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Portugal getting a hand on Venezuela's energy riches

by Luis de Sousa Thu May 22nd, 2008 at 10:41:24 AM EST

In advance of the European Union - Latin America and Caribbean summit, the Portuguese prime minister, José Sócrates, visited Venezuela. During two days, more than twenty economic agreements were celebrated between the two countries, where energy had a major role.

Among the entourage where representatives of some of the largest companies operating in Portugal, with the objective of firming protocols in the vein of "oil for goods", towards which the Venezuelan executive has been showing great openness.


This is a crosspost from TheOilDrum:Europe.

Oil and Gas had the major focus, with several agreements struck on exploration, production and trading. The biggest being respective to Orinoco where GALP will start operating in the Boyacá 6 block. José Sócrates and Hugo Chávez both speech in a ceremony inaugurating a drilling rig in the site.






Chávez and Sócrates at Orinoco's block Boyacá 6. Source: PeriodistaDigital

As usual Chávez was very expressive, explaining why previous agreements with oil majors where cancelled:


For a long time the international companies told us that this wasn't oil, it was bitumen. They said it was something like coal, and hence should be price as coal. See, this is the coal.

[Chávez then showed a small sample of Orinoco oil slowly flowing from a cup to another.]

Oil, liquid hydrocarbons. This is the greatest reserve that exists in world.

Chávez then effusively thanked GALP's president and Sócrates, for the negotiations that long preceded the agreement, facilitating a deal of great value for Venezuela.

Then José Sócrates went on to the rig helping the PDSVA workers in the starting operations, sending a drill bit down, wearing a red safety helmet, just like the workers that clad in red from head to toe. He also had the opportunity to express his joy with the outcome of those two days spent in Venezuela, welcoming the tightening of economic relations between the two countries.

These relations are not fortuitous. There are 400 000 Portuguese emigrants living today in Venezuela, about half in Caracas, many of whom run small business. About two thirds of the bakeries and restaurants in Venezuela are run by Portuguese or their descendants, as so half of the grocery stores in the country.

Looking closer at deals struck, GALP celebrated several protocols with PDVSA, the most publicized being the consortium to assess and produce oil from the Boyacá 6 block, from which the companies expect to be producing 200 kb/d ten years from now. Some of this oil will be transported to Portugal and only refined there (at the Sines complex) where according to GALP's president, there exists the technology to process some of these heavier oils. GALP's president also referred to journalists that Orinoco oils cost 15 dollars per barrel to produce. GALP and PDSVA will also form another joint company to trade Orinoco's oil internationally.

GALP celebrated other agreements, namely to build 4 wind farms totalling over 70 MW of installed capacity, and got access to the data on the offshore Blanquilla gas blocks in order to assess their potential, with future perspectives of production. GALP will co-build with PDVSA two gas liquefaction terminals from which one third of the gas consumed in Portugal will come in 2013.

This last agreement on natural gas supply, might be the most important of all in strategic terms. Having in mind Europe's dire prospects on Natural Gas, this deal opens the South American market to Europe, to which the Sines complex, where a re-gasification terminal was built recently, presents itself as the most useful entrance. At the westernmost tip of continental Europe, Sines shorts the travel distance for LNG tankers coming from South America; from there gas can be easily transported to the rest of the country by pipeline or even to Spain.






The Sines Refinery, one of the largest in Europe. The Sines complex also comprises, among other infrastructures, a LNG terminal and several electricity generation plants.

Also integrating the Portuguese entourage were representatives from EDP (the country's electricity generation monopoly) that firmed several agreements on renewable energy, including 3 wind farms and technical support to other renewable energy prospects. EDP will also be involved in the assessment of the Blanquilla blocs and will have a 15% share in the construction of a third a gasification terminal.

EDP will also help PDSVA assessing the potential of using the coke residues from the refining process of Orinoco oils in electricity generation. EDP is also studying the possibility of building and operating combined cycle units in Venezuela.

Other deals were also struck with other companies on different areas such as civil construction, fish conservation and naval construction. Although details are not given in the press, this last one might be related to the LNG transportation to Europe.

Addressing journalists, Venezuelan oil minister Ramiréz produced the usual OPEC litany on why oil prices are so high: geo-politics (was he thinking of Venezuela?), the dollar devaluation and so on, re-affirming that there's nothing OPEC can do to hinder oil prices. He also said that 200 $ oil is a serious possibility.

