UNCLAS CARACAS 000197

SIPDIS

SIPDIS

ATTN: S. GAIL ROBINSON S/CT

E.O. 12958: N/A
TAGS: ASEC EAID ECON ETTC PGOV PTER PERL EAGER EFIN
SUBJECT: VENEZUELAN KEY RESOURCES AND CRITICAL
INFRASTRUCTURE

REF: A. STATE 6461


B. GAO-06-668 JUNE 2006


1. In response to reftel A, Venezuela has little or no
critical infrastructure (as defined in reftel A) and few key
resources that are vital to the United States. Venezuela's
most significant resource that is supplied to the US is
petroleum and petroleum products. Venezuela produces
approximately 2.6 million barrels per day (MBD) of oil and
exports approximately 1.4 MBD of oil per day to the United
States, which accounts for approximately 11 per cent of U.S.
imported oil and approximately seven per cent of the total
daily US oil consumption.


2. Reference B, a U.S. GAO study: Energy Security: Issues
Related to Potential Reductions in Venezuelan Oil highlights
a DOE estimate that a 6-month disruption of crude oil with a
temporary loss of 2.2 MBD would result in an increase in
crude oil prices and a reduction of up to USD 23 billion in
U.S. GDP relative to a predicted GDP of USD 13 trillion,
about 0.19 percent of total GDP. The study also estimated
that GDP growth would be about 0.18 percent less than what it
would have been otherwise for the year. A separate analysis
in the same report conducted by GAO estimated a reduction
between USD 2.5 to 7.5 billion of total GDP.


3. Some of the options the United States may pursue to
mitigate any impact of a Venezuelan oil supply disruption
include diplomacy, whereby U.S. government officials
negotiate with senior officials in oil producing countries to
increase their supply of crude oil in case of a disruption,
using oil in the U.S. Strategic Petroleum Reserve and
coordination with the International Energy Agency, whose
members hold stocks equal to 90 days or more of its net
imports to address supply disruptions. According to an
Energy Information Agency (EIA) study, during the Venezuelan
oil workers strike in the winter of 2002-2003, which resulted
in an approximate loss of 2.2 MBD of crude oil, most of the
replacement oil came from Mexico and the Middle East,
especially Iraq.


4. Finally, any disruption in Venezuelan oil production
would be devastating for Venezuela. Oil revenues account for
between 45 and 50 percent of Venezuelan government revenues.
A severe drop in oil revenues would cripple the economy and
pose a grave threat to the Venezuelan government and to the
country as a whole.

DUDDY