VENEZUELA

MARITIME BORDERS

United States : Venezuelan Navy Actions in Guyana

The Venezuelan Navy aggressively stopped ExxonMobil contracted vessels operating under an oil exploration agreement with Guyana in its Exclusive Economic Zone. We underscore that Guyana has the sovereign right to explore and exploit resources in its Exclusive Economic Zone. We call on Venezuela to respect international law and the rights of its neighbors.

The socialist government and its political opponents, starkly divided over two decades on the best path forward for the country, suddenly united for once around a common theme: the century-old territorial dispute with Guyana.

The neighboring countries are clashing over offshore oil development in the disputed area as Exxon Mobil Corp ramps up activity and after the Venezuelan Navy interrupted the path of a vessel for seismic surveying.

Exxon said that development work off the Guyanese coast will continue after the incident halted efforts to map the sea floor. Guyana is one of Exxon’s biggest projects for the next decade and may produce 750,000 barrels of oil a day by 2025, about 20 percent of the oil giant’s current output. All its Guyanese discoveries have been made in the Stabroek block, a vast area covering 6.6 million acres, part of which is near Venezuelan territory.

Caracas-based Datanalisis said “The action of the Navy defending national sovereignty in Venezuelan waters is correct. All Venezuelans, without distinction of political position, must support it and send a clear message of unity in the defense of our territory.”

Venezuela’s foreign ministry said that its navy during the daily patrolling activities detected an “unprecedented presence in Venezuelan jurisdictional waters of two seismic exploration vessels.” The vessel were identified as Ramform Tethys and Delta Monarch. The ministry said that the vessels were located “within the Orinoco River Delta maritime waters, over which Venezuela undoubtedly has unquestionable sovereignty.” It claimed that Guyana has no jurisdiction over the maritime area of the Orinoco River Delta citing that as the reason for stopping Guyana’s activities.

Guyana has spent GYD$780 million (US$3.7 million) from the US$18 million signing bonus from ExxonMobil on legal fees for the settlement of the border controversy with Venezuela.

Oil Exports Slump to 28-Year Low

Venezuela, home to the world’s biggest crude reserves, ended 2018 with a whimper as overseas sales dropped to the lowest in nearly three decades.,

Once Latin America’s largest oil exporter, the OPEC founder exported 1.245 million barrels a day last year, the lowest since 1990, as production tumbles amid an economic and humanitarian crisis. Financial sanctions imposed by the U.S. have further tightened the screws on the ailing economy, while creditors seek to seize its assets including oil cargoes and its prized Citgo refineries in the U.S. Falling exports compound the pain, as oil is the country’s main source of revenue and bankrolls the Maduro regime. Crude production fell by more than half in the past five years to a daily average of 1.346 million barrels this year, according to OPEC data. The country is also bracing for more sanctions, as the Trump administration is said to mull new actions against Venezuela by January 10, when Maduro’s current term expires. He faced criticism in May, when he was re-elected in a vote derided as a sham.

American Security Project

International experts and anti-corruption watchdogs warn Guyana about the resource curse—a phenomenon in countries endowed with natural resources struggling to use wealth effectively, eventually enduring low levels of economic development. Most advice to local authorities focus on debilitating effects of the resource curse on the economy. In its report “Guyana: Building Sustainable Security,” the American Security Project (ASP) said it is imperative for security that the politicians avoid the resource curse.

Author, Andrew Holland, the American Security Project’s Chief Operating Officer (COO), said that Venezuela should serve as a warning.

“….. look across Guyana’s western border, to Venezuela, to see how a country rich in natural resources can fall victim to this curse. This is a security and humanitarian crisis. Venezuelans are fleeing … as hyperinflation rages while basic services like health care and food distribution fail. ..the country has become a haven for transnational criminals and the government has become implicated in humanitarian abuses as it puts down demonstrations.”

These outcomes are directly attributable to the resource curse and the imposition of policies of resource nationalism. There are models for how Guyana can build a prosperous, stable country with oil revenues. Norway grew from a small, poor country to one of the wealthiest. Gulf States like the United Arab Emirates and Qatar show a remarkable rise from poverty to wealth in a generation, with some unsteady moments.
The resource curse is not a prophecy: it is a warning which Guyana can overcome through foresighted investment and smart policy and build a secure, stable future with its newfound wealth. Oil wealth can create a model for the Caribbean and South America, an outcome with deep geopolitical consequences for the region.

