Greedy Little Guys
We’ll go Down The Rabbit Hole in a few but first…Argus Media reports that Canada’s New Stratus says it has signed initial agreements with Gold Pillar, a British Virgin Islands company, as part of a potential joint venture with PDVSA (Venezuela government-owned oil company).
A deal would give New Stratus access through Gold Pillar to an agreement with PDVSA to oil and natural gas assets in Venezuela including four onshore fields in Venezuela’s eastern basin where “due to infrastructure erosion and lack of capital investment, production has been minimal since 2017”.
Gold Pillar would fund capital expenditures and operating expenses of the relevant joint venture in return for essentially payment in oil and products.
Companies with business ties in the US still face potential restrictions on paying Venezuela in cash due to sanctions.
So, what does this tell us? We’ve told you many times, none of the international oil majors is coming to rebuild Venezuela’s dilapidated oil infrastructure since many of them had assets expropriated by the Chavistas and none of them trust the Maduro regime. This just leaves the greedy little guys willing to risk a deal with the Chavistas.
Also, as we’ve told you, PDVSA needs approximately $10 billion a year for 10 years, according to most responsible oil industry analysts, to repair it’s long-neglected infrastructure.
New Stratus certainly isn’t the answer with a market cap of only $66 million and Gold Pillar is a small investment firm. For comparison Exxon Mobil has a market cap of $107 billion.
Then we have Law 360 reporting that a group of holders of nearly $1.7 billion in defaulted Venezuela bonds has asked a Delaware Federal Court to award them an attachment order over Citgo shares saying PDVSA, Citgo’s parent company, continues to be Venezuela’s alter ego.
With recent stories of companies with billions of dollars in awards given their official places in line for the auction process of Citgo shares the bondholders must be feeling they’re getting too far back in the line and there won’t be anything left.
Then we have AP reporting that Venezuelan authorities announced a ban on e-cigarettes use, manufacture, and import forcing shop closures and leaving 5,000 people unemployed. That’s the whole story…until the next ban.
Now, let’s head Down The Rabbit Hole…
Chapter 4/ continued…
…That left Corpolec with the trial and error method which led to the length of the first blackout and the second and third blackouts. If it wasn’t so dire a situation the government’s response would be laughable. First it was a hack, then a “high-tech electromagnetic assault”, then fires set by saboteurs (the usual suspects..CIA, paramilitaries, etc.). Caracas Chronicles said it best in their mock headline ” There was another big electric failure in Lara and Yaracuy this week. No wild animal has been charged so far”.
The government’s absurd explanations aside, a plan was needed going forward. An emergency 30-day rationing plan was put into effect, for the most part excluding the capital of Caracas, and most people expected this would become the new normal. Power rationing normally means four hour power cuts. For much of the country that formula was inverted and they only have power four hours a day. The government assured “normalcy will return soon”. The spokesman for Sintraedelca, the electrical workers union, disagreed. Other than sticking to their “boogeyman” theme and increasing security to protect the public from further “attacks” (that never existed) there wasn’t much of a plan other than to shorten the work day and send workers home at 2:00 PM.
The Electric Ministry’s solution was more like an ideological talking point than a solution. “Electrical workers will participate in union-related courses with Cuban experts to form sociopolitical cadres.” Huh? And exactly how does that solve the problem? If a statement from the government’s budget in 2013 is any indication, things don’t look good. “All problems will be solved by 2032 incorporating the Popular Power … under socialist values.” So, how’s that working out so far?
It’s also worth noting that 40% of Corpolec’s allocated power output is not charged to anyone. A major contributor to this problem is the Gran Mission Vivienda, Chavismo’s low cost housing project. These houses have no meters! Electricity prices in Venezuela are so low I never paid more than a dollar a month in 12 years. Combine this with a government that is broke and has no credit anywhere and I wouldn’t look for a revenue bump for Corpolec anytime soon.
Diminished expectations were (are) the order of the day. With 45% of the country reporting frequent days without power various organizations asked (and are asking) for power at least a few hours a day on the weekends. The metals processing sector won’t be returning to normal either. It relies on nodes which once they are without power for an extended number of hours are effectively dead. And if you thought it couldn’t get any worse, the Tuy pumping system, which supplies water to a large portion of Caracas, would require a third of available power to restart since the power supply was so degraded. This leads us to the other part of the power crisis, the water crisis.
There is a reason that beginning with the first civilizations in Mesopotamia, at the confluence of the Tigris and Euphrates rivers, civilization has started around rivers and spread from there. Access to fresh water is essential to survival.Chavismo seems to have lost sight of this basic fact. In 1998, just before the election of Hugo Chavez, approximately 80% of Venezuelans had regular access to fresh water. Since the Chavistas took the reins, that percentage has dropped to around thirty.
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