Bloomberg News

PDVSA Has Long Way to Come Back After Chaves: Hofmeister

March 06, 2013

John Hofmeister, former president of Royal Dutch Shell Plc (RDSA)’s U.S. unit from 2005 to 2008 and founder of Houston-based Citizens for Affordable Energy, comments on the outlook for state-owned oil producer Petroleos de Venezuela SA, known as PDVSA, after the death of Hugo Chavez in an interview with Alix Steel, Indira Lakshmanan and Tom Keene on Bloomberg Television’s “Surveillance.” He also spoke about TransCanada Corp. (TRP)’s Keystone XL pipeline.

On PDVSA: “It really is disrespected today because of corruption, cronyism, incompetence and it’s just doing a terrible job for the people of Venezuela.” “They’ve got a long way to come back. Let’s hope they can come back, because otherwise it’s gonna get worse before it gets better.”

On investment in Venzuela’s oil after Chavez: “Companies like” Exxon Mobil Corp. and ConocoPhillips (COP:US) “pulled out. Other companies stayed on the basis that Chavez can’t live forever and it’s better to stick around rather than try to reenter. It wouldn’t surprise me that, if the environment changes and if the rule of law comes back, you could see companies wanting to reinvest in Venezuela on the basis that this rich source of crude is valuable.”

On Venezuela’s oil reserves and production: “The reserve amount is hugely important not only to the U.S. but to the world as a whole. The production in Venezuela has gone downhill essentially throughout the Chavez era.”

On crude from Venezuela vs. crude from Canada and other nations: “You get heavy crude from Mexico and you get heavy crude from elsewhere. So it’s not simply Venezuela that produces heavy crude. But let’s be clear, we will be using heavy crude from wherever it comes from and hopefully some of it comes from Venezuela if they can turn their act around.” “It’s gonna take time, but in terms of bringing in Canadian crude some of the refineries are already prepared.” “Some of the companies along the Gulf coast already made preparations for Canadian crude, anticipating a pipeline. It’s been delayed by politicians but it deserves to be built because it’s an important source of crude oil.

On TransCanada Corp.’s Keystone XL pipeline: ‘‘From an environmental standpoint, the Canadian tar sands are going through an environmental revolution. The old mining technology is giving way to steam-assisted production, where you don’t have the big pits anymore. You clean up the dirty lakes of oil remnants. Rail is a crutch when you’re really struggling to get oil into the market but a pipeline is so much more efficient, so much more predictable. Fortunately there have been no rail crashes, but there could be, so I think a pipeline is long-term safer than rail as well.”

PDVSA spokeswoman Rosarys Ysturiz didn’t immediately return phone calls and e-mails seeking comment.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at ccaminada1@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net


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