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RE: PDVSA Punta Cardon Refinery crippled by parts shortage

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Charles Randall

This news article on PDVSA Punta Cardon contains a huge insight into what is really occuring within Venezuela despite the efforts of accomplished mythmaker President Hugo Chavez and the PDVSA propagandists controled information flow to the media.
A position I have been reporting on since Chavez took control of PDVSA in 2003, esentially turned it into “Petroloes Chavez”, removed technically compentent workers because of political convections and diverted independent operating funds into a government sponsored programs designed to esentially buy votes or promote a Bolivarian Revolution. And the problems aren’t limited to just PDVSA production problems from the shoddy maintenance, shortages of spare parts, lack of experienced workers or depth of knowledge – workers are dying in PDVSA!  
Dozens of major industrial accidents have occurred in Venezuela since 2003, like the 17 major accidents in 2006 including 5 major fires and explosions at Paraguayan Refining Complex <the 950 MBD PRC complex includes the Amuay (640 MBD), Bajo Grande (16 MBD) and Punta Cardon (300 MBD) refineries> where dozens of people were injured and nine killed at PRC in 2006 alone. The deadly July 17, 2006 fire was the 3rd accident at PRC in less than 96 hours. PRC’s General Manager Jesus Luongo said that human error caused all of the accidents where fatalities and injuries occurred and was result of inexperienced personnel (since 47% of all workers at PRC were hired since 2003).  This year, 2007, there have been 12 major outages with more than nine workers hurt and nearly half are blamed on power failures.  But, the PDVSA “official” explanation for all major industrial accidents since 2003 is that saboteurs backed by US CIA are responsible for the fires, explosions, injuries, deaths & oil spills.
The chavista rant (echoed by PDVSA president Raphel Ramirez) is that the “old” PDVSA harmed Venezuela but the “new” PDVSA is fueling unprecedented national economic & social progress while making the country and world believe that the Venezuela oil industry is stronger today than anytime since the oil industry was nationalized 30 years ago (Jan. 1976). But the truth that shines through when facts like Punta Cardon Refinery condition shows up and how bad things are and will continue to become.
See the VenEconomy article 8/14/06 published in Petroleum World – The “new” PDVSA: Lies, deceptive statistics & bad management: ( The truth in the words in this article shine forth in the current news release on Punta Cardon.  You can “read collapse between the headlines”, see that people are “dying in PDVSA”, and PDVSA is “targeting Strategic Associations” – especially Latin America where it desperately needs private foreign and local oil company investments. And “Recent Citgo moves signal Venezuelan disengagement” is clearly part of Chavez scrapping the past strategy for US integration in favor of his “oil supply dependency” away from the US and focusing on China, Asian & Latin America “Strategic Allies” (now have to add Iran & Russia to SA list).
Even “Bagdad Bob’s” boldfaced, exaggerated miss-information pales against Hugo Chavez myths (by way ever notice facial similarity between the two – especially in uniform?) and US refineries need to take measures to prepare for the collapse of a system that is not sustainable.
I believe the bulk of the harm unfortunately will fall onto the shoulders of the Venezuelan people – the PDVSA myth flaws are that few of its “strategic allies” have refining complexity to process more that a portion of the heavy non-conventional crude and the world dominant consumer of both gasoline and crude is still the U.S. whom the PDVSA “allies” must still eventually export into (and like China has shown – are not likely to put that trade relationship at risk for the Venezuelan alliance).  The Venezuelan “strategic allies” also depend heavily on the Europe and US based major oil companies for the technology on both exploration and refining capabilities. These major oil technology companies have become toxic ex-JV relationships with significant financial claims against PDVSA. Worse these companies have more than 60% of the worlds complex refineries capable of handling the worst of heavy crude’s and  located in easy coastal accessible locations. Only now are the new global refineries beginning to add complexity and coking capable of handling heavier crude’s and reducing fuel oil production but overall Europe, Japan & Austria have a 7.0 Complexity, China and Asia have a 4.0-6.0 Complexity, Canada, Mexico, Venezuela & Brazil a 6.0-9.0 Complexity while the US has an average 10.0 Complexity with those currently processing more than 50% heavy crude’s having a 15-25 Complexity.
And if that isn’t bad enough – the alternate supplier of Bitumen Syncrude, Canada, is completing several major new pipelines into the US to deliver crude even cheaper than by vessel and will be capable to reach all three US coast (West, Gulf & East) as well as the inland refineries that are blocked from the Venezuelan Bitumen crude. Several new joint ventures for investment and expansion have been made: ConocoPhillips-EnCana, BP-Husky, and MAP purchase Western Oil Sands. Several long term supply agreements between Canadian Suncor & Syncrude and numerous past northern US inland refineries like Flint Hills Rosemount are in place, with new ones in the draft stage.
So the Chavez “threats” to pull oil supply from the US are more in the “Bagdad Bob” area than actual threat arena and the outcome would be that US refineries would choose from several other alternate market suppliers and that Venezuela would place crude into larger number of  less complex-profitable/logistic/reliable refineries (or have to revive the Orimulsion concept at huge discount to the crude market as before). Both are already occurring at lower but more certain pace than Venezuela is aware of and place it in the path of a non-conventional crude oil glut that will be occurring in the middle of a conventional crude shortage.  Anything less than a “Very Complex” refinery can only run small amounts of heavy/non-conventional crude and must have the lighter conventional crude that often does not have the margin to justify running at capacity levels & do not justify exporting large amounts of fuel products like gasoline. This effectively blocks PDVSA from simple (asphalt/fuel oil) to complex (diesel/cracking) type refineries for most of the former syncrude blends (Petrozuata & Cerro Negro Upgraders) but does not make it profitable to sell the light synthetic crude (Hamaca & Sincor Upgraders) due to high gasoline yield (remember Europe / rest of world is really diesel economy unlike US gasoline based economy), premiums, taxes, freight cost and lower margins. 

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