SECURITY AND STABILITY The opportunity that oil presents is clear. More money will flow into government coffers in the form of royalties, profit sharing and lease payments and to the broader economy, as workers are hired and local contracts are signed. The economic boom, directed properly, can provide the basis for dealing with longstanding security problems. Without reform, throwing money on top of intractable social problems can worsen them. Evidence shows that unexpected increases in resource wealth given to countries with weak and unstable political institutions can only aggravate problems. Holland cautioned that it can add a layer of government instability and economic challenges to already existing internal threats. For that reason, policymakers should acknowledge that money could solve some problems, while reform and foresight will prevent others.

SOLVING SECURITY CHALLENGES Some security challenges can be reduced with more money. Guyana is a common transit country for cocaine headed from Colombia and Venezuela to the United States, Canada, and Europe. In the last decade, under pressure from the U.S. to combat drug smuggling, the government passed legislation to address money laundering, terrorist financing, and extradition. It created a new Special Organized Crime Unit and launched an updated Drug Strategy Plan.

” These actions provided important legal and institutional ability to fight drug trafficking and organized crime, but the country has lacked the means to fund and support the efforts. The large coastline, long navigable rivers and sparsely inhabited jungles offer easy cover for illicit smuggling. Increasing funding and manpower in the Coast Guard, customs enforcement agency, and police will allow the country to more effectively manage its borders and understand how and where illicit goods transit to larger markets.

Guyana is a member of the U.S.-led Caribbean Basin Security Initiative, in which the U.S. collaborates with Caribbean countries to build the capacity to address transnational threats. Such collaboration allows intelligence sharing so that host countries can monitor and track illicit goods. With greater resources dedicated to law enforcement, the Government of Guyana can more effectively act on American intelligence.”

In connection to the rise of transnational security threats like drug trafficking, Holland highlighted that domestic criminal activity has increased in Guyana. From 2000 to 2015, the homicide rate doubled, from 10 to 19.4 homicides per 100,000 people. United Nations Office on Drugs and Crime ranks this as the fourth highest homicide rate in South America, after Brazil, Colombia, and Venezuela. The violent crime rate is similarly high, particularly in Georgetown.
Although these statistics are separate from transnational threats that directly impact the United States,the financing, weapons, and criminal organizations involved in drug trafficking are often the same as those involved in domestic crime.
More money alone will not solve an intractable problem like violent crime: Guyana must ensure its judicial system is perceived as fair and equitable to all ethnic groups and that corruption does not undermine the ability of the security services to do their jobs.
More resources devoted to police, criminal courts, crime prevention, and criminal rehabilitation programmes can reduce crime rates.

https://www.americansecurityproject.org/wp-content/uploads/2018/10/Ref-0216-Guyana-Building-Sustainable-Security.pdf)

Security Risk to Vessels Visiting Jose Terminal

The International Maritime Bureau reports that vessels visiting Jose Terminal face a rise in security related incidents after three attempted vessel boardings and six actual boardings of bulk carriers and product tankers anchored in the vicinity of the terminal in 2018. Robbers were armed with knives. and guns were sighted. Robbers often escape when realising the crew were aware of their presence. An Able Seaman was threatened with a knife and tied to a railing before his shipmates were able to free him.

One vessel was boarded by alleged government personnel, who reportedly found cocaine during an inspection. The inspectors attempted to reach a cash settlement with the Master, which was resisted and the inspectors left the vessel. Crews of vessels visiting the terminal are on alert to the improper conduct of alleged officials, who should provide identification documents and all activities should be closely followed by the crew.

