PETROANDINA: A STILL BIRTH?

C O N F I D E N T I A L LA PAZ 002270 SIPDIS SIPDIS E.O. 12958: DECL: 03/07/2017 TAGS: ECON PGOV PREL EPET VE BL SUBJECT: PETROANDINA: A STILL BIRTH? REF: LA PAZ 2205 Classified By: DCM Kris Urs for reasons 1.4 (b) and (d). -------------- Long On Promises -------------- ¶1. (C) The birth of Petroandina took place with great fanfare during the August 9-10 visit of President Chavez to Bolivia. Petroandina was one of a myriad of announced projects, donations, and associations that were portrayed as the answer to Bolivia's energy puzzle. Detailed plans, however, were noticeably absent. -------------- Short On Details -------------- ¶2. (U) As a manifest example of the Venezuelan/Bolivian cooperation, Petroandina is to be a joint venture between the Bolivian (YPFB) and Venezuelan (PDVSA) state oil companies. Ownership will be divided 60% for YPFB and 40% for PDVSA. The joint venture will be initially capitalized with $US600 million. While it was implied that PDVSA would put up all the initial capital, a strict interpretation of the announcements would mean that YPFB will put forward $US360 and PDVSA will invest the remaining $US240 million. The principle mission of Petroandina will be oil exploration in northern La Paz state, but additional exploration in the southern states of Tarija, Chuquisaca, and Santa Cruz, where there are large proven reserves of gas, is also anticipated. The joint venture was made possible by a May 2007 decree that enabled the YPFB to partner with other state or private companies to develop 21 areas for natural gas or oil. -------------- Comment -------------- ¶3. (C) The promise of oil in northern La Paz may well be worthy of exploration, but it is a long-term project and is certainly not a fix for a looming energy crisis in Bolivia. Moreover, YPFB is in no condition to initiate major new undertakings. The structure of the state company is still undefined, its capabilities unproven, and its financial assets cloaked behind increasingly thick government curtains. Given that YPFB is effectively a shell company and that PDVSA is better known for its corruption rather than sound management practices, Petroandina's parents may have given birth to a still born. End comment. GOLDBERG