Friday , October 7 2022

Chevron stayed in Venezuela Long after the opponents gave up. He has other thoughts.



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CARACAS – Nearly a century,

Chevron
Corp.

he survived dictatorships, blows and nationalization to continue pumping oil in Venezuela.

Now, the leaders in the last US oil major are debating whether it may be time to get out, to people who are familiar with their considerations.

The Chevron dilemma is both moral and commercial. It is hoped that President Nicolas Maduro will remain and dominate, as he did with his late mentor Hugo Chavez and other rulers. The California giant has long enjoyed close relations with the socialist regime that controls the world's largest oil reserves and earned big money in Venezuela – about $ 2.8 billion between 2004 and 2014, according to estimates of cash flows by an analytic firm

GlobalData
.

The company is aware that the withdrawal could cause collapse of government finance, as a significant part of its scarce currency comes from joint operations with Chevron.

However, if they stay in the country as economic and humanitarian crises deepen, the company risks damaging its reputation, considered to be the support of an authoritarian regime sanctioned by the US government. There's also not much more money left.

Filling in Puerto Pirito, Venezuela. The government provides almost free gas.

Filling in Puerto Pirito, Venezuela. The government provides almost free gas.

Photo:

Carlos Becerra for The Vall Street Journal

Chevron had to fulfill many provocations in Venezuela, including late payments, demands for employees to attend political meetings and preempted loans that Venezuela had requested because it could not afford to maintain oil fields. Chevron's joint venture with a state-owned oil company was regularly subjected to what Venezuelan prosecutors labeled as corrupt exaggerations by sellers. The graft and the deterioration risk are measured by managers because they consider Chevron's position in the country.

It became more difficult to stomach after the big money disappeared from operations in Venezuela, say people who are familiar with the company. Chevron's operations in Venezuela have lost money from 2015 to 2017, according to GlobalData, and this year they are modest thanks to higher oil prices. Oil fields are aging, and unless reserves are opened, Chevron's work in Venezuela will disappear with steam in less than five years, estimates GlobalData.

"Chevron is one of the largest foreign investors in Venezuela," spokeswoman Isabel Ordonez said. She noticed that Chevron was almost 100 years old and added: "We remain dedicated to the land."

The turning point for foreign companies operating in Venezuela came in 2006, when Mr. Chavez began to nationalize oil fields run by foreign operators and sharply increased taxes.

The contracts signed were done by Petroleos de Venezuela SA, known as PdVSA, operator and majority owner of most projects. Chevron's top competitors in the US,

Ekkon Mobil
Corp.

i

ConocoPhillips
,

she shrugged with the changes, left her and put her suit. Ekkon is yet to recover the full value of billions in equipment and other assets he has left behind. ConocoPhillips has recently grown to $ 2 billion.

Some European oil companies, such as

In total
WITH

i

Ecuinor
LIKE

A (then called Statoil), he stayed, but he reduced the property.

Chevron decided to stay, and headed by a charismatic Iran-US executive function called Ali Moshiri – a number of partnerships with PdVSA were formed. Mr. Moshiri, who was head of the Chevron company in Latin America and Africa, sometimes spoke with Mr Chavez, who once called him "a dear friend".

Ali Moshiri, former head of Chevron in Latin America and Africa.

Ali Moshiri, former head of Chevron in Latin America and Africa.

Photo:

Brian Bedder / Getti Images

Joint venture Mr. Moshiri has become a model for foreign companies operating in Venezuela. The venture called Petropiar between Chevron and PdVSA is one of four so-called. Raising the venture between a state-owned oil company and foreign operators to match Venezuelan heavy crude oil with lighter oils or other substances and made it portable.

Although Chevron's bail was financed for a long time, the price of a shorter oil price, which began at the end of 2014, triggered a dead cycle in which government revenues fell and then oil production, as the country placed a priority on debt payments due to oil fields difficult reinvestment to stay healthy.

Since the end of 2017, according to Fitch Ratings, Venezuela has covered more than $ 6 billion in debt, while its oil industry has been reduced to near-ruins due to neglect and the departure of experienced engineers.

