Identifier
Created
Classification
Origin
07CARACAS2346
2007-12-14 16:19:00
CONFIDENTIAL//NOFORN
Embassy Caracas
how-toVZCZCXYZ0000 RR RUEHWEB DE RUEHCV #2346/01 3481619 ZNY CCCCC ZZH R 141619Z DEC 07 FM AMEMBASSY CARACAS TO RUEHC/SECSTAT%QQ 2633 RUEHPE/AMEMBASSY LIMA 0908 RUEHSP/AMEMBASSY PORT OF SPAIN 3521 RUEHQT/AMEMBASSY QUITO 2722 RUEHSG/AMEMBASSY SANTIAGO 4027 RUEHDG/AMEMBASSY SANTO DOMINGO 0532 RUMIAAA/HQ USSOUTHCOM MIAMI FL RHEHAAA/WHITEHOUSE WASHDC RHEBAAA/DEPT OF ENERGY RUCNDT/USMISSION USUN NEW YORK 0955 RUCPDOC/DEPT OF COMMERCE RUEATRS/DEPT OF TREASURY RHEHNSC/NSC WASHDC
C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 002346
SIPDIS
SENSITIVE
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD
NSC FOR JCARDENAS AND JSHRIER
E.O. 12958: DECL: 10/02/2017
TAGS: EPET ENRG EINV ECON VE
SUBJECT: PDVSA CASH FLOW PROBLEMS
REF: A. CARACAS 183
B. CARACAS 2330
CARACAS 00002346 001.10 OF 002
Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D)
C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 002346
SIPDIS
SENSITIVE
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD
NSC FOR JCARDENAS AND JSHRIER
E.O. 12958: DECL: 10/02/2017
TAGS: EPET ENRG EINV ECON VE
SUBJECT: PDVSA CASH FLOW PROBLEMS
REF: A. CARACAS 183
B. CARACAS 2330
CARACAS 00002346 001.10 OF 002
Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D)
1. (C) SUMMARY: Multiple oil sector contacts have stated
that PDVSA is not paying service companies and has told a
number of them that they will not be paid until mid-January
or even February. A local analyst also stated that PDVSA had
not paid the missions prior to the December 2 constitutional
referendum. It is not clear where Venezuela's oil revenues
are going or why PDVSA thinks that it will have funds in late
January or February. END SUMMARY
--------------
SHOW ME THE MONEY
--------------
2. (C) As reported in Reftel A, rumors have been swirling
since the summer of 2006 that PDVSA has been suffering from
severe cash flow problems due to social development
expenditures. However, multiple oil sector contacts have
stated that beginning in early December PDVSA has told
service companies that it will not be able to pay them until
mid-January or even February. A senior executive at Williams,
(strictly protect throughout) told Petroleum Attache (Petatt)
on December 13 that his contacts in Anaco, Zulia, and Maturin
were all reporting that PDVSA was not paying any bills until
mid-January on instructions from PDVSA headquarters.
According to the executive, all vendors and contractors have
been cut off, including Chavista contractors.
3. (C) The Williams executive stated that a senior executive
at Wood Group (strictly protect) also complained that his
company is no longer being paid. The Williams executive
added PDVSA has also canceled its employee's Christmas
parties this year. The executive admitted that it was not
clear if the cancellations were due to cash flow problems or
were punishment for not voting in sufficient numbers in the
constitutional referendum. The president of a Venezuelan
hydrocarbon consulting firm also told Petatt on December 12
that PDVSA was only paying small bills.
4. (C) We note that two major service companies,
Schlumberger and Baker Hughes (strictly protect throughout),
have not reported a cessation of payments. However, both
complained that payments are frequently delayed.
Schlumberger officials told Petatt on December 6 that their
company's waiting period for payment is over 100 days but
that the company is willing to accept the situation in order
to maintain market share. They also added that
Schlumberger's operations in Venezuela have the lowest return
on equity in Latin America.
5. (C) A senior Baker Hughes executive told Petatt on
December 6 that his company was still suffering from payment
delays. However, he stated that Baker Hughes was more
concerned about PDVSA's attempts to change the dollar/bolivar
split in payments. He said PDVSA has recently begun to
insist that Baker Hughes accept more bolivars in its
payments. The executive noted that recent problems at
CADIVI, the foreign exchange agency (Reftel B),made it
extremely difficult to repatriate bolivar profits.
--------------
WHERE IS THE MONEY?
