Wednesday, April 8, 1987
Petroleum Chamber says evidence
shows cost hikes have hurt ind. dustry if necessary, Romero
By Heather Scott
• Daily Journal Staff
Although the government
says increased costs have not
caused any financial problems
for the national petroleum
industry, there is much evi-
dence to the contrary, the
president of the Venezuelan
Petroleum Chamber said
Tuesday.
Edgard Romero Nava re-
red to a statement made
Monday by Energy and Mines
Minister Arturo Hernandez
Grisanti, who said the in-
creased costs have not
created cash flow problems
for Petroleos de Venezuela,
S.A. (PDVSA).
"The minister (Hernandez
Grisanti) says there are no
problems, Petroleos de Vene-
zuela says there's no pro-
blem, but we are the ones
who do contracts with them
and we know something's
happening," Romero Nava
said.
He said one of the indica-
tions is PDVSA has an-
nounced several major pro-
jects in the past several
monthshs, but has not signed
the first contracts for any of
them.
Although Hernandez
Grisanti said Monday there
are resources available in the
reserve fund to help the in-
Nava said PDVSA's policy is
to not sign contracts until the
funds are available, so the
amount of "un-started" pro-
jects indicates a problem.
These projects include the
benzene, toulene and xylene
(BTX) refinery in El Palito;
the jet fue!, paraffin and
asphalt plant in Puerta la
Cruz; and the modifications
on the Amuay Refinery and
the Cardon plant, he said.
"(The government) is try-
ing to minimize the problem
with announcements in the
press that aren't true, be-
cause (the problem) is evi-
dent: for the projects that
have been announced they
haven't signed the first con-
tracts, although the people
continue to negotiate with
them, proposing dates to sign
the contracts," he said.
Romero Nava said the cash
flow problem stems from the
Bs.10 billion cost increase
caused by the devaluation of
the bolivar from Bs.7.50 to
Bs.14.50 a dollar .
This has caused the pet-
roleum industry to spend
more than half of its income
on operating costs, when it
used to spend half on operat-
ing costs and half on new
investments, he said.
"If they don't take sorne
sort of measures now, in the
Nation
medium term, the situation Also, even if the price of oil
increases, the industry is not
will cause decapitalization be-
cause they will start using the much better off because it
reserve fund to cover operat- only earns Bs.1.40 for each
ing costs," he said. additional dollar, due to the
tax and since it sells the
Romero Nava said the re- dollars to the BCV at Bs. 7.50,
serve fund in the Central
Bank was created to pay for instead of the Bs.14.50 rate,
new investment, not for he said.
operations and maintenance. The petroleum industry
needs this special exchange
Another aspect of the cash rate because it cannot in-
flow problem is part of crease its prices when its
PDVSA's reserve fund is costs increase, as other
frozen in bonds which it is state-owned companies like
required to buy, he said. Cadafe have, he said.
One solution would be to "The minister (Hernandez
establish a law which Grisanti) said this Bs.14.50
guarantees PDVSA a liquid rate won't go through for the
supply of bolivars, just as it is petroleum industry - then
guaranteed a supply of
decrease the reference
dollars, he said. However, price," he said. "They're
this fund should be reserved charging (based on a price) 20
for "productive" PDVSA percent more than the price
investments, "not for any
they actually sell at."
other fiscal ends," he said.
Romero Nava said it is
Another alternative would important for the govern-
be for the government to base ment to take steps to solve
its income tax rates for the this cash flow problem, be-
industry on the "real price (of cause it is likely to repeat
a barrel of oil) not sorne itself.
ficticious price;" Romero
"The problem has come up
Navasaid. twice in the last three
He said the reference price months, and if we don't find a
currently used is 20 percent solution for the long and
more than the actual price, medium term, in three
which means the petroleum months we'll be meeting here
industry is paying about 80 again," about the same pro-
percent tax. blem hesaid