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Statement of the Embassy of Venezuela Before the Senate Committee on Energy and Natural Resources

The Embassy of the Bolivarian Republic of
Venezuela in the United States
Before the
Senate Committee on Energy and Natural Resources
On the Energy Information Administration Annual Energy Outlook 2004
March 4, 2004
The Embassy of the Bolivarian Republic of Venezuela in the United States thanks the
Senate Energy and Natural Resources Committee for the opportunity to present its views to the
Committee on the Energy Information Administration?s Annual Energy Outlook 2004. Our
message is simple. Venezuela, and its national energy company Petroleos de Venezuela, S.A.
(PDVSA), are steadfastly committed to meeting the energy needs of the United States.
Venezuela is among the largest foreign suppliers of crude oil and refined products to the United
States, and has been so for many years. In the future, we continue to increase these supplies, and
will become an important supplier of liquefied natural gas (LNG) to the United States. We see
these developments as advancing the interests of both of our countries.
We would like to cover four topics in our testimony today: First, the long and proud
history Venezuela and PDVSA have as a reliable supplier of energy to the United States; second,
PDVSA?s recovery in record time from the challenges it faced in late 2002 and early 2003; third,
Venezuela?s future energy plans; and fourth, Venezuela?s role in the U.S. energy outlook.
Venezuela?s History of Supplying Energy to the United States
For over eighty years, Venezuela has been a constant, stable, and reliable supplier of oil
to the United States. Through global crises and calm, Venezuela has been, and remains, a
consistent and dependable source of crude oil and petroleum products for the United States.
Venezuela and the United States have developed a strong energy relationship that has
engendered increasingly broader economic development and investment opportunities in both
countries. Recognizing the potential in energy cooperation with the United States, Venezuela
has taken numerous steps to realize that potential, including opening its energy industry to U.S.
involvement and making substantial investments in the U.S. refining industry. Venezuela, in
turn, serves as a trusted oil supplier, and it should be noted as a major export market for many
U.S. industrial and service sectors.
The energy trade relationship between the United States and Venezuela has been, and
will continue to be, a key component in the diversification of foreign energy sources that
underpins much of U.S. int ernational energy policy. The development of the U.S./Venezuelan
energy relationship has fostered, and continues to foster, the broader growth and linkage of
energy infrastructures, and the development of cooperative energy policies, throughout the
Western Hemisphere as a whole. Therefore, due in large part to the U.S./Venezuela energy
relationship, the Western Hemisphere continues to evolve as a geographically and politically
cohesive energy market, strongly supporting the energy security of the United States, and all
countries in the Americas.
Venezuela assigns great value to its long-standing relationship with the United States and
the long history of oil trade between our two countries that has benefited both countries so much.
The supply of oil and energy products to the United States from Venezuela has been particularly
crucial to U.S. energy security during global crises such as World War II, the Korean conflict,
the Suez Canal crisis, the Six-Day Arab-Israeli War, the Yom Kippur War, the Iran-Iraq War, the
Persian Gulf War, the aftermath of September 11th and, most recently, the War in Iraq.
The geographic proximity of Venezuela to the United States makes trade between the two
countries both economically advantageous and logistically feasible. Major port cities along both
the eastern seaboard and the Gulf Coast can be reached from Venezuelan ports by tanker much
faster and more economically than from California, Alaska, or Middle East points of
embarkation. Shipping time between Venezuela and the United States is 4-5 days, as opposed to
35-45 days from the Persian Gulf. In addition to its geographic location, Venezuela's natural
resources set it apart from other Western Hemisphere suppliers of oil to the United States.
Venezuela's proven reserves of crude oil and condensates amount to over 78 billion barrels, the
largest outside the Persian Gulf. Venezuela's total oil resources are, in fact, much greater by
virtue of one of the largest hydrocarbons reserves in the world ? the Orinoco Belt, which
contains 1.2 trillion barrels of conventional and unconventional crude oil in situ, of which 270-
320 billion barrels are recoverable under today's technology. Venezuela also has 148 trillion
cubic feet (tcf) of natural gas reserves and an additional 198 tcf of anticipated reserves. In
addition, Venezuela maintains a vast worldwide distribution system and has access to most of the
Caribbean Basin oil storage capacity.
Venezuela has substantial investments in the United States as well. These investments
include PDVSA?s ownership of CITGO which is the third largest refiner in the United States.
Investments also include joint ventures that PDVSA has with Amerada Hess and ExxonMobil.
These joint ventures own and operate major refineries in the U.S. Virgin Islands and Chalmette,
Louisiana, respectively.
The United States is Venezuela?s primary energy export market; we deeply value the
energy relationship between our two countries.