Due to the robbery risk at the anchorages, crew members should always remain vigilant, amid reports that the anchor chain and the poop deck are favoured means of boarding for pirates. Advice to crews aimed at thwarting boarding attempts include

• Maintain a good visual and radar watch for approaching small craft.
• Supplying the vessel with a pair of night vision binoculars.
• Illuminate areas over the side.
• Fit searchlights to illuminate suspect craft or use the Aldis Lamp for this purpose.
• Illuminate the main deck and all points of access when at anchor and so far as is safe and practicable when navigating in the area.
• Keep pilot ladders and accommodation ladders stowed and secured at deck level when not in use.
• Fit substantial hawse pipe covers when at anchor and consider continuously running the anchor wash.
• So far as manning levels and compliance with STCW regulations allow; have roving personnel on deck in contact with the bridge.
• Securely lock all stores and accesses, whilst always allowing easy escape for personnel from inside working and living spaces.

Deals to Shield Citgo from Creditors, in Doubt.

A lawyer for Canadian mining company Crystallex International Corp said Venezuela had breached the $1.4 billion November agreement that resolved a long-running fight over an expropriated gold mine.

Venezuela’s $1.3 billion settlement in October with Rusoro Mining of Vancouver, also over expropriated mining assets, was upended by U.S. sanctions.

Both companies had their sights on a U.S. court order to auction the parent company of Citgo, indirectly owned by Venezuela through SOC PDVSA.

Venezuela, crippled by an economic crisis, defaulted on billions of dollars of debt and struck deals to protect Citgo’s refineries, a key destination for Venezuela’s crude.

Crystallex said Venezuela breached its agreement because PDVSA continued to try to overturn a court order that allowed Crystallex to seize the stock in Citgo’s parent company.

PDVSA disputed that a filing with a federal appeals court amounted to a breach. “As far as I’m aware, PDVSA is not a party to a settlement with Crystallex,” said Joseph Pizzurro.

Crystallex plans to restart efforts to auction Citgo, hiring advisers for a possible sale of Citgo, although that process has been stayed during the appeal by Venezuela and PDVSA.

Rusoro’s deal in October required Venezuela to pay $100 million by the end of November. Caracas transferred part of that payment to a Canadian bank which returned the funds to Venezuela due to concerns about violating U.S. sanctions.

Since the chief financial officer of Huawei Technologies Co Ltd, was arrested in Canada at the request of U.S. authorities sanctions have become a headline concern.

Hyperinflation

International Monetary Fund estimates inflation will jump 10 million percent by 2019, after Maduro’s failed economic policies to reduce inflation, which reached 1.29 million percent in November.

The national assembly forecast that it would hit 4.3 million percent in December. Econoanalítica, affirmed hyperinflation of 2 million before 2018 ends

With this staggering rate, Venezuelans rushed to spend money prices continue to rise. After the sixth minimum wage rise in 2018, the cost of a cup of coffee rose 285,614 percent— 400 sovereign bolivars or $0.76. The black market exchange rate, the real measure of real costs, sank to 526 bolivars per dollar from 460. Christmas staple, pan de jamón, bread with raisins and ham, rose 52 percent.

Citizens cannot have savings in the bank. The central bank prints and covers money that government is not producing. Hyperinflation is the culprit of this phenomenon and the population are victims. An Economic Recovery Program was launched to rein in rampant inflation that stifled the economy, raise the minimum wage by 3,000 percent and introduce the sovereign bolivar, a new banknote that cut 5 zeroes from the “strong bolivar” currency that lost absolute value due to high inflation. The wage hike can never catch up to 7-figure hyperinflation as workers still cannot afford basic items.

The launch of Petro, a cryptocurrency backed by oil, diamonds and gold reserves was another move to mitigate currency devaluation and “anchor” the sovereign bolivar The mining of Petro, the process whereby transactions are verified and added to a public ledger, does not build trust among market participants in light of Venezuela’s history of economic mismanagement.

Venezuela endured skyrocketing inflation rates since the Chávez administration declared that the government should control foreign exchange after a strike at SOC PDVSA in 2003, which lowered GDP. In addition to exchange rate policy that pegged the central bank’s rate of exchange to that of the U.S. dollar, root causes of high inflation are expropriation, nationalization and social programs funded by oil revenue, which plummeted in 2014, a year after Chávez died.

Strict price controls of the chavista regime, decline in domestic production, reliance on the state for basic goods ending in empty shelves at stores and a shrinking economy causing large fiscal deficits exacerbated a humanitarian crisis. 3 million Venezuelans left since 2015.The economy shrank 30 percent from 2013 to 2017. Foreign reserves fell from $30 billion in 2017 to less than $10 billion to date. Food and medicine are ebbing. Venezuela is not an important producer of oil, losing production of its main source of income. People are just surviving.

