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Enron Mail |
Rick,
Thanks for the update. The rumor about the separation has been going on for= weeks and we take it with mixed feelings. In terms of the Jose LNG project= , we don't foresee significant impacts as the Project only is an offtaker o= f gas (i.e., purely physical) and commercial non-performance is not an issu= e. The contracts being negotiated with PDVSA have enough protections for no= n-delivery of gas. As you probably already know, PDVSA has an option to bec= ome a partner in the venture and now we might have this entity and not PDVS= A as a partner, which might be an issue when making cash calls, if the even= t happens. I presume that will be taken care in the JV agreement since this= is standard practice: in the event of cash calls, for example for an expan= sion, the partner not contributing the cash would be diluted. Of course, we= would prefer to have PDVSA as a partner because we see them financially mo= re solid. In any event, both are state-owned and both would be responding t= o the same policies set by the MEM. If things are done the right way, there would be a complete separation betw= een the gas and the oil industry and this would be good for us. To make a f= inal assessment, however, we need a significant amount of information that = is not available yet. We need that information to answer questions such as:= Who will be the owner of the gas associated with oil production? If it is = the new entity (otherwise it would not make a lot of sense making the separ= ation), then PDVSA's E&P would be required to buy gas at the tariffs set by= the MEM. If there is a buyer who is willing to pay a higher price, then th= e new entity will make the case that it prefers to sell to that entity. Mor= eover, PDVSA E&P would need to make clear how much gas it needs to sign the= appropriate contracts, which will force an increase in the efficiency of t= he gas it uses, hopefully increasing the transparency of the sector. Right = now, PDVSA E&P buys gas at a transfer price set internally, probably at pri= ces significantly lower than the tariff. PDVSA E&P is the largest user of g= as in the country, accounting for more than half the consumption.=20 Another question is how the gas owned by the new entity will be priced (if = non-associated gas is priced differently from associated gas)? Will it have= the autonomy to sign contracts (of course with the blessing of the MEM)? W= ill the terms already negotiated with the Jose LNG be accepted? How much po= litical intervention will the new entity have? Who will stay?=20 So far the only people that have taken actions against the split are the em= ployees themselves because they are concerned about the benefits they enjoy= . There has been some strikes and demonstrations due to the separation. The main benefit that I see is that it will make the price for E&P explicit= , because we are dealing with two separate companies, and will allow other = parties to search for gas (or its replacement such as Nitrogen, which under= current plants would be three times the size of our project) and sign cont= racts with PDVSA E&P if that is cheaper. All this assumes an economic ratio= nality that we have not seen in the sector, and therefore nothing might cha= nge. I'll keep you posted with any other developments. Regards, ALF From:=09Richard Shapiro/ENRON@enronXgate on 10/01/2001 09:05 AM To:=09Alberto Levy/SA/Enron@Enron cc:=09=20 Subject:=09FW: Venezuela to Create Separate Government Gas Company -----Original Message----- From: Nelson W. Cunningham [mailto:ncunningham@mclarty.com] Sent: Monday, October 01, 2001 9:00 AM To: Richard S. Shapiro Esq. (E-mail) Cc: sdonehoo@mclarty.com; tfmclarty@mclarty.com; rkeene@mclarty.com Subject: FW: Venezuela to Create Separate Government Gas Company Rick -- Trust that Neal is keeping you in the loop on Venezuela developments. Chavez has tried twice to reach Richardson (he keeps on trying Richardson's home phone numbers, despite our telling his office that Richardson can best be reached at his work numbers). Chavez has been forward-leaning in the tone of his voicemail messages, and we understand from Neal that Enron has received some positive signals from the Venezuelan government in recent days. Richardson is back from Europe today and we'll check with him on any Chavez updates, as well as press to make phone contact if it hasn't happened in th= e past few days. Attached is the public announcement of the important changes in the gas sector that we previewed for you some weeks ago. Our assessment continues to be that this change is more positive for the Jose project than not. Best, Nelson -----Original Message----- From: Stephen Donehoo [mailto:sdonehoo@mclarty.com] Sent: Thursday, September 27, 2001 6:40 PM To: Neal Gerstandt (E-mail) Cc: Bill Richardson; Nelson internet (E-mail) Subject: Venezuela to Create Separate Government Gas Company Neal, FYI. Sec. Richardson is in Europe so I have no word on Chavez. Stephen 09/27 17:25 Venezuela to Create Separate Government Gas Company By Patrick Gordon Caracas, Sept. 27 (Bloomberg) -- Venezuela's Energy and Mines Ministry plan= s to create a state-owned gas company as the country begins a campaign to boost natural gas production. The new company will replace PDVSA Gas, a subsidiary of the state oil company Petroleos de Venezuela SA now in charge of the gas industry, said Luis Vierma, director policy and planning for the Energy and Mines Ministry= . ``Until now gas has always been placed in line behind oil at PDVSA,'' said Vierma. ``We need a company that will focus on gas.'' He added that the as yet unnamed company will start operations before the end of the year. Venezuela has about 147 trillion cubic feet of natural gas reserves, the largest in Latin America and the seventh largest in the world= . Venezuela produced 3.42 billion cubic feet of gas in 2000, compared with 3.= 5 billion a year earlier. The new company is being created as the South American country has increase= d its emphasis on natural gas production. Venezuela sold rights to six natural gas tracts in June, the first time since it nationalized the oil and gas industry in 1975- 1976 that private companies could participate in the exploration and production of natural gas. Critics said the removing natural gas production from PDVSA would be inefficient and increase costs. ``It doesn't make any sense to separate the two businesses,'' said Luis Giusti, former PDVSA president who is now a senior adviser for the Center for Strategic and International Studies in Washington. ``Gas is usually found with oil. That's why it's called the oil and gas industry,'' said Giusti. Venezuela and private companies may invest up to $50 billion over the next 30 years to develop Venezuela's 100 trillion cubic feet of probable offshor= e gas reserves, he said. Exploratory drilling for gas would begin Dec. 15 at the Deltana Platform of= f the eastern coast, said Vierma. Natural gas for November delivery rose 37.1 cents, or 16 percent, to $2.62 per million British thermal units on the New York Mercantile Exchange. ?2001 Bloomberg L.P. All rights reserved.
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