output a trend developed by the oil opening process?

BM: Yes. The objective of the oil opening process was to privatize production for companies. Moreover, consuming countries were interested in cheap oil and not paying for it was a way to get it. Hence, the oil opening policy would have eventually eliminated payments to the State who is the owner of this natural resource.

The scheme governing to the Orinoco Oil Belt was that the natural resource had a nominal value of 1%. This is ridiculous. There is no oil country that will accept that. They don’t accept Venezuela, but Norway, Alaska, Alberta or Texas won’t accept it either. They all charge royalties. Any country hosting a mineral resource in its soil has to reap benefits from it, regardless of skin color, religion or political affiliation.

EV: What other countries in the world besides Venezuela received 1% royalty during the oil opening era?

BM: In Nigeria; in deep waters in the U.S. the Bill Clinton Administration gave out leasing contracts with 1% royalty. It was an international move against oil producing countries. This was a ridiculous regulation and the problem was how to make it last. There was no way Venezuela would not react to international oil price increases. Nothing happens at the beginning when this measure is introduced. But in the long run, it ruins the government and the domestic economy, and that is exactly what happened. Subsequently, a political strategy was developed to tie up the Venezuelan State so that it could not get out of that arrangement. Let me explain that point because it is that precisely what take us to the ExxonMobil arbitration proceedings. The history of the oil opening process lies in the internationalization of oil. The first thing PDVSA did in the 80’s under this policy was to start taking tons of money out of the country by buying refineries in Germany and CITGO in the U.S., among others. It also set discounted prices for Venezuelan crude supplies. The two strategies were to take money and PDVSA assets overseas. It did so according to a plan designed by Lagoven, PDVSA’s affiliated company back then, derived from Creole Petroleum Corporation, ExxonMobil’s predecessor.

EV: Was this the so called PDVSA’s internationalization policy?

BM: Yes. Then another strategy was implemented. It included having multinational corporations come back to Venezuela to do upstream explorations under certain conditions. These conditions were, for example, zero royalty or 1% royalty in Lagoven’s Cristobal Colon Project. Now, how did we pay for that? The old PDVSA offered 1% royalty to multinational corporations to guarantee these investments, and if the government changed these conditions corporations would be compensated or they could take PDVSA to an international arbitration court. In order to do this, contrary to our regulations, ExxonMobil signed an agreement with Lagoven to go to the Supreme Court of Justice to eliminate the article included in the 1967 Hydrocarbons Law which prohibited any arbitration process involving state-owned companies. Consequently, Lagoven went to the Supreme Court in 1990 and was able to eliminate this article, therefore making possible to introduce arbitration in our legislation. After that, this decision was taken to the extinct National Congress and it was at that point that PDVSA surrendered itself as a hostage to those foreigners. The State is sovereign and can do whatever it pleases, but we will compensate you. That is an absolutely incredible situation: that the State will grant foreigners guarantees against the State. That is beyond belief.

This action granted multinational companies guarantees against any sovereign action implemented by the Venezuelan State and involving tax matters. A State within the State. PDVSA was a State within the State.

EV: So it seems that this was plan orchestrated with that purpose in mind?

BM: Absolutely. No doubt whatsoever.

EV: So what about the argument that overseas investments were needed to guarantee markets for Venezuelan crude?

BM: Never. You don’t need to own royalties to sell oil or own the refinery to refine it. Oil is a scarce resource. The problem is selling oil based on prices. Oil is increasingly scarce. This is not a story; it is easy to prove this point. Oil is increasingly located deeper and more drilling is necessary. The deeper oil is, the scarcer it becomes. What we are witnessing now with ExxonMobil is oil opening’s true story. ExxonMobil’s action allows for the plaintiff to create turmoil, to generate anxiety in the banking industry and the oil world. Yet, we are well positioned and ExxonMobil is isolated. Large multinational corporations in Venezuela such as Shell, BP, Chevron and Total agreed to the migration process and to the elimination of arbitration in Joint Venture Companies. What happened with Cerro Negro will never happen again in the new contracts.

Obviously I was involved in all negotiations and I can guarantee you that the disagreement we had with ExxonMobil didn’t involve economic terms, but rather the legal relation not of the oil regime, but the political structure.

EV: In other words, did the multinational corporations that were partners in Joint Venture Companies accept minority shareholding?