The Chávez government introduced the “bolivar fuerte” currency —launched in 2008 to assuage high inflation and ease financial transactionsn to little avail. In 2016, it depreciated 60 percent against the U.S. dollar on the black market. Venezuelans purchased food with bags of cash. Scales to weigh money instead of counting it mirrored scenes from hell-holes of hyperinflation like Zimbabwe.

As hyperinflation made banknotes less valuable and demand outpaced supply, artisans created items out of bolivar bills which sold for $10-$15 U.S. dollars, a large return of investment when bolivars were only worth 17 U.S. cents in Colombia near the border.

Government controls prices in commercial establishments to curb hyperinflation which affects all aspects of life. WIth high demand in funeral services, materials are scarce for coffins. Lack of propane gas increases cremation costs.

Economic woes push reliance on credit cards but their use poses limitations.

Cash is hard to see and is only used for gasoline and bus fares and ATMs have limits. Points of sales take debit and credit cards or bank transfers. Venezuela shows what hyperinflation looks like in the digital age. The government creates physical and digital money daily, to repay debt and pay public institutions and corporations. Credit cards have a 2-dollar limit. Spending money fast is a rally. Covering debts with money printing deepens hyperinflation.

U.S. sanctions banning restructuring or issuing new debt and restriction of Americans in business dealings with Venezuelan officials and companies, hamper the administration to fix its economy. An exchange-rate-based stabilization program (ERBS), with the bolivar fixed to the U.S. dollar at a sustainable exchange rate can eliminate hyperinflation. Of ways to accomplish ERBS, the most extreme is dollarization, to adopt the dollar as Venezuela’s currency. Once the dollar is adopted as the national currency, it becomes politically extremely difficult to remove. If a country lacks its own currency, it cedes control of most monetary policy as well as exchange rate policy.

This sacrifice need not be permanent but must be made temporarily. The government must eschew use of monetary policy to finance deficit spending, to change’expectations about inflation and to end hyperinflation. Fiscal reform is vital. Government cannot donate energy.

U.S. sanctions have no direct role in the country’s inflation. Other measures must be implemented. The only significant policy to mitigate inflation is a shift to the rule of law, with free and fair elections. Maduro’s new presidential term starts on January 10 but elections creating this new mandate are not recognized by the international community. There will be no confidence in his administration or the currency until Venezuela returns to institutionality.

The sovereign bolivar provides a temporary solution and the president will continue to dock zeroes. Until he ends massive printing of banknotes and embraces a disciplined fiscal and monetary policy, malnutrition will spread, patients will lack medicine, infrastructure will crumble and basic goods will be out of reach. Hyperinflation has a great cost with daily loss of llife.

Maurel & Prom completes acquisition of Shell’s stake in the Urdaneta West field

New milestone in Maurel & Prom’s growth strategy in Latin America
Urdaneta West field is a producing asset with large reserves and significant upside potential
An appropriate organisational and contractual framework has been set up to ensure an efficient redevelopment of the asset and secure payments
Photo – see caption
Maurel & Prom announced in the press release published on 12 October 2018 the signature of a Share Sale and Purchase Agreement (the ‘SSPA’) for the acquisition of Shell Exploration and Production Investments 40% interest as ‘Shareholder B’ in Petroregional del Lago Mixed Company, which operates the Urdaneta West field in Lake Maracaibo, Venezuela.

Further to this publication, Maurel & Prom has announced that all condition precedents have been satisfied and that the acquisition has been completed.

The total consideration for the acquisition of Shell’s shares in the Mixed Company is €70 million, funded from Maurel & Prom’s existing cash resources and composed as follows:

• €47 million which have been paid at closing of the transaction, and
• €23 million payable in December 2019, on the anniversary date of the transaction closing.

Maurel & Prom Venezuela, subsidiary of Maurel & Prom, has replaced Shell as Shareholder B in the Mixed Company, with a 40% interest. Petróleos de Venezuela S.A. (‘PDVSA’), wholly owned subsidiaries Corporación Venezolana del Petróleo (‘CVP’) and PDVSA Social (‘PDVSAS’) collectively referred to as ‘Shareholder A’, jointly own the remaining 60% stake of the Mixed Company.

