THE LOCAL PRIVATE SECTOR IN THE VENEZUELAN OIL INDUSTRY Antonio J. Vincentelli July 17, 2003
GOODS AND SERVICES FOR THE OIL INDUSTRY GEOPHYSICS DRILLING AND WELL SERVICES ENGINEERING AND PROFESSIONAL SERVICES MANUFACTURING OF CAPITAL GOODS CONSTRUCTION OPERATION AND MAINTENANCE OF INSTALLATIONS
PRIVATE PARTICIPATION IN THE HYDROCARBONS INDUSTRY Areas of participation for the local and foreign private sectors: Orinoco Belt Heavy Oil Strategic Associations Mature Fields Operating Agreements Oil Exploration Agreements with risk and profit sharing Gas Industry Development Petrochemicals and Chemicals Development of Refinery Streams Over 60 companies with investment programs of more than 36 Billion US$
VENEZUELAN COMPANIES PARTICIPATION IN THE UPSTREAM OIL & GAS SECTOR Cartera de Investor Oil Land Inversiones Ehcopek Investor Oil & Gas Land/offshore Inelectra Investor Operator Oil & Gas Land/offshore Jantesa Investor Operator Oil Land Polar Investor Oil Land Otepi Investor Operator Gas Land Open Investor Operator Oil Land Suelopetrol Investor Operator Oil Land Vincler Investor Operator Oil & Gas Land REPRESENTS A TOTAL INVESTMENT FOR THE VENEZUELAN COMPANIES OF OVER 400 MM US $ IN 14 FIELDS
STRATEGY OF THE LOCAL PRIVATE SECTOR Develop current properties to their full potential. Identify new opportunities. Develop associations with local and international players. Increase capitalization (strategic partnerships, capital markets).
INELECTRA IN THE VENEZUELAN OIL INDUSTRY Operator Ypergas (34% Inelectra) Operator Inemaka 70% Inelectra 10.2% Yucal Placer North & South Additional 34.5% Kaki & Maulpa Partners Total Repsol Otepi Polar Epic Operator GOPEOC 100% Inelectra Additional 90% Gulf of Paria East 16.7% Kaki and Maulpa 15% Profalca 10% Gulf of Paria East Boscan 1993 1995 1997 1999 2001 2003 Koch Proesca Polar ChevronTexaco
INEPETROL IN NUMBERS Net production Oil 2.700 BPD Natural Gas 47 MCFD (*) Reserves Proven and probable 286 MMBE Stockholders Equity $80 MM$ * Utilized for secondary recovery, gas lift and fuel
THE O&G PRIVATE SECTOR IN VENEZUELA TODAY The private sector has a fundamental role in the development of the hydrocarbons industry in Venezuela. Its is firmly established and participates in all areas of the business: from providing goods and services, to investing and operating major enterprises in the areas of oil, gas, chemicals and petrochemicals. The National Development Plan promotes the private participation. The local private sector is continuously growing its participation in the O&G business.
El Paso Why Venezuela? New Orleans Monterrey MEXICO Gulf of Mexico Havana Miami Guadalajara CUBA México JAMAICA BELIZE Belmopan Guatemala HONDURAS GUATEMALA San Salvador Tegucigalpa EL SALVADOR NICARAGUA Managua Panamá COSTA RICA PANAMA
WORLD TOTAL ENERGY CONSUMPTION Quadrillion BTU 700 600 500 400 300 200 207 243 285 311 348 Projection 481 433 399 366 532 583 640 100 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 YEAR Average Annual Rate 2001-2025: 1.9% From: EIA, International Energy Outlook 2003
WORLD TOTAL ENERGY CONSUMPTION BY FUEL 250 200 Projection Oil Gas GROWTH Oil % 1.8 Quadrillion BTU 150 100 50 0 Coal Other Nuclear 2000 2005 2010 2015 2020 2025 Natural Gas Coal Other Nuclear 2.8 1.6 1.7 0.3 YEAR From: EIA, International Energy Outlook 2003
OIL 2003 Sub region/ctry. Reserves Production Demand (Billion barrels) (MMBD) (MMBD) USA 30.4 7.7 19.7 CANADA 6.9 2.9 2.0 MEXICO 12.6 3.6 1.8 NORTH AMERICA 49.9 14.2 23.5 S. & C. AMERICA 98.6 6.7 4.6 TOTAL AMERICAS 159.6 20.9 28.1 VENEZUELA Traditional 77.8 2.9 2.9 0.3 0.3 Faja 235.0 Latin America energy surplus Oil deficit in the Americas 3.9 MM BD 7.2 MM BD BP Statistical Review of World Energy, June 2003
USA: PROJECTION OF IMPORTS OIL AND PETROLEUM PRODUCTS 14 GROWTH Millons of Barrels per Day 12 10 8 6 4 2 CRUDE P. PRODUCTS CRUDE PETROLEUM PRODUCTS % 1.4 5,1 Millions of Barrels per Day 4.0 5.4 0 2.000 2.005 2.010 2.015 2.020 2.025 YEAR From: EIA, International Energy Outlook 2003
LOCATION OF NEW PETROLEUM PRODUCTS MANUFACTURING El Paso A large deficit New Orleans of Petroleum Products is anticipated Monterrey Gulf of Mexico Miami MEXICO Havana Guadalajara CUBA for the U.S. in the coming years México JAMAICA BELIZE Belmopan Guatemala HONDURAS GUATEMALA San Salvador Tegucigalpa EL SALVADOR NICARAGUA Managua COSTA Panamá RICA PANAMA The Atlantic Basin requires substantial additional refining capacity, the probability of expanding U.S. capacity is low Where should the new capacity be installed?
Venezuela is called to be the main energy supplier of the western hemisphere due to its large reserves of oil, natural gas and hydroelectric potential. Reserves & Capabilities The opportunities for the participation of the private sector are here
WHY VENEZUELA: CONFIDENCE AND COMPETITIVINESS Most prolific hydrocarbon region outside of the middle east Attractive Geographic Location. A strong, long established and demanding industry based on international standards, with a competitive supply sector. More than twenty private oil companies operate in Venezuela ranging from large multinational to small local companies. A free market economy subscribed to the WTO. Substantial development plan for the coming years. A tradition of respect to private investment. A modern legal framework. The right attributes to develop competitive advantages
OIL AND ECONOMIC DEVELOPMENT IN VENEZUELA Before Depletion Depletion of of reserves. reserves. Short Short term term activity. activity. Most Most activities activities in in the the hands hands of of the the State. State. Minimum Minimum ties ties with with the the country s country s private private sector. sector. Objective: Objective:! Maximize Maximize petroleum petroleum rent. rent. Now Abundant Abundant reserves. reserves. Long Long term term activity. activity. Promotes Promotes national national and and foreign foreign investment and and participation. Objectives:! Industry Industry growth growth and and creation creation of of value. value.! Shift Shift from from rent rent to to development.
h HYDROCARBONS IN VENEZUELA MAKE BUSINESS SENCE