The press coverage of the event was quite below the dimension of the agreements firmed, although several local TV channels and newspapers run pieces on the subject (from which the information presented here was distilled). Excluding brief articles in economic newspapers, the visit was invariably covered by journalists ill informed on energy matters, often confusing measuring units and mixing oil flows with reserves (the difference between Giga barrels and Mega barrels seem to be on of the hardest concept to grasp). Few of them might have understood what really happened during those two days they spent in Venezuela.

While on one hand the Portuguese executive shows some agility in trying to face the present energetic panorama, on the other hand it shows itself incapable of seeking alternative strategies to the continuous flow of fossil fuels. Being electricity generation from renewable sources now a reality (furnishing more than a third of the electricity consumed in the country, one of the best scores in Europe) the country's economy is still heavily reliant on fossil fuels, especial on Transport, being still at the mercy of the variations on international prices emanating from the depletion of these finite resources. These agreements will surely help, but not only are firmed relaying on private companies (held in some cases by foreign capital) as they can't possibly be a long term option for a future independent of finite resources that Portugal doesn't have.



This article was gathered on the information run on Portuguese media during the visit, of which the following links are left as reference:

Jornal de Negócios (on Orinoco)

Jornal de Negócios (on Natural Gas)

Diário Económico

TSF

Agência Lusa

RTP (news program Jornal 2 of 15-05-2008)

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Energy spend in domestic thermal comfort is a significant fraction of all energy consumed. Energy consumed in the Services sector of economy (Offices) and domestic consumption is 22% of all energy spent in Portugal, and this fraction is rising by 4% yoy. Notice that this rise may be due to de-industrialisation. However, it is certain that Bioclimatic architecture is still marginally applied.

New rules - easier to implement than mentality changes - will however demand a built-in solar panel capability per presumptive building occupier.

One must consider always the action of the closed oligarchy on the development of society. Take this example: until recently it was not defined how companies making bio-fuels should operate. Nevertheless the local administration in Ericeira was making it for free, unknowingly breaking the law - by not paying taxes for filling the tanks of motorised vehicles. When they decided to make it legal, discovered that the  production quotas had already - near immediately - been subscribed by people close to law-makers.

There were also some large pools of pig dejects awaiting use in energy production, because probably the Right Folks were not yet ready to start production.

by findmeaDoorIntoSummer on Thu May 22nd, 2008 at 01:35:52 PM EST
I had to correct myself. Insinuations such as I have made in the abovepost are a malpractice which doesn't fit in proper blog standards (and I haven't found data yet to present on the subject).
by findmeaDoorIntoSummer on Sat May 24th, 2008 at 06:22:51 AM EST
[ Parent ]
European Tribune - Portugal getting a hand on Venezuela's energy riches
Among the entourage where representatives of some of the largest companies operating in Portugal, with the objective of firming protocols in the vein of "oil for goods", towards which the Venezuelan executive has been showing great openness.

Interesting. Could this become more of a trend worldwide? Could we get a global barter economy for oil?
Addressing journalists, Venezuelan oil minister Ramiréz produced the usual OPEC litany on why oil prices are so high: geo-politics (was he thinking of Venezuela?), the dollar devaluation and so on, re-affirming that there's nothing OPEC can do to hinder oil prices. He also said that 200 $ oil is a serious possibility.

Something I've also heard from OPEC is that there is a shortage in refining capacity. Is that still what they're saying?
by nanne (zwaerdenmaecker@gmail.com) on Thu May 22nd, 2008 at 02:15:02 PM EST
In the XX century we had the Thatcher politics, in the XXI century we'll have the Chávez politics.

In recent times no one from OPEC have been referring to the refining problems. But it is a problem, especially in Europe, were after decades of fiscal policies correctly favouring diesel consumption we are far from being autonomous on diesel refining.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri May 23rd, 2008 at 04:55:01 AM EST
[ Parent ]
And yet, the biggest pieces of news from that trip were about Socrates smoking on the plane, presumably violating the law...
by Torres on Thu May 22nd, 2008 at 06:48:59 PM EST
You mean Portugal was not mortally offended by Chavez calling W "el diablo" from the podium at the U.N?  Imagine that!  More interested in petroleum than rhetoric.

