This is part of a series of re=published articles I wrote in 2005 for the Daily Journal in Caracas.
June 7, 2005
Energy and Petroleum Minister Rafael Ramirez denied reports in the local press that Petroleos de Venezuela (PDVSA) planned to transfer Orimulsion production contracts to China, El Universal's website reported.
"We're not giving up the management of the business to anyone," said Ramirez on Monday in a press release. The minister, who is also president of PDVSA, added that the contracts obligate Chinese companies to pay royalties on production.
Orimulsion is a patented bitumen-based synthetic combustible that is derived from extra heavy crude oil in the Orinoco belt and is used for commercial boiler fuel in power plants worldwide.
PDVSA, through its affiliate Bitumenes del Orinoco (Bitor), signed agreements with Petrochina Fuel and China National Petroleum Corporation in 2001 to create the Orimulsion production firm Orifuel Sinoven S.A. (Sinovensa). In 2003, Venezuela announced intentions to minimize production and linked Orimulsion prices to the price of carbon, much cheaper than the price of heavy fuel.
RamÌrez also called a report in Sunday's El Universal confirming the Orimulsion transfer "totally false" and added that Venezuelan rights were "inalienable." He also said that the contracts "would be honored" and that "it has been demonstrated with new technology that this extra heavy crude can be exploited more reasonably and economically."
But El Universal reported Monday that PDVSA has planned for the past year to transfer the Orimulsion contracts to Sinovensa and that meetings between the companies have taken place in the past few weeks.
Also, a memo written by Bernard Mommer, vice minister of hydrocarbons, when he was director of PDVSA's United Kingdom division and sent to Ramirez stated that selling Bitor to Sinovensa would represent important savings for Venezuela.
Leopoldo Puchi, secretary-general of the party Movement Towards Socialism (MAS), called for a debate on Tuesday in the National Assembly on what he called "not sufficiently clear" government intentions to give up Orimulsion patents.
"These are matters that must be considered in the Assembly and we propose it because agreements of national interest need to be approved by the legislature," Puchi said.
Economist and oil expert Rafael Quiroz Serrano also criticized any government move to sell Orimulsion rights because Venezuela had a monopoly on the fuel and because its patent represented 25 years of work.
"Taking measures like this will have a negative impact on everything for future deals in the industry," Quiroz Serrano said.
Carlos Borregales, former president of Bitor, said Tuesday that research for the patent cost the nation "a lot of money" and was designed to counter low oil prices at the time, Union Radio reported.
Venezuela currently sends 1.8 million tons of the fuel to China per year, 89,400 tons to Singapore and approximately 80,000 tons to Japan at around $93 per ton.
President Hugo Chavez announced the construction of a new Orimulsion production model and the intent to increase energy imports to China during an official trip to the country last December.
"We have been producing and exporting petroleum for over 100 years, but they were 100 years of domination by the United States," Chavez said. "Now we are free and we will put (petroleum) at the disposition of the great fatherland of China."
JENS ERIK GOULD
Jens Erik Gould is the Founder & CEO of Amalga Group, a pioneering Texas-based nearshore outsourcing firm specializing in IT, software engineering, and contact center staffing.