BM: Conversations were over when ExxonMobil clarified it would not accept the elimination of the provision for arbitration against PDVSA included in the agreements. We said we had nothing further to discuss because we did not allow that provision to anyone else. We spoke to Shell, BP and all other corporations and we discussed those points. You are not PDVSA’s partner, PDVSA is your partner, and PDVSA is the majority shareholder, not your hostage. With regards to the tax regime, the State, in this case the People’s Ministry for Energy and Petroleum, is responsible for having all necessary discussions with private partners to take the pertinent sovereign measures.

EV: Did the corporations that signed the agreements to migrate to Joint Venture Companies accept the elimination of the arbitration provision? In other words, any discussion that may arise will be solved in Venezuelan courts?

BM: Yes, indeed. Discussions between partners are very common. They can arise due to profit distribution issues or anything. But you have to have a normal partnership relation. Plus there are conflict resolution methods. What you cannot do is bring a lawsuit against PDVSA because the State did this or that. The State responds on its own. That means that what ExxonMobil is doing today won’t happen again because this is the last chapter of a story that is about to end.

EV: That means that ExxonMobil hoped to uphold a clause according to which if the agreed production conditions were to change the company would have the option of arbitration?

BM: Arbitration against PDVSA. We have to differentiate: we have two arbitration processes with ExxonMobil. ExxonMobil began one arbitration process against PDVSA and another one against the Republic of Venezuela in the International Centre for Settlement of Investment Disputes (ICSID), a World Bank institution headquartered in Washington D.C. The latter is based on the bilateral investment agreement between States. But the action against the State has no temporary injunction clause. This means they have to win the lawsuit first and then see how they will collect. This action wouldn’t have allowed them to create the anxiety they wanted to create by seizing those assets.

EV: Also, the State has sovereignty immunity

BM: But by engaging in arbitration against PDVSA, which is a state-owned company, they are trying to seize the assets the company has in the United States and that belong to Venezuela, such as bank accounts or assets. That was precisely what the old PDVSA did. It put itself in a deliberate position to be susceptible to damages in case lawsuits arose. Furthermore, this action goes in tandem with this unprecedented media campaign. The information they were initially broadcasting in the country about this issue was beyond belief. It has nothing to do with what’s really happening. ExxonMobil suddenly informed it had frozen 36 billion dollars. That is false. What really happened was that the Court unilaterally issued a ruling in secret, without previous consultation with PDVSA, without having the presence of the involved party. This week PDVSA lawyers in the U.S. will issue the first response to this. The Court issued such rulings based on ExxonMobil’s allegations and without having any preliminary hearing.

The only concrete measure derived from ExxonMobil’s action is that one of PDVSA Cerro Negro’s accounts was frozen. ExxonMobil was a Cerro Negro partner in the U.S. We cancelled that partnership, expropriated the assets and own them compensation.

EV: In other words, ExxonMobil’s discussion is also related to how much PDVSA will give to the company as compensation?

BM: Exactly. Yet, ExxonMobil was able to freeze a 300-million-dollar bank account in New York.

BM: Yes. At the end of December. Now I have to clarify that neither PDVSA nor the country are in ruins. They led the international community to believe that all PDVSA accounts were frozen. That is not true. No PDVSA account has been frozen. You cannot do that in the U.S. until you win the lawsuit. Here there’s the rumor that Venezuelan oil shipments will be seized, that there are serious financial solvency problems, among others. ExxonMobil notified all banks and companies in order to create panic and see if it could effectively create a crisis.

But they have nothing else to do because we did a good job in the Joint Venture Company migration process with all but two corporations. The other corporations accepted it and migrated. Moreover, financial debts with the banking industry were handled impeccably. For example, Petrocedeno, formally Sincor, migrated to a Joint Venture Company and all documents were issued again so that Sincor’s debts were transferred to the Joint Venture Company. We don’t have any problems with the banking industry.

EV: What happens in all countries of the world when oil prices go up and they realize the oil sector is yielding much more to producing companies than to the State is that they review the conditions, right?

BM: Naturally. But that is precisely what countries like the U.S. didn’t want to do. England and France have discussed the topic simply because profits are too large at a given time and it is not proportional to their oil production.

In the Joint Venture Company case, profits amount to around 84% of the profits that the State receives.

EV: What is really the scope of this decision concerning PDVSA?

