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PDVSA and its new direction

Jun. 20, 2005 9:53 AM ET

According to an article from El Universal, a Venezuelan newspaper, PDVSA is becoming more of a source of domestic funds and less of a major Oil and Gas company. Few people realize that the Citgo stations we drive by are actually a part of Venezuelan government so to speak.

Since the strike in 2001 Venezuelan production has yet to reach pre-strike levels. However, it should be pointed out that people were surprised that PDVSA was able to produce over 2 million barrels a day as quckly as they did.

Still, Venezuela is quite short of its OPEC quota of 3.16 million barrels a day. Chavez has siphoned monies from PDVSA to support his social agenda and has not put the capital back into the company.

It is becoming clearer that this trend of lower production might continue. The takeaways:

  • In 1Q 2005 PDVSA spent $850 million in social programs compared to the budgeted number of $465 million
  • Only $628 million was spent on investment for the same time period.
  • Chavez admitted that the 2005 goal for production might not be reached because of "drilling troubles" in Western Venezuela
  • The SEC is investigating CITGO
  • Taxes on private companies that operate in Venezuela will see an altering (increase) to the tax code.

This article was written by

Michael McAllister is a contributor for Seeking Alpha.

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