New milestone in Maurel & Prom’s growth strategy in Latin America

Michel Hochard, Chief Executive Officer of Maurel & Prom, declared: ‘This transaction fits Maurel & Prom’s growth strategy, focusing on opportunities with significant potential in regions and countries where we have operating experience. It provides us access to an established producing asset in a world class petroleum system, with a potential for significant production improvements. Investments in oil and gas projects require a long term approach, and we expect that jointly with PDVSA and its subsidiaries we will help boost the redevelopment of the Field in the years to come. We have operated in Venezuela in the past and our experience of the region make us confident in the ability to transform this opportunity into a successful project.’

Producing asset with large reserves and significant upside potential

The production of the Field in 2018 is estimated to be around 15,500 barrels of oil per day on a 100% basis (approx. 6,200 barrels of oil per day net to Shareholder B’s 40% interest), and there is potential for a swift ramp-up in production. In particular, it is expected that a number of targeted well interventions in the first months of operations could have a significant impact on production.

Maurel & Prom will also maintain the efforts which have been deployed over the years to achieve high standards of health, safety, and environmental practices on the Field.

As announced in the press release published on 12 October 2018, Maurel & Prom has agreed to a redevelopment plan to increase the production of the Field. The redevelopment plan (amounting to up to c.€350 million for the period 2018-2023) will be partly funded by operating cash flow from the asset, and partly with funds advanced by Maurel & Prom Venezuela (the ‘Project Funding’).

In addition to this, the Field offers significant growth optionality through the development of additional resources, and the possible extension of the licence duration beyond its current term in 2026.

An appropriate organisational and contractual framework set up to ensure an efficient redevelopment of the asset and secure payments

As part of the transaction, a number of contracts have been pre-approved by the Mixed Company in order to ensure the restart of the work programme operations and guarantee a smooth circulation of cash flows.

On the operational side, Maurel & Prom Venezuela will provide the Mixed Company with technical assistance through a dedicated structure controlled by Maurel & Prom Venezuela, the ‘Technical Assistance Company’ (‘TAC’), registered in Venezuela and established in Maracaibo. In particular, the Technical Assistance Company is intended to closely support the Mixed Company for the conception and implementation of development plans. A significant amount of work has been performed already in order to start a work programme immediately after completion and see a swift impact on production.

Maurel & Prom will also appoint a number of secondees for certain positions within the Mixed Company, in an agreement similar to what Shell had in place as Shareholder B.

On the financial side and in order to secure the access to cash flows and guarantee the payments to the various stakeholders, it has been agreed that the oil production of the Field would be split in two parts:

• A portion of the production will be retained by PDVSA in order to satisfy Venezuelan taxes and royalties as well as a portion of the dividends due to the Shareholder A;
• The balance of production will be made available by PDVSA to be lifted by a buyer designated by the Mixed Company from the Ulé terminal in Lake Maraicabo. The proceeds from the sale will be denominated and paid in euros to a bank account located outside Venezuela.
• Funds transferred to the Collection Account will be used for the payment of contractors for operating and capital expenditures, as well as the payment of dividends to Shareholder B. Reimbursements made to Maurel & Prom Venezuela under the terms of the Project Funding will also flow through the Collection Account.

Source: Maurel & Prom

Russian  Base

RUSSIA plans its first military base in the Caribbean Sea with the largest semi-permanent postings of military hardware in the region since the Cuban Missile Crisis in 1962,

The Kremlin will be “deploying strategic aircraft” to Venezuela . Russian experts selected the island of La Orchila, 125 miles northeast of Caracas, as a possible military base if the cash-strapped country gives Moscow permission. Temporary,deployment of the supersonic heavy bomber allows Maduro to easily approve. Military expert Colonel Shamil Gareyev said “It is the right idea to include Venezuela in long-range aviation missions. Our strategic bombers will not have to return to Russia every time and perform aerial refuelling while on a patrol mission in the Americas.”

OBITUARY

Two previous presidents of PDVSA died

Chemist Nelson Martinez and

Engineer Eulogio Del Pino.