BM: In this case we know very well such scope because we were partners. Since we expropriated the assets, the real number ExxonMobil can hope for is a small percentage, a one-digit figure, between 9% and 1%. That is the real number. If you take Sincor’s case in which we paid 1,100 million and use the same calculations with Exxon, you can reach 1,400 dollars. But you need taking into account that Sincor’s (formerly Petrocedeno) upgrader is very good and Exxon’s upgrader is very bad, the worst of all. Exxon’s investment was very small. It produced just the diluent to extract oil. In other words, the poorest upgraded oil was Exxon’s.

EV: But the decision published in newspapers talks about 12 billion dollars. How does this affect PDVSA?

BM: That is ridiculous. The Court’s ruling stated we have to keep 12 billion in assets in our balance sheet. But PDVSA has around 90 billion so that doesn’t have any relevant effect. The only relevant effect is the 300 million of PDVSA-Cerro Negro. That’s the only relevant effect. The rest of it is just stirring things up to create panic that could lead to a crisis.

EV: We will now watch several videos. The first video has Gustavo Cañonero from Deustche Bank in CNN.

Gustavo Cañonero (in video): “I think in this case we have to consider two factors or two dimensions. First is the factor that limits what you can do in certain sectors. This clearly shows there are companies that are not willing to renegotiate conditions as the Venezuelan State wants to. But we also have to highlight that ExxonMobil’s case is an exception and not the norm. You have to remember that many other European companies have already negotiated the contractual conditions of the strategic associations they had with PDVSA. ConocoPhillips is the only one still negotiating them.

This clearly shows some weakness in the results of a particular energy economic policy. But once again, this is an exception and not the norm”.

BM: Yes. That’s right. Now I want to clarify what we negotiated and what we didn’t negotiate. We negotiated economic terms at a given time because when you buy some wells in assets … but we never negotiated our sovereignty.

From the first day of negotiations we stated “this clause right here will disappear”. We did not discuss the issue. In other words, we began negotiating with well defined political positions. Sovereignty will not be discussed or negotiated here. Numbers will.

EV: The following video includes Henry Ramos Allup, Secretary General of the Democratic Action Party.

Henry Ramos Allup (in video): “PDVSA has made it to the tabloids once again, almost to the yellow pages. PDVSA used to be an exemplary, emblematic company, an insignia and source of pride, not only for Venezuela but also the best managed oil company in the world. Unfortunately, many things have happened and now PDVSA is undergoing a really sad situation. This reaches beyond the suitcase issue, the gas crisis or the refinery crisis, and reaches international cheat.

This is not a trivial thing as Minister Ramirez, head of the PDVSA clique, upholds. It’s not only that 300 million in assets were frozen. That’s a lie. 12 billion in assets were frozen. They are compromised and are no longer available in three countries: Great Britain, the U.S. and The Netherlands. And that’s linked to the oil produced in Venezuela and sold worldwide. Is it that they are going to bring the cash in a suitcase when they sell the oil overseas? Where are they going to sell it so that they can bypass the injunction order?

BM: The statements of Ramos Allup describing the wonderful old PVDSA are shameful. We are talking about the company that turned the country in. When you analyze operating agreement contracts, several of these contracts included services paid to multinational corporations that were higher than what the country was getting. The State was paying more it was receiving as oil revenues.

It is always interesting when you analyze those contracts to see how the old PDVSA turned itself in as a hostage and not as a partner. PDVSA was there as a business partner to be a hostage. Then it gave away the Orinoco Oil Belt and didn’t worry about natural resources. Also, association contracts went through the National Congress, but operating agreement contracts were not.  PDVSA was a façade, a smokescreen to cover up the privatization of the oil industry and the elimination of natural risks regulations. So, all the publicity describing the old PDVSA as efficient doesn’t match the facts.

EV: How will they pay for our oil? According to Ramos Allup we are almost in an economic secrecy?

BM: When I listen to statements like those I wonder what the opposition’s cultural level is. I don’t understand the stand they have taken against Venezuela because they are seeking to win more votes by putting aside the national oil policy. We are not saying the policy is nationalist, that’s exaggerating. We are talking about a national policy. The oil policy cannot be part of the anti-national non anti-nationalist policy. I cannot understand how you can govern an oil country if you don’t have a national oil policy. Whoever promotes this is driven by prejudice. It is necessary to be informed before talking nonsense.

EV: Teodoro Petkoff talked about this topic in the TV channel Globovision. Let’s hear his statements.

