Alliances for Competitiveness:
North Sea Experiences. A Vision for the Country
he new open oil policy, timidly opened some five
years ago with strategic
partnerships for the development of gas deposits in Paria and heavy oil deposits in the
Orinoco belt, represent today the biggest change in oil business in Venezuela since
nationalization twenty years ago. The opening of the oil policy, shows the end of
exclusive State participation in all oil activities. It brings a massive private sector
participation in operations handling, sharing the business risks. Figures speak for
themselves. Fifteen operational agreements for marginal fields, another one associated
to the Boscán field, three already approved strategic associations, one for the Cristóbal
Colón project and two for the production and improvement of the belt's crude; eight
profit-sharing agreements for the development of new areas and a mixed company for
the production of orimulsion. With these new deals the Country incorporates 28
additional oil operating companies þreally 21, since some operate in more than one
areaþ, and at least 30 companies more participating as investors associated to the
operating companies.
And this is just the beginning. There are talks on new rounds for the handling of
marginal areas, three additional strategic associations under study and, above all, a wide
outsourcing policy by PDVSA and its affiliates that, if implemented, would transfer all
activities not considered as chore ones by the industry, to the private sector. This
includes transportation, storage, oil, gas and refined products distribution and
dispatching, and the supply of all kinds of services required by the operating
companies.
All these initiatives are encompassed within an industry expansion plan
aiming at doubling its production capacity from 2.t mmbd to 5.6 mmbd in the next ten
years.
In this context, the opening meets two objectives: it globalizes the domestic
industry aiming at making it more competitive through the incorporation of technology
and specialized international business strength. At the same time, it generates sufficient
investment capacity as required to allow for the sector's accelerated growth. From the
plan's overall investments of 60 billion US$, more than 45% will come from the private
sector.
We feel free to say, then, that the opening is nothing more than the
establishment of long-term alliances between the State oil sector, PDVSA, and selected
private sector companies. The purpose is to complement capacities enabling to reach
the objectives drawn by Venezuela in order to make good use of its hydrocarbon
resources.
What is the private sector's role in this joint effort? Only seven domestic
companies linked to the oil sector are participating as minority investors in some the
opening's agreements, and other than these, Electricidad de Caracas, through its
Genevap C.A. subsidiary, has executed the first important outsourcing agreement to
provide power and steam to the Cardón Refinery. All the other initiatives have been
left
to international companies, many of them with previous experience in the country.
To summarize, we are in the presence of an expanding oil sector in the
area of exploration and production, with the confluence, on top of the four PDVSA
affiliates, including Bitor, of 21 international operators. All these new companies, each
of them with diverse cultures, work experience and skill and with different business
objectives and strategies, bring a new and exacting demand of specialized goods and
services.
Under these circumstances, in order to be able to face the challenge of a
new oil plan for Venezuela and to make proper use of the huge opportunities it offers
for
its development, we must identify the benefits that we want to get from a process of this
kind.
The most important benefit is that this new investment may have a
multiplying effect similar to that of PDVSA's investment since the nationalization.
There
is no doubt that this multiplying effect is associated to the way how this investment
integrates to the rest of the country. It must promote a growing domestic participation
in the supply of goods and services, competing with international offers.
If we reach this goal, it will also generate increasing and deeper
technological exchange between participants and will result in better ways of adapting
foreign investment parameters to national reality.
Based on these challenges and opportunities, how may we define
objectives being common to all the linked actors? How may we design strategies
fostering cooperation and shared benefits?
The experience obtained from the CRINE initiative in the British North Sea
sector tells us that it is possible. In spite of the cultural and business approach diversity,
we have seen how the reduction of costs associated to oil production as a common
need originated a shared view between all the companies performing exploration and
production activities. Subsequently þand quite soonþ it turned into specific action plans
with all the groups participating into their implementation.
Now then, the specific features of oil activity in the North Sea must have
contributed to the attainment of such goals in such a short period. First, there is a
danger of disappearance of the very same oil activity in the area, in view of the low
productivity of the remaining deposits and the high production costs. Second, there is
a mature industry with more that 30 years of joint development between clients and
suppliers, sharing high levels of specialization under the zone's particular
conditions.
Both these aspects, the need to survive and the work jointly developed by
the parties through so many years, are elements that have favored the integration of a
great alliance and have accelerated the process.
In Venezuela, we are in the presence of a quite different situation. First, we
are under an expansion period with highly attractive prospects. As we said before, there
are also many new operators who have never interacted with local suppliers and,
consequently, there are no common experiences for both sectors.
Among the latter, although there are more than 700 member companies in
the Oil Chamber who may show a wide trajectory as suppliers to PDVSA and its
affiliates,
the severe recession that we have experienced during the recent years has limited their
development capacity. These companies depend also on the local financial sector to
assist them on a business level, but it is limited in its ability to provide medium and long
term financing.
All these differences notwithstanding, between the North Sea oil business
and that of Venezuela there is a common element and that is that all producing
companies, regardless of their origin, aim at getting their investments' higher value
added and the greater return on heir investment. In other words, the companies' main
objective is t secure high competitiveness in all their activities.
That is why, in order to conciliate this objective with the reaching of the
highest multiplying effect for the country, the only way is to incorporate the domestic
good and services producing sector to the existing alliance between producers, i.e.
PDVSA and the international operating companies. This would allow the former to
strengthen its position and to be able to offer an increasing share of goods and services
under conditions resulting in a value added being compatible with the clients'
expectations.
In order to favor integration between the parties, it is possible to take
advantage from the CRINE experiences, using the same mechanisms of the North Sea:
equipment standardization, common work specifications and methods, more simple and
clear agreements, reduction of documentation requirements and use of uniform
procedures to pre-qualify suppliers.
In this integration effort, PDVSA must play a fundamental role as a link
between all participants. In fact, through its affiliates, PDVSA is the partner of all the
new
producers, and that p[laces it in a privileged position to promote among them and share
with them the effort required in order to develop common elements. Moreover, in its
role
as a client, PDVSA has a relationship with all the domestic producing sector; it has
established working methods with it through the years and these methods may be
improved and shared with the other suppliers.
Last, PDVSA has the credibility and the capacity to promote þas it is doing
itþ new project financing formulas, for clients and suppliers; it is also able to reduce
costs and minimize economic risks.
If each of the parties, PDVSA, suppliers and new producers face the
challenge, we shall build a new alliance securing growth for the domestic oil industry in
an ever more exacting and competitive environment .
Translation by Carlos Armando Figueredo
URL: http://www.internet.ve/analitica
Message to the Editor: editorva@ccs.internet.ve
