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By Robert Rapier on Jul 22, 2007 with no responses

Venezuela’s Production Difficulties

I think this speaks for itself:

Venezuela drops 2007 rig count target by 40 pct

CARACAS, July 20 (Reuters) – Venezuela’s difficulties in acquiring oil rigs amid soaring global demand could lead to lower oil production amid a nationalization crusade by leftist President Hugo Chavez.

Chavez has forced the hand of foreign energy companies in Venezuela with an aggressive campaign to take over oil projects that last month pushed Exxon Mobil (XOM.N: Quote, Profile, Research) and ConocoPhillips (COP.N: Quote, Profile, Research) out of multibillion-dollar heavy crude ventures.

Apparently, for some odd reason the nationalization campaign 1). Seems to be scaring some foreign firms off; and 2). Is being met by falling production.

The problem comes amid growing concerns that PDVSA’s output may fall after it took over operations at four multibillion-dollar heavy crude upgrading projects previously run by foreign oil companies.

Venezuela’s official figures show output at 3.07 million bpd, though international energy agencies say it is only around 2.5 million bpd.

PDVSA’s figure is below its official figure of 3.3 million bpd reported in 2005, when Venezuela launched a plan to raise production to 5.8 million bpd by 2012.

So, the plans were to raise production to 5.8 million bpd by 2012. Yet production has actually fallen since they kicked off the plan. Time to make another prediction: Venezuelan production will not reach 5.8 million bpd by 2012. Any Chavez-cheerleaders want to make a bet on it? Truth be told, it will probably languish where it is right now, if it doesn’t continue to fall. That’s great news for me on 2 counts. It will help drive up world oil prices by restricting supply (encouraging conservation) and it will make Chavez look like an idiot.

He specifically mentioned Schlumberger as one of the companies that had refused to participate in tenders.

What, they don’t trust Chavez?