Teodoro Petkoff (in video): Of course! Exxon is not a philanthropic organization. Exxon is not a Sisters of Mercy company. Exxon is what Chavez says it is. That’s true. It is not the great Standard Oil. It is a company that had a very bad reputation before. And how many governments did it help to overthrow? But the President should have known that Exxon was going to react the way it did. It was going to be told that war is war and then it would react as it did. It didn’t even talk to the Government. It took the matter straight to the Arbitration Commission and now it hopes to get that injunction.

EV: What do you think of those statements?

BM: Obviously the quality of Petkoff’s and Ramos Allup’s statements is significantly different. It is not true that ExxonMobil did not hold conversations with the Government. Exxon did have talks and serious discussions. I would even say that Exxon made an effort to reach an agreement with us, but it wanted to negotiate points that are guarantees and we said no. That’s how we got to this point. I also believe Exxon took time to define its strategy and chose the most aggressive option possible. But it is not true that we didn’t talk to Exxon and that Exxon didn’t talk to us.

EV: Why did you not reach an agreement with Exxon but you did so with the other companies? Is Exxon’s case similar to Conoco’s?
 
BM: Frequently the problem with big oil companies is that the decisions they make in a country affect other countries as well. They have tons of businesses in other upstream parts of the world. So, if there are consequences or repercussions in Nigeria, Angola and Kazakhstan, whatever happens in Venezuela will also have consequences on the businesses they have in these countries.

EV: You mean that the larger the company is the stronger consequences there will be based on what it decides to accept?

BM: It’s more difficult.

EV: Humberto Calderon Berti, Ex Minister of Energy and Mines during the Luis Herrera Campins Administration and Minister of Foreign Affairs during the Carlos Andres Perez Administration, talked to the radio station Union Radio.

Calderon Berti (audio): “The problem that Venezuela faces is a total lack of legal security. The government doesn’t respect the contracts it has signed and changes the rules of the game every time it so pleases. This results in a natural reaction from those who have invested money in Venezuela.

The Orinoco Oil Belt problem was basically a fundamental change in the contractual terms with ExxonMobil and other companies. When this problem arose many of us said it would bring about a lawsuit against Venezuela. But apparently in Venezuela people think that the country is the center of the universe, that there are no international courts and no international entities you can go to in order to defend investors’ interests”.

What do you think about these statements?

BM: This argument is more serious because Calderon Berti was Minister of Hydrocarbons and then president of PDVSA. So you would ask him to get some information before he starts talking. I don’t have to say this to everybody, but he is different. He was and is considered an expert. But obviously he has no idea of what we have made public, even in the National Assembly reports. There was a Special Committee that investigated the oil opening process and wrote a very good 50- to 60-page report. We put forward our arguments in these contracts and we discussed them extensively clause by clause. It was not just that we eliminated or abode by a contract. We explained very well what we deemed unacceptable and what we could accept. We did not say: “you have no rights”. With regards to sovereignty, that is unacceptable. With regards to economics, it needs to be adjusted. So, it is sad to hear an expert like Calderon Berti saying that the government acted arbitrarily, and it is an indication of the collapse of the Fourth Republic. These are people who lost sight of their country, people who lost sight of the Nation.
 
EV: To close the program we have a somewhat confusing headline from the El Universal newspaper, a journal that is closely linked to the oil world and that strongly defended the oil opening process back then. “Canada and Brazil will substitute Venezuelan oil”. This newspaper is somehow saying that it doesn’t matter because the oil that Venezuela is currently selling to the U.S. can be brought from Canada and Brazil. Do you think that scenario is feasible, likely or unlikely, a scenario where this dispute would escalate so much that oil supplies to the U.S. would be completely halted?

BM: When I got to Venezuela in 1970 newspapers were full of stories about oil findings in Alaska and how Venezuela’s oil wouldn’t have a market due to the Alaskan production. Alaska reached a 1.5-million barrel production. Since 1970 the U.S. production has continued to fall and Alaska has stopped it. Brazil has some great findings but it is a big consumer. These findings could guarantee fulfilling Brazil’s dream of being energy independent. But Brazil will never be a very significant oil exporting country. Canada is producing in bituminous areas and there is bitumen there. They are producing and they will stop the falling of North America oil production. But if you are wondering if Venezuela’s oil could be replaced, the answer is no, it is not replaceable. Oil is a scarce resource. Americans don’t care about prices. Oil production has been falling since 1970. This means 38 years. And it continues to fall. Nowadays we have more intensive production methods. So the reason why countries that produce the highest oil volumes are currently producing less than they did 30 years ago is because oil is running out.

EV: Also oil consumption is going up.

