12-09-02 Venezuela could soon reach a long-term energy supply agreement with the United States, the president of state-owned oil producer PdVSA revealed. Ali Rodriguez told that the United States energy authorities were interested in reaching a deal under which Venezuela will guarantee supplies of petroleum products and natural gas to the US market.
Venezuela has the largest proven oil and gas reserves in the Western Hemisphere and is already the fourth most important supplier of crude to the United States, which is seeking to limit its dependencies on supplies from the Middle East. PdVSA possesses proven reserves of 78 bn barrels of crude oil and 148 tcf of gas, and already has the production and export capacity in place to meet the growing needs of the US market.

The PdVSA president said the United States was facing a major energy shortage in the medium-term and would require an additional 9 mm bpd of oil and an extra 38 bn cf of gas by 2020. "Venezuela can offer all of this and now it's a case of reaching a win-win agreement," Rodriguez said. "The United States will benefit because they will have a significant percentage of their new requirements guaranteed, and Venezuela will benefit because this will encourage our refining industry and add value to our exports."
The PdVSA president noted that US companies, such as Exxon Mobil and ChevronTexaco, are already major players in Venezuela's oil and gas sectors, and he added that a formal energy accord would encourage further cooperation between the two countries. Rodriguez also added that PdVSA is sitting on an extra 6 mm bpd of supply capacity at the moment that it would be ready to release at the behest of the United States' energy authorities, should Middle Eastern supplies be disrupted by a possible attack on Iraq.

The Venezuelan government is as enthusiastic as Rodriguez about the potential benefits to both sides of a long-term agreement between the United States and Venezuela. Energy Minister Ramirez first discussed the prospect in public back in late August and subsequently told United Press International that "our natural market is the East Coast of the United States."
The prospect of an export agreement would particularly benefit Venezuela's gas sector. Successive Venezuelan governments largely ignored the sector's potential, but in recent months President Hugo Chavez has signed a number of key agreements with foreign partner companies to exploit Venezuela's huge offshore gas-fields.

The government aims to export around 70 % of all the gas produced, mainly to the United States, where the market for gas will far outweigh supply within the next 4-5 years, according to PdVSA Gas estimates. In particular, several parts of the United States will face electricity shortages over the medium-term, and environmental regulations mean most new power stations will be configured to run on natural gas, which is a cleaner fuel than oil or coal.
PdVSA Gas President Fernando Puig told UPI that Venezuela was the obvious candidate to meet US gas requirements. "We have always enjoyed excellent relations with the United States," he said. "We think all the ingredients are here for a successful partnership."

Puig said that the United States currently imports the majority of its gas from Mexico and Canada, but he said that Mexico increasingly needs a greater percentage of its gas to develop its own internal market, while he said Canadian reserves and capacity could not match those of Venezuela.
Other major gas supplies such as Iran, Qatar and Russia are more focused on supplying the European and Asian markets, leaving Venezuela as the best candidate to meet the upsurge in US demands, the gas company president added.

Puig believes Venezuela's late entry into the gas industry will also work to its advantage by allowing PdVSA Gas to make use of new techniques and equipment unavailable to longer established rivals. "It's now cheaper to build liquefaction plants and offshore rigs, and all the related technology is better too," he said.
Significantly, gas exports are not covered by the quota system employed by the Organization of Oil Producers and Exporters, unlike Venezuela's oil exports, meaning that PdVSA Gas could step up production in line with any growth in US demand. The benefits for both countries are obvious or in the words of PdVSA's president, a "win-win."