What is the extent of Portugal's oil production technology?  Do they have experience with off-shore production?

I was unaware of the extent of Portuguese emigration to Venezuela. What is the attitude of these immigrants towards Chavez?  Most of his opposition comes from the indigenous middle class, according to what I have read.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 23rd, 2008 at 02:42:12 AM EST
En este lugar huele a azufre.

That was one of the funniest moments I ever saw on TV.

Galp is involved in deep and ultra-deep offshore exploration and production in Angola and Brasil. I think they've also focused in The Gulf of Guinea and Mozambique, but on that the info is not as good.

There has been some question on how will a relatively small company hold on to its recently found wealth, especially in the Santos Basin off Brasil; it might not have the structure to take such commitments. But don't forget that Galp is owned by ENI, who will unlikely give way these recent prospects.

During the early days of Chavez' rule the Portuguese community at Caracas was in majority against him. But as time went by, Chavez kept respecting democracy and the economy kept growing, so that image is not as prescient in our press today.

Sócrates and Chávez have always get along, which eventually led to the outdoor affair in 2006:

During the campaign the Chavez camp used the good relations between the two men to promote their foreign policy. The outdoor was eventually withdrawn after a call from Lisbon.

All in all, the stability and welfare of the Portuguese community in Venezuela is in the best interest of both countries, who ever rules them.


You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri May 23rd, 2008 at 04:46:34 AM EST
[ Parent ]
Yeah, he cracked me up too.  Of course the US press had to rally round the flag.  Doesn't Chavez know what Nixon did to Allende?  Or does Chavez have better control over his local teamsters?

It is rather the reverse of the situation in Chile circa 1972.  There the intelligentsia were the supporters of Allende.  Parents of one of our son's best friends only avoided having their brains blown out in the stadium because the wife, and artist, was having an exhibition in Caracas. Her husband was a TV newscaster and Allende supporter.  The last I heard he was the city editor of "La Opinion", the largest Spanish language daily in L.A. He would have been much happier covering Latin America.  Their son became an officer with the Los Angeles Police Department.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 23rd, 2008 at 05:35:04 AM EST
[ Parent ]
Y tambien, mi Espanol es muy malo y los verbos son el mas dificil.  Que quiere decir "huele"? No es en mi 501 Verbos Espanol. Gracias.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 23rd, 2008 at 05:51:23 AM EST
[ Parent ]
He meant that it still smelled like sulfur.

huele = smell

Verbs are definitely the hardest in Castellan, apart from that it is a very useful language.

You might find me At The Edge Of Time.

by Luis de Sousa (luis[dot]a[dot]de[dot]sousa[at]gmail[dot]com) on Fri May 23rd, 2008 at 06:07:14 AM EST
[ Parent ]
Thanks, I thought I had divined the intent from context, but it is better to know.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri May 23rd, 2008 at 12:22:05 PM EST
[ Parent ]
huele is irregular, the infinitive is holer (o > ue is a common vowel change). It has to be in your 501 verbs, along with moler, soler, poder.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat May 24th, 2008 at 06:31:08 AM EST
[ Parent ]
Thanks for the infinitive.  Interestingly holer is not in my third ed. of 501 Spanish Verbs by Kendris. Guess smell didn't make the grade. Neither is it in Dr. Mario A. Pei"s 1226 page Spanish/English,English/Spanish Dictionary.  When I looked up "smell" in the English/Spanish portion I did get "oler." I guess you could say my Spanish was bereft of smell! Or that it doesn't smell.  I always thought otherwise.

I had one year of high school Spanish and then spent a wonderful six weeks in a micro-bus traveling from Tucson to Guadalajara and back the summer of 1967.  A field biologist friend had a commission to collect butterflies from any ecological niche in Mexico.  We considered moving to the Lake Chapala area when we left L.A. but the wife has no ear for languages, so we moved to Arkansas, where she has learned to understand the local accent.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat May 24th, 2008 at 06:05:47 PM EST
[ Parent ]
Holy... did I really write holer instead of oler? <sinks head in shame>

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Sat May 24th, 2008 at 06:25:14 PM EST
[ Parent ]


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