--------------
6. (C) The standard explanation for PDVSA's cash flow
problems is the BRV's insistence that it fund a wide variety
of social missions. However, a local analyst told Petatt on
December 12 that PDVSA did not pay the BRV's missions
CARACAS 00002346 002 OF 002
immediately prior to the December 2 constitutional
referendum. Analysts had expected the BRV to significantly
increase missions spending in the weeks leading up to the
referendum. A conservative estimate of Venezuela's gross oil
revenues is 150 million USD per day. If PDVSA is not paying
the service companies or the missions, the obvious question
is where is all of the money going?
7. (C) In addition, it is not clear why PDVSA officials
believe that they will have sufficient funds to pay
contractors in late January or mid-February. The only
plausible explanation that we can think of is that PDVSA
intends to secure external financing in the next sixty days.
DUDDY
SIPDIS
SENSITIVE
SIPDIS
ENERGY FOR CDAY AND ALOCKWOOD
NSC FOR JCARDENAS AND JSHRIER
E.O. 12958: DECL: 10/02/2017
TAGS: EPET ENRG EINV ECON VE
SUBJECT: PDVSA CASH FLOW PROBLEMS
REF: A. CARACAS 183
B. CARACAS 2330
CARACAS 00002346 001.10 OF 002
Classified By: Economic Counselor Andrew N. Bowen for Reason 1.4 (D)
1. (C) SUMMARY: Multiple oil sector contacts have stated
that PDVSA is not paying service companies and has told a
number of them that they will not be paid until mid-January
or even February. A local analyst also stated that PDVSA had
not paid the missions prior to the December 2 constitutional
referendum. It is not clear where Venezuela's oil revenues
are going or why PDVSA thinks that it will have funds in late
January or February. END SUMMARY
--------------
SHOW ME THE MONEY
--------------
2. (C) As reported in Reftel A, rumors have been swirling
since the summer of 2006 that PDVSA has been suffering from
severe cash flow problems due to social development
expenditures. However, multiple oil sector contacts have
stated that beginning in early December PDVSA has told
service companies that it will not be able to pay them until
mid-January or even February. A senior executive at Williams,
(strictly protect throughout) told Petroleum Attache (Petatt)
on December 13 that his contacts in Anaco, Zulia, and Maturin
were all reporting that PDVSA was not paying any bills until
mid-January on instructions from PDVSA headquarters.
According to the executive, all vendors and contractors have
been cut off, including Chavista contractors.
3. (C) The Williams executive stated that a senior executive
at Wood Group (strictly protect) also complained that his
company is no longer being paid. The Williams executive
added PDVSA has also canceled its employee's Christmas
parties this year. The executive admitted that it was not
clear if the cancellations were due to cash flow problems or
were punishment for not voting in sufficient numbers in the
constitutional referendum. The president of a Venezuelan
hydrocarbon consulting firm also told Petatt on December 12
that PDVSA was only paying small bills.
4. (C) We note that two major service companies,
Schlumberger and Baker Hughes (strictly protect throughout),
have not reported a cessation of payments. However, both
complained that payments are frequently delayed.
Schlumberger officials told Petatt on December 6 that their
company's waiting period for payment is over 100 days but
that the company is willing to accept the situation in order
to maintain market share. They also added that
Schlumberger's operations in Venezuela have the lowest return
on equity in Latin America.
5. (C) A senior Baker Hughes executive told Petatt on
December 6 that his company was still suffering from payment
delays. However, he stated that Baker Hughes was more
concerned about PDVSA's attempts to change the dollar/bolivar
split in payments. He said PDVSA has recently begun to
insist that Baker Hughes accept more bolivars in its
payments. The executive noted that recent problems at
CADIVI, the foreign exchange agency (Reftel B),made it
extremely difficult to repatriate bolivar profits.
--------------
WHERE IS THE MONEY?
--------------
6. (C) The standard explanation for PDVSA's cash flow
problems is the BRV's insistence that it fund a wide variety
of social missions. However, a local analyst told Petatt on
December 12 that PDVSA did not pay the BRV's missions
CARACAS 00002346 002 OF 002
immediately prior to the December 2 constitutional
referendum. Analysts had expected the BRV to significantly
increase missions spending in the weeks leading up to the
referendum. A conservative estimate of Venezuela's gross oil
revenues is 150 million USD per day. If PDVSA is not paying
the service companies or the missions, the obvious question
is where is all of the money going?
7. (C) In addition, it is not clear why PDVSA officials
believe that they will have sufficient funds to pay
contractors in late January or mid-February. The only
plausible explanation that we can think of is that PDVSA
intends to secure external financing in the next sixty days.
DUDDY