Oil squeeze

​Ramirez calls operating agreements 'anti-national'
 
By Jens Erik Gould
Daily Journal Staff
May 25, 2005

​This is part of a series of re-published articles I wrote in 2005 for the Daily Journal in Caracas.

Crowds of government supporters surrounded the National Assembly (AN) on Wednesday to cheer Energy and Mines minister Rafael Ramirez as he tightened the government's grip on foreign oil companies.
In an appearance lasting all day, Ramirez told a special AN commission formed to investigate operating agreements with foreign firms that an initial study of the agreements showed them to be ""illegal."
The commission will be in charge of studying the documents, deciding if multinational companies are guilty of irregularities, and whether sanctions will be applied to these firms, he said.
Turning his scrutiny towards strategic associations that upgrade heavy crude, Ramirez said that Venezuela would charge the Sincor project a 30 percent royalty fee for production exceeding agreed-upon levels.
The minister said that Sincor, comprised of France's Total, PetrÛleos de Venezuela (PDVSA) and Norway's Statoil, is currently producing 210,000 bpd and will soon reach 260,000 bpd, while the National Congress in 1993 only authorized Sincor to produce a maximum of 114,000 barrels per day (bpd).
Ramirez said he will also reduce the operating area of the four strategic associations to 250 km2. Sincor, is currently operating on 324 km2, he said.
The minister, who doubles as the president of Petroleos de Venezuela (PDVSA), wasted no time in criticizing the company's former management. He called the "old" PDVSA "essentially anti-national," accusing it of conspiring with international interests to "assault" the Venezuelan state, which he said brought economic and social crisis to Venezuela.
He called the oil "opening" or "apertura," which opened up investment to foreign firms in the 1990s, a strategy "orientated towards the capture and control of PDVSA by multinational interests, towards the minimization of the value of our resources, towards the evasion of control on the part of the state, and towards open and direct confrontation with the nation and the Venezuelan state."
He added that the "old" PDVSA preferred to pay taxes to foreign governments than to the Venezuelan state.
"The National Assembly has to take a position against this scandalous case," he said.
The minister formally handed over to the AN a document including the texts of the 32 operating agreements, which he said the AN and PDVSA did not previously have access to. Ramirez added that he wanted Venezuelan citizens to have access to the documents.
Turning his attention to Citgo Petroleum Corp, which is owned by PDVSA, Ramirez said that a study could demonstrate a failure to pay taxes by the company. He added that the ministry is conducting a study of oil sales to the United States since 1999, when the two countries signed a double taxation agreement.
The minister has previously criticized an agreement between Citgo and PDVSA that allows the former to buy oil at discount prices.
A price control system similar to ones used by Saudi Arabia and Mexico will also be put into place, Ramirez said. The system will assure that PDVSA maintains the same price for all of its clients.
Of the deputies who posed questions to Ramirez, Christian Democrats (Copei) party member CÈsar PÈrez Vivas and deputy CÈsar Rincones of AcciÛn Democr·tica (AD) were notable members of the opposition.
Before Ramirez spoke, Perez Vivas demanded that the session be suspended, calling Ramirez "corrupt" and charging that the session would not be conducted in an objective manner.
"Yesterday we established rules and methodologies for this interpellation and this morning we can observe that an audience has been prepared to give a political show rather than an interpellation," said PÈrez Vivas.
Yet Ramirez saw nothing wrong with the session. "I thought it was a very democratic discussion," said Ramirez afterwards, noting that over 20 deputies had a chance to speak.
Rincones told Ramirez he believed PDVSA needed to be supervised by the Comptroller's office. The deputy said he had no problem with PDVSA money going to social programs, but wondered if some oil profits might be ending up in corrupt pockets.
Yet Ramirez said after the session the ministry did not "have anything to hide." The minister recognized that problems currently existed in the oil sector, but preferred to discuss such matters "at another time and in another space."
Ramirez also said that the press' coverage of supposed irregularities at PDVSA was "very confusing," and that he "wouldn't use it as a reference for any reason."
Perez Vivas also wondered why so many PDVSA workers left work to attend the session and asked who had paid for the buses that brought the minister's supporters to demonstrate outside the AN building.
The minister called the presence of the PDVSA workers a "gesture of support." He added that PDVSA had "changed forever" and that it was now devoted to the Venezuelan people and the government's social "missions."
Televisions and large speakers were placed at the entrance of the National Assembly so that the red-clad crowd could watch the session. They waved banners of support for the minister, cheered when he spoke and heckled when opposition deputies took the stand.
Insults and calls of "dirty deputy" erupted from the crowd outside when PÈrez Vivas took his turn at the microphone.
The minister's demands on Wednesday marked another move in increased government efforts to crack down on foreign companies operating in Venezuela. The government removed a royalty holiday for strategic associations last November, which raised royalties from 1 to 16 percent.