gotta love sepia (click to enlarge)

However, the numbers tell a different story. And when it comes to the hard numbers, we don't even have to rely on the Venezuelan government's word of honour as world class independent bodies do the talking for them. For example, I bet you didn't know that according to the undisputed industry bible 'Petroleum Intelligence Weekly', PdVSA is the world's number five oil company, and has scored in the top five all this decade (out of interest, first is Saudi Arabia's state oil company, second is Iran's state oil company, third is Exxon Mobil, fourth is BP. Industry darling Petrobras doesn't even make the top ten).

Also, PdVSA seems to have entered a growth phase. With JV agreements largely in place for the development of new fields and refineries, PdVSA has recently announced that country production will grow from the current 3.2m barrels per day (mbbl/d) to 3.45mbbl/d by the end of this year. Also, the perforation and tapping of the enormous Mariscal Sucre offshore gas field finally started last month after literally years of delays. This long term project will eventually provide natgas to Venezuela for internal use and surplus sold to JV partners.

But back to hard, verifiable, numbers. Last week PdVSA released its first quarter results (here's the link). According to its preliminary audit (for those looking for a chink in the armour, PdVSA is audited by world class KPMG) year over year production was slightly up and revenues were up a whole boatload. Check out the numbers for yourself, and you'll see revenues up 52% and costs of production up 38% in for the period.

However, it's the PdVSA state contribution that most catches the eye. Like any quarterly report, the 1q08 isn't as complete as the annual report for 2007 (available at this link) but by using the same percentages of royalty revenues paid to the state by PdVSA in 2007, it's possible to estimate a total like this:



Some notes on the above: The first line on royalties etc is the only estimate I have to make. I do it by calculating the total state payments made in the "costs" column for 2007 (a touch over 30%), and using the same percentage for 1q08. Social development fund payments are often thought of as "what PdVSA contributes to the people". However, we clearly see it is a minor part of the total. Income tax is income tax. Dividend to shareholders is included because the only shareholder is the state itself. Obvious if you think about it for over a second.

Therefore in the first quarter of 2008, PdVSA handed approximately U$14.2Bn (that's billion, with a "B") to the state. To give you a bit of context, as Venezuela has a 2008 estimated population of 26.41m people*, that works out at six US dollars per person per day. Still wondering why nobody goes hungry in Venezuela?

So much for the past; what happens for the rest of 2008? Well scarily, the first quarter just reported looks like being the worst of the year, as two things are about to kick in to results going forward. Firstly, the well publicized nationalization of the Orinoco Faja production area happened in the first part of 2007 (well, it wasn't really wholesale expropriation, either as PdVSA upped its share of production from 49% to 60% generally). This will mean comparatively more barrels are sold by PdVSA this quarter, no doubts. But most importantly, look at this chart....

(click to enlarge)

.... and you can see the big run up in oil prices started in April. With WTI only touching U$100/bbl at end 1q08, and currently selling at U$144/bbl now, have a wild guess about the profits that PdVSA will print this quarter. Just by a quick eye-to-the-chart I can see average barrel prices coming in around 30% higher this quarter..........

So to sum up; PdVSA is producing well, is investing in the future, has JV agreements signed and moving forward, is making a lot of money, is contributing enormous amounts to the state and will almost certainly make substantially more going forward. Any further questions?

*source: CIA world handbook, July 2008 estimate