Venezuela?s Successful and Rapid Recovery in 2003
In late 2002 and early 2003, the reliability and dependability of the Venezuelan energy
sector was, unfortunately, threatened. Restoring PDVSA to its earlier production levels in a
sustainable ? and safe ? manner presented enormous challenges. We have successfully met
those challenges. In 2003 alone, PDVSA hired 6,000 new employees.
We restored our production and our refining operations quickly and fully. In fact, we did
it in record time, without damaging any of our oil reservoirs. We are extremely proud that our
exports of crude oil to the United States reached their highest level in December 2003. With
1.44 million barrels per day exported to the United States, Venezuelan oil now accounts for more
than 15 percent of all oil imports to the United States.
Venezuela?s Plans for the Future
Having made such a successful and complete turnaround in 2003, we are now ready to
look to the future. PDVSA?s 2004-2009 business plan is both ambitious and realistic. The plan
calls for an increase in crude oil production capacity from the current 3.8 million barrels per day
to more than 5 million barrels per day by 2009. While this increase will be achieved principally
from substantial investments by PDVSA, there will also be sizable investments by foreign oil
companies ? including U.S. companies ? in Venezuela. Under the business plan, a total of $37
billion will be invested in the Venezuelan energy industry over the next five years. Foreign
companies will account for 26 percent of this total. PDVSA?s plans provide tremendous
business opportunities for U.S. companies. In addition, Venezuela has a legal framework in
place that allows for foreign participation up to 49 percent in upstream activities, 100 percent in
downstream activities, and 100 percent in natural gas projects.
There are already four multi-billion dollar projects that upgrade extra-heavy oil from the
Orinoco Belt into synthetic crude oil. U.S. companies including ExxonMobil, ConocoPhillips
and ChevronTexaco participate in these projects. Approximately 500,000 barrels per day
currently are produced from these projects, and most of these barrels are exported to U.S.
refineries. We welcome the involvement of U.S. companies in the Venezuelan energy industry
and believe it is beneficial to both countries.
In fact, we anticipate greater involvement by U.S. and other foreign companies in both
the Venezuelan oil and natural gas sectors in the future. PDVSA, in concert with foreign energy
companies, is implementing an ambitious plan for the production and development of liquefied
natural gas (LNG) that will be dedicated to the U.S. market. PDVSA is already pursuing two
large LNG projects ? the Mariscal Sucre Project (with Shell and Mitsubishi) and the Platform
Deltana Project (with ChevronTexaco, ConocoPhillips, and Statoil). PDVSA has already made
great progress on these projects. The Mariscal Sucre project is scheduled to be on- line by 2008,
and Platform Deltana will follow soon thereafter in early 2009. These will be sustainable,
efficient projects and will make Venezuela one of the most important foreign LNG sources for
the United States by the end of this decade. In addition, the importance of Venezuelan LNG
projects to the United States will be magnified by Venezuela?s shipping advantage. The cost of
shipping LNG to the United States is only $.26 per million british thermal units (BTUs) ? the
lowest in the world.
Venezuela?s Role in the U.S. Energy Outlook
Venezuela has a long and deep commitment to the U.S. market and that will never
change. In fact, Venezuela is in integral part of the U.S. energy picture not only because of its
exports to the United States, but, as noted earlier, through its ownership of CITGO ? the third
largest refiner in the United States. CITGO distributes its gasoline throughout the United States
everyday by means of 13,000 independently owned and operated retail outlets. CITGO has more
than $12 billion in investments in refineries, terminals and pipelines. These investments directly
generate 2,400 jobs and indirectly generate 150,000 jobs. PDVSA and CITGO also purchase
about $2 billion of goods and services from more than 800 U.S. companies every year. Clearly,
Venezuela has a vital role not only in the U.S. energy market but in the U.S. economy as a
Venezuela?s role in the U.S. energy picture is destined to become even more important.
The reasons are straightforward: Venezuela?s proximity to U.S. ports, its 78 billion barrels of
proven crude oil reserves, its huge reserves in the Orinoco Belt, its already significant investment
in the U.S. energy industry, and its large natural gas reserves and the LNG projects that are
underway. PDVSA?s business plan and substantial investments are predicated on this idea ? to
meet the growing U.S. demand for oil and natural gas.
From our vantage point, the energy ties between the United States and Venezuela will be
strengthened each year far into the future. The United States is our largest and most important
market for energy products. Venezuela, in turn, is one of the most significant foreign suppliers
of crude oil and refined products to the United States, and we are your neighbors in the Western
Hemisphere. The mutual advantages of an enhanced energy relationship are undeniable. We are
determined, and committed, to do our part to make sure that the United States will always have
enough energy ? at affordable prices ? to meet its needs now and for the future.
We thank the Committee for holding this hearing and for providing us the
opportunity to present our views on these important issues.

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