Oil production fell to 1.2 million barrels per day from 3.2 million per day in 2006, according to the Organization of Oil Exporting Countries. A land with huge reserves now produces about as much oil as the US state of North Dakota. As production fell, and thus revenue, the country's economic crisis worsened.

Less for sale

While oil prices are rising, oil production in Venezuela continues to decline.

Venezuelan oil production

Venezuelan oil production

Venezuelan oil production

Venezuelan oil production

With supermarket shelves almost naked and price rises, two-thirds of Venezuelans reported a loss of 25 kilograms in weight in 2017, according to a survey. Violence is endless, including the misdeeds of the police and soldiers. Hospitals lack medicine and clean water, but the government refuses most of the humanitarian aid as a Trojan horse for foreign intervention. More than three million Venezuelans escaped, leaving those who were left to face emergency killings, malnutrition and hyperinflation.

Venezuelan energy companies are under pressure from the expansion of corruption in the US and Europe. In an investigation in the United States, focusing on claims that PdVSA officials sought bribe sellers, he confirmed 15 guilty pleas, including a number of PdVSA honchos.

Refinery PdVSA in the Venezuelan state of Anzoategui.

Refinery PdVSA in the Venezuelan state of Anzoategui.

Photo:

Carlos Becerra for The Vall Street Journal

An investigation into the tiny European nation in Andorra led to charges of money laundering against 28 people, including former deputy ministers in Venezuela, who allegedly took $ 2 billion through recruitment schemes from 2007 to 2012.

Zair Mundarai, a former Venezuelan prosecutor who is now in exile, said his team discovered an alleged scheme in a joint venture, Petropiar, in which PdVSA executives skipped officially contracting contracts and opposed sellers of a wide range of supplies, from oil equipment to coffee cafeteria excessive prices. Profit was distributed among certain Petropiara managers, PdVSA to higher companies and suppliers, according to the billing documentation.

PdVSA and the Venezuelan Information Ministry did not respond to calls and detailed e-mails asking for comments.

The online payment and invoicing documents reviewed by The Vall Street Journal state that contractors transported more than $ 200 million in two years of joint investment through markups such as $ 156,000 for printers / photocopiers and $ 9,000 for nozzle cartridges.

Among the defendants was Manuel Sosa, the former actor of the soap opera who once gave to the daughter of Mr. Chavez, whose company delivered costly printers / copiers. Mr Sosa pleaded guilty in December and was sentenced to four years in detention in exchange for his co-operation. He could not comment.

"Where were the checks? Where was the accounting?" Asked Mr. Mundarai. "Absolutely no way [Chevron] he did not know what was going on. "He said he gave evidence he had collected in the US Department of Justice, who refuses to comment.

Pedro Burelli, a former PdVSA board member and critic Maduro, said Chevron "does not close what's happening".

"When you agree to work with a majority partner who is abandoned, you are only at high risk. You are deeper and deeper when you need to hit the red button to get out," said Mr Bureli.

Chevron said it was in compliance with all applicable laws wherever it operates and expects its partners to do so. He said he did not control the procurement process in a joint venture, in which Chevron owns a 30% non-performing stake. In joint ventures of oil and gas, the operator usually has the primary competence over costs, although minority partners generally consult and sign certain costs. Chevron did not say that none of the documents they showed suggested any wrongdoing by the US company.

Surveillance of the survey changed hands as he picked up the pair. Mr. Mundarai and his team left Venezuela in August 2017, after their boss, former State Prosecutor Louis Ortega, criticized Mr. Madur for alleged human rights abuses. The president called the prosecution traitors.

The new General Prosecutor, Tarek Villiam Saab, has presented a list of indictees for the lack of some names on the list. Mundare.

One of the disadvantages was the name of former Petropiary chief Francis Velasquez, who former prosecutors said they were on pink Ferrari and villa at the exclusive Casa de Campo resort in the Dominican Republic, while the oil project had ruptured and lagged behind. He could not comment. G. Saab did not respond to comment requests.

Decompose

In economic and social terms, Venezuela faces a crisis

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The murder rate in Venezuela

In April, two Chevron employees, working in a joint venture of Petropiar, closed Venezuelan military intelligence services when they refused to sign an oil processing equipment contract at a price they considered well above market value. Employees are released after six weeks of tense negotiations, but not before too many curves are threatened by Chevron: free them or we will leave, people who are familiar with the conflict say.

Shevron confirmed that in April they were arrested in April and released in June, but said: "We have no more information to exchange about this issue."

The reduction in the number of foreign companies continues to operate with the Maduro administration, which faces threats of stricter sanctions by Washington. The United States has sanctioned dozens of Venezuelans, including Mr. Madura, for allegations that are different from corruption to the abuse of human rights in drug trafficking. Sanctions at least American citizens and companies to work with them.

Mr Maduro said he wants foreign oil partners to use a cryptocutaneous role called petro his government designed to avoid US sanctions on Venezuelan debt. In March, the US banned the Americans from using petro.

Staying in Venezuela, Chevron risks being exposed to legal penalties under US anti-corruption laws, some analysts say. Chevron said he "adheres to the strict code of business ethics according to which the company meets all applicable international, American and Venezuelan laws".

Pictures by Nicolas Maduro and the late Hugo Chavez in Puerto la Cruz, Venezuela.

Pictures by Nicolas Maduro and the late Hugo Chavez in Puerto la Cruz, Venezuela.

Photo:

Carlos Becerra for The Vall Street Journal

Her management meetings with government officials and PdVSA officials "are in line with all applicable laws and regulations, including United States sanctions targeting Venezuela," Chevron said.

About 700,000 barrels of daily oil production from the country comes from joint ventures between PdVSA and foreign companies, say consultants. This includes about 200,000 to 250,000 barrels per day from Chevron.

Joint venture production has generated far more money for the government in the past few years than the oil pumped by PdVSA alone, as the state-owned production went to repay debts to allies such as China and Russia or to process gasoline, and the government provides almost free. This means that the withdrawal of Chevron will deprive a large income from the government.

The other side of the company,

Roial Dutch Shell

PLC, strives to exit most of the remaining operations in Venezuela by selling its share in a joint venture, to people who are familiar with their plans. Shell's spokeswoman said that such an arrangement would not represent a total exit, as the company is working to develop gas marine resources on the coast that would supply near Trinidad and Tobago.

Some analysts believe that other western companies operating in Venezuela, such as France Total or Norvegian Ekuinor, may feel pressure to follow the departure or partial exit by Shell or Chevron. At the same time, according to GlobalData, those who stay maybe may get access to new fields or negotiate contracts for better conditions. Chinese or Russian companies such as PAO

Rosneft

can be the beneficiaries of such deviations in the long run, analysts say.

Total, Ekuinor and Rosneft officials or refused to comment or not answer the questions.

Signs of an upsetting relationship between Chevron and the Venezuelan government arose a year ago when he was succeeded by Mr. Moshiri, chief Chevron's Latin American and African operation Clai Neff, sitting in a meeting with Mr. Maduro and other Venezuelan officials.

Venezuelans took a photo without Chevron's consent and announced it. At Chevron headquarters in San Ramon, California, concern has grown to make the company turn into Venetian propaganda, people said familiar with the issue.

Venezuelan President Nicolas Maduro, second from the right, with Chevron Claire Neff, Executive Director, left, on the left.

Venezuelan President Nicolas Maduro, second from the right, with Chevron Claire Neff, Executive Director, left, on the left.

Although such photographic descriptions have taken place earlier, the worsened economic collapse of the country, plus US sanctions, make it more difficult to tolerate, people say. Chevron refused to talk about the Caracas meeting.

The company's closeness with the government is causing wounds among PdVSA workers who left hyperinflation that increased their earnings to less than $ 10 a month.

Jose Bodas, the leader of the unions in eastern Venezuela, where Petropiar is located, said photographs of sports cars and European vacations published on social media by executives of angry workers who sometimes do not have boots and hardhats.

"I do not object to people who have Ferrari and palaces, but this is all corruption," Bodas said. "I do not mind telling you – if you are a multinational work with this government, you are an accomplice in what is happening."

To write Kejal Vias at [email protected] and Bradley Olson at [email protected]

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