BM: Yes, obviously consumption continues to go up. Oil scarcity is not a joke, it is not speculation. Technological developments have been able to stop this fall, and that is precisely what they have attained. New provinces are being promoted, including Kazakhstan and Angola, among others. Production in Africa and Brazil is going up. But that is all you have and it is not enough to compensate for the fall in the North Sea, for example.

EV: So is it wrong to think that producers are competing to be able to sell our oil? Or is it the other way around?

BM: Evidently. Oil is a scarce good. Perspectives are very clear. There will not be large findings that will lead to changes in this trend. Therefore, Venezuela’s reserves are known for their size. There is no way we wouldn’t be on the map or we wouldn’t find buyers for Venezuelan oil.

EV: Would it be possible to think that the U.S. Government, or as President Chavez calls it, the empire, could be behind ExxonMobil’s action as a multinational corporation?

BM: I am not sure if you know the risk you’ve taken by asking me that question because the answer is not simple. Naturally, when you study the oil opening policy you have to differentiate between two things: the policy of consuming countries and the policy of multinational corporations. Corporations are interested in their profits and not in whether royalties are paid or not. What they care about is if you pay or not. They don’t care if you pay royalties or if you have large profit. Consuming countries are interested in cheap oil. That’s different.

EV: Can you have interests of countries and multinational corporations that overlap?

BM: There are companies that implement the consuming countries’ policy of eliminating royalties. And this wasn’t a strategy developed by such corporations. But ExxonMobil spearheaded the policies of consuming countries.

I would like to clarify a point. When you come to a country as an oil producing company you have to refrain from promoting policies of consuming countries in that nation. That is not your job. You have come as an investor producer and, by the same token, we don’t ask Shell, BP or Chevron, which are foreign corporations, to defend our interest over there. No. We do that by ourselves. You take care of your business as a technology company, as a company that can assist in producing oil. But stay away from the oil policies of consuming and producing countries. That is our problem.

EV: You have not answered my question, do you or do you not think it is feasible that Venezuela will stop selling oil to the United States?

BM: It is always feasible. It will carry costs because margins are really tight in the refining structure.

EV: But do you see it as a likely, unlikely, probable or improbable scenario?

BM: I don’t want to give my opinion on this subject. But let’s say it will always create economic adjustments. But it is feasible, it is possible.

EV: No one wants to.

BM: No. And it would cost us and the other party money. It is a complex situation because U.K.’s refining network is made for imported oil and not English oil. Sometimes the oil flow is strange. Moreover there are U.S. refineries specialized in Venezuelan oil, and if there were none they would incur costs, etc.

EV: (reads the public’s testimonies).
Carlos Serrano from Filas de Mariche: “I would like to know if the assets of the deputies or senators that allowed this way of negotiating with ExxonMobil can also be frozen.”

Flores Ackell from Alto Prado: “Imperialism won’t go back to the old game, oil opening was killed by the guillotine of President Chavez and by the revolutionary leaders like Francisco Mieres”.

Nixo, cartoonist and poet: “They justify invasion with any excuse and they attack by desperately searching for oil at ridiculously cheap prices”.
 
Mauro from Catia. “We Venezuelans were taught to defend the U.S. but really the U.S. depends on us because of our oil. For the first time Venezuela has an opposition to the oligarchy, to the ecclesiastic hierarchy and to the empire”.

Roberto Bastardo: “Many years later we will have another La Victoria battle. We are implementing the School to Train Revolutionaries to respond to the aggressions from the North”.

Jose Antonio Marquez from Anzoategui state: “Let’s carry out a commercial boycott against ExxonMobil’s products. They are no longer in the lubricants market. They used to have service stations. We still see some Mobil logotypes.

We would like to end the program with these words. Thank you very much. We did not talk about the very polemic topic of Orimulsion.

BM: It was an old hobby of mine, but it’s gone.

EV: ¿Is Venezuela not producing any more Orimulsion?

BM: Starting on December 1, 2006, not a single ton of Orimulsion has been produced, and it will not be produced again.

EV: Not even for the Chinese?

BM: No. That was cancelled and the company finally migrated. Now we have a 60% company where we produce oil blends and we export them.

EV: And that is still a better business than Orimulsion?

BM: Of course. Orimulsion implied a 6-dollar discount per barrel.

EV: Perfect. Thanks Dr. Mommer. We will continue our conversation some other day. Good luck. And to you my friends, thank you very much for being here with us.