Good evening.
I would like to thank Mr. President of the Republic of Portugal Aníbal Cavaco Silva for your invitation and say that you have our deepest sympathies on the death of your father. We would like to thank also Portugal’s Prime Minister José Sócrates, GALP President Manuel Ferreira de Oliveira and ex President, Mr. Mario Soares, who took the necessary steps for our participation in this event.
Distinguished members of the panel, here, in Lisbon, I would like to thank the vast Portuguese community in Venezuela that has enlivened our society, and greet the soul of the Portuguese people: Camoens, Orlando Pessoa and José Saramago. The issues discussed in this forum are very significant. I must speak, both as the Chief Executive Officer of a state-run oil holding and as the People’s Power Minister of Energy and Petroleum of Venezuela. I think that sites like this should be used to clarify positions.
On some occasions, oil consuming countries organize forums to listen to what they want to say. I feel I need to speak on behalf of oil producers and their national companies.
It should be noted that, unlike international oil companies, national companies have different standards, approaches and goals. National companies are tools created by our states to utilize our natural resources, particularly oil and gas, as efficiently as possible. We must also perform tasks inside our economy that are related by no means with the objectives of international oil corporations or private companies.
We must bear in mind that oil and natural gas are non-renewable natural resources that are running out. Therefore, we claim the sovereign right of some countries to set the utilization rate of our resources and get a far price for them.
We have a different viewpoint, because we think that fossil fuels are non-renewable and run the risk of depletion. Therefore, they should be considered otherwise. There must be a commitment between producers and consumers for a balanced market and fair management of such resources.
As a result, we do think, and claim our right as OPEC founding member countries, that the oil market is and should be influenced by regulation tools, such as our quota systems. Previously, the Texas Commission used to set the quota system in an attempt at offsetting supply and demand.
Our role as national oil producing company and oil producing country is to address the issues of steady market and reliable supply. I would like to talk somewhat about the current conditions of global oil supply.
On the one hand, more than 70 percent of world oil reserves are in OPEC countries. Therefore, this Organization plays a fundamental role in the global energy balance and has played it effectively in the face of the ups and downs of the oil market. On the other hand, oil of non-OPEC countries has declined significantly, particularly in Europe, the Northern Sea and other countries of the Americas. Perhaps our major contribution to this forum might be to make a firsthand presentation of the oil policy of a producing country like Venezuela and our role as a national oil company responsible for the implementation of such policy.
First of all, I must say that there cannot be reliable supply in the absence of fair treatment for oil producing countries. I have listened here to some of the honorable panel members saying that contractual conditions have changed over the course of time, and we intend to claim our right to change or adjust these conditions on fair, reasonable terms.
Particularly in our country, the government of President of the Bolivarian Republic of Venezuela, Hugo Chávez, has made since 1999 a number of adjustments to the fiscal and tax policy, claiming thus our people’s fundamental right to use oil as a gearshift for development. Let me say that when we took office, we found that our oil policy and our national company were in the midst of privatization.
I must clarify here that Venezuela is contrary to privatization of our national companies and any of their basic activities. We have claimed the right of national companies to develop and produce our natural resources to the benefit of our country and the world. I am speaking on behalf of our company, Petróleos de Venezuela, S.A. In 2006, the company recorded gross revenues for USD 99 billion; output for 3.3 million bpd, and a refining capacity of 3.3 million bpd. The corporate 2012 investment plan amounts to USD 70 billion, to raise the output to 5.8 million bpd and the refining capacity to 4 million bpd of oil and 12 billion cubic feet of gas. All of these are sound numbers that show the significant role to be played by our national companies in terms of output and availability in the world market of our oil resources.
Again, we found in our country that our national company was on the way to privatization, but we stopped it. We strengthened our national company and now Petróleos de Venezuela, S.A. is the fourth major company in the world. We made also some fiscal adjustments. Therefore, both foreign companies and PDVSA should return to the Venezuelan state what we view as fair on account of the exploitation of our natural resources. We found a number of agreements that had been executed in the nineties as part of the so-called oil opening. Our traditional position as producer and OPEC founding member country had suffered a setback. The fiscal and tax system had been swept. We found, for instance, that large volumes of oil production -600,000 bpd- were delivered to multinational companies, which paid the National Treasury only 1-percent royalty. This is virtually nothing. The principle of the Venezuelan state ownership of subsoil hydrocarbons had been damaged.
We found also that the tax system had collapsed. It fell from our standard schedule of 50 percent to 34 percent. That is, in our country, the approach of international oil companies had prevailed, namely: unlimited access to natural resources and removal of all fiscal and tax systems in order to produce, have a volumetric goal and have a niche in the hydrocarbons marketplace. We put an end to this policy. We paid dearly for it with socio-political unrest in 2001. There was a coup in 2002 and then instability. We eventually took over our oil industry. I must say that we have standardized our oil fiscal and tax system. Now we have set clear rules for the foreign private sector planning to invest in our country. And we must advocate always our people’s right to enjoy and use the oil profit for our development.
Further, we claimed the Venezuelan state right to control oil development, in this case, through PDVSA.
We do not believe in privatization, but in reinforcement of our national company as a tool to utilize our resources and a tool for domestic development. I am making emphasis on these two issues for consumers, particularly the European Union, to realize that there cannot be reliable supply in the absence of stability in oil producing countries. There cannot be reliable supply where the people’s rights have been violated. There cannot be reliable supply where peoples or countries are plundered in the international private interest and against the national interest.
We maintain in the context of OPEC that there must be a balance, a balance between the interests of major producers and consumers, based on equality, justice and fair common treatment.
Since 1999, we have experienced a very important process labeled as re-nationalization of our oil industry.
Some of the companies with which we are holding talks are represented here –British Petroleum, TOTAL, ENI. We have compromised and settled with some other major world companies based on our domestic laws and regulations. As for other companies, since no agreement was reached, court proceedings and international arbitration are underway in order to enforce our rights. Anyhow, under our current policy, we can say that Venezuela took over again our main activity, the oil business, our fiscal and tax system and the exploration and exploitation of our major resource.
I would like to list some focal points in our policy related to the Oil Sowing Plan at the Orinoco Oil Belt. Once our oil policy and control over it have been restored, we will proceed with expansion of our reserves. The Oil Sowing Plan is set to reach 5 million bpd based on the development of the Orinoco Oil Belt. There are in this place almost 235 billion barrels of oil. We have divided the site into 27 blocs that we are developing together with national companies of friend, fellow countries. A total of 20 billion barrels of oil has been certified. As a result, Venezuelan proven oil reserves stand at 100 billion barrels. We seek certification in 2008 and 2009 of 215 billion barrels of oil to total 315 billion barrels of oil proven reserves.
National or state companies are taking part in this process, namely: Iranian corporations, Spanish REPSOL, Russian GAZPROM and LUKOIL, Chinese CNPC, Indian ONGC, and companies of Cuba, Vietnam and Belarus. Following this event, we will enter into an agreement with GALP to certify bloc Boyacá 6 at the Orinoco Oil Belt, where 50 billion barrels of oil are estimated to be originally on site. It will be the first step as part of a strategic agreement between Portugal and Venezuela to ensure supply to our fellow Republic of Portugal.
Diversification of the marketplace is another focal point in our policy.
Venezuela used to be a satellite of the US economy. Since 1914, the beginning of our oil production, all of the output went to meet the energy needs of the United States. We have made the political decision to diversify our supply. In this regard, we have executed significant agreements with China. This means that CNPC will develop in the Orinoco Oil Belt up to one million bpd and we, for our part, will have access to three refineries in China. We will place these volumes and turn into the major energy supplier of one of the largest economies in the world.
Our plans for diversification include also the supply to Europe. We think that Venezuela could play a leading role in the current supply to Europe both of oil and liquefied petroleum gas. Our country has the eight largest reserves of gas in the world. We are to build our first LPG re-gasification plants to make gas available to our fellow countries of South America, Europe, Africa, and, why not, the East Coast of the United States.
We have held talks with multiple oil companies in order to meet the European gas needs. According to some studies, Europe is facing a delicate situation because of the decline in its own production and its dependence on few countries. We hope to become a gas and oil supplier for Europe. In this regard, we are working on a strategy towards comprehensive agreements with European public companies. These agreements include supply –from a stake in the Orinoco Oil Belt and other oil deposits, to transportation and joint shareholding here, in the European market. Diversification of our market is a fundamental issue in our oil policy.
Further, we are working on a very important people’s involvement plan to address the regional needs.
There is a set of initiatives with neighboring countries. For one hundred years of oil production we had ever used not a single barrel of oil for their development. Now, we have entered into joint agreements with Colombia, where we will lay a gas pipeline to supply gas to that country; Brazil, where we are building a refinery along with Petrobras; Uruguay, where we are supplying 50,000 bpd of oil; and Bolivia, where we are expanding La Teja Refinery and supplying 200,000 barrels of diesel. Agreements have been executed also with Argentina, Paraguay and the Caribbean.
Note that as we are aware of asymmetries in the global oil market, our relation with the poorest countries in Latin America is different from the free market. As we know, while the oil market is strained and there are high oil prices, this makes not a major impact on some economies, on the economies of industrialized countries. However, we understand that oil prices are making an impact on some developing countries, the poorest in the world. Therefore, Venezuela, accountable to her Latin American fellow countries, has set supply plans different from the ordinary market under Petrocaribe. We finance 40 percent of the invoice during 25 years and get for valuable consideration 60 percent in goods, services and kind. This is the case of Cuba. We provide them with 90 million bpd in exchange of public health care. This has helped us to save thousand lives in our country. The point at issue is to lessen the effects from an asymmetric oil market such as the present one.
Last, I should mention that, in addition to fair treatment for the countries that own the resource; in addition to a fiscal and tax system that helps us use the oil to take our people out from misery and poverty, for instance, in the Venezuelan case; in addition to having the control of the main national company, the issue of political stability is most important.
Consuming countries, the largest consuming economies in the world, cannot ask for reliable supply if they fuel political unrest in our countries. Our country was the victim of a coup because we undertook a nationalist oil policy in our own interests. We were subject to sabotage, resulting in losses of almost USD 8 million and a period of political unrest that was overcome thanks to our people’s active part and our democracy. However, concomitantly, Iraq was invaded. And I must say it here on behalf on an OPEC member country, Iraq was invaded in order to get twice the oil output from the Republic of Iraq available in the market. And that invasion has turned into a chaos. It is a shame on humankind and a disaster in economic and oil terms. Today, our fellow Republic of Iran is under threat for oil-related issues. But industrialized super powers need to realize that there will be no reliable supply if turmoil and havoc are to be spread over our producing countries.
On behalf of our government and our people, I would like to thank you for giving me the opportunity to express these simple views. Once instability in the global oil market and the attempts at disturbing our countries are overcome, we would like to tell Europe, the European Union, that we are interested and willing to join efforts with the companies in this region. In this way, we will produce enough oil and have a reliable supply in order to keep our growth. We are very worried about the annihilating consumption rate of our planet, environment and natural resources. When speaking about reliable supply, we urge major consuming countries to outline a plan in order to rationalize their consumption, because these resources will be eventually depleted. Once the abundant reserves of oil are over, the planet should be ready to start a new era and find an alternative production economic system more consistent with the planet and the human being.