LatAm NRG Brief - May 2017 (Wk 21)

LATAM NRG BRIEF

25 May 2017

Week 21

VENEZUELA OIL SPILL CLEAN-UP ACTIVITIES ADVANCE

Photo source: PDVSA PDVSA announced that clean-up activities continue along the Venezuelan coast off Sucre state, related to the spill of crude oil at the Pointe-à-Pierre refinery in Trinidad and Tobago, reported the state oil co. in an official statement.

After reviewing clean-up activities along the Paria Peninsula, PDVSA President Eulogio Del Pino announced Venezuela had removed 80% of the spill fuel.

“We flew over Cocal, Pata, and Puerto Hierro beaches as well as Pato Island and observed that the clean-up process is above 80%,” said Del Pino. “The remaining impact is minimum.”

We have removed 80% of the fuel from the spill that had reached La Caracola beach in Margarita Island, said Del Pino. Oil also reached Los

Roques; however, the impact was minimum, PDVSA reported.

PDVSA is awaiting a visit from Petrotrin to discuss the oil spill.

“Petrotrin [officials] will visit all the affected areas,” said Del Pino.

[Piero Stewart, Energy Analytics Institute, 20.May.2017]

PDVSA, SHELL GAS EXPORTS PDVSA and Shell continue to conduct discussions related to the exportation of Venezuelan natural gas to the twin-nation island of Trinidad and Tobago, reported PDVSA in an official statement.

"We are evaluating the base of resources for export,” announced PDVSA, citing PDVSA Gas President César Triana. “We have received proposals to finalize the accelerated production project and future development of the field to boost export volumes to the Caribbean nation,” she said.

Discussions between the cos. were headed by PDVSA President Eulogio Del Pino and PDVSA Gas President Cesar Triana and Shell Venezuela and Trinidad President Luis Prado.

VZLA OIL OUTPUT (MMb/d) DC

2ndS

2.194 2.235 2.248

1.956 1.982 1.998

2.244 2.265 2.326

1.996 2.057 2.103

2.373 2.654

2.159 2.375

Monthly Apr.17 Mar.17 Feb.17 Quarterly 1Q:17 4Q:16 3Q:16 Yearly 2016 2015

Source: OPEC Secretariat Note: DC = Direct Communications 2ndS = Secondary Sources

VZLA OIL PRICE Weekly 15-19.May 9-12.May

$43.01 $40.72

Monthly May.2017 Apr.2017 Mar.2017 Feb.2017 Jan.2017

$41.67 $44.08 $42.95 $46.37 $45.12

Quarterly 1Q:17

$44.76

4Q:16 3Q:16 2Q:16 1Q:16

$41.98 $37.84 $36.06 $24.71

Yearly 2017 2016 2015

$44.27 $35.15 $44.65

Source: Venezuela Oil Ministry Note: All figures preliminary.

Discussions between the co. teams focused on three aspects: gas volumes, gas prices and the field interconnection point.

An earlier agreement signed by the cos. entails construction, operation, and maintenance of a gas pipeline to transport the fuel source between both nations and span from the Dragon field located in Sucre state to the Hibiscus field in Trinidad. The project is estimated to have achieved the 91% completion mark, PDVSA reported.

Paria North -- where the gas will come from -- contains 14.3 Tcf of gas reserves in four fields: Dragón, Patao, Mejillones and Río Caribe.

The Dragón field alone contains 3.1 Tcf, according to PDVSA. Discussions also focused on the flaring of gas in North Monagas and future recollection of this gas and other general themes related to the Petroregional del Lago mixed company.

The initial volumes from the Dragón field will be destined for the Venezuelan domestic mkt to substitute the use of diesel at thermoelectric plants, and is estimated to free up 32,000 b/d of fuel.

[Piero Stewart, Energy Analytics Institute, 21.May.2017]

OIL PRICE SENSITIVITY With each $1 dollar drop/rise in the price of oil, Venezuela loses/gains estimated revenues of $700 mln a year, PDVSA estimates.

PDVSA CONTINGENCY PLAN FOR T&T SPILL PDVSA reiterated in a twitter post that once the authorities from Trinidad and Tobago notified the co. of the Petrotrin oil spill that it activated a local contingency plan.

[Piero Stewart, Energy Analytics Institute, 20.May.2017]

PDVSA SAYS CURACAO REFINERY FIRE OUT PDVSA announced that it has completely controlled a fire that occurred at its Isla de Curacao refinery. The incident occurred at the distillation unit of the refinery, reported PDVSA in an official statement.

PDVSA has assigned an investigation committee to determine the causes of the incident.

[Ian Silverman, Energy Analytics Institute, 21.May.2017]

PDVSA’S DEL PINO BACKS CONSTITUENT

Photo source: PDVSA PDVSA President Eulogio Del Pino announced that he fully backs Venezuelan President Nicolás Maduro in the Constituent Assembly process to defeat what he described as violence brought about by the right-wing political groups, reported PDVSA, citing the president of the state oil co.

“They send paramilitaries to attack our distribution units and services stations to later say there is no fuel and generate false opinions about supply,” said Del Pino.

[Ian Silverman, Energy Analytics Institute, 23.May.2017]

OIL WORKERS MARCH WITH MADURO

Photo source: PDVSA Venezuelan petroleum sector workers accompanied Venezuelan President Nicolás Maduro during a march for peace to the headquarters of the National Electoral Council (CNE by its Spanish acronym) in Caracas where he revealed details related to the upcoming Constituent Assembly, a process to rewrite the OPEC country's Constitution.

“The petroleum workers are here defending the Bolivarian Revolution and giving their all for dialogue,” said PDVSA External Director Ricardo León, referring to the ongoing protests nationwide against the gov’t of Maduro.

[Ian Silverman, Energy Analytics Institute, 23.May.2017]

PDVSA HALTS CARDON CATALYTIC UNIT PDVSA halted the catalytic cracking unit at the 310 Mb/d Cardón refinery in Punto Fijo, reported Reuters, citing a worker at the plant and a union official. It is unclear when the unit will be back online.

[Piero Stewart, Energy Analytics Institute, 16.May.2017]

PDVSA STEPS UP FUEL SECURITY PDVSA has reinforced effects to protect is fuel supply amid ongoing protests across Venezuela. Several protests have led to incidents affecting gasoline distribution tankers and oil sector workers, reported PDVSA in an official statement.

“We have reacted rationally and continue to transport more than 1,600 gasoline gondolas and another 1,000 with gas that are moved daily throughout the country,” said Del Pino.

[Ian Silverman, Energy Analytics Institute, 18.May.2017]

RANCHERS AFFECTED BY GASOLINE SHORTAGES In recent weeks, a reported 66 cos. in Venezuela dedicated to the collection of milk have closed their doors and stopped distribution activities due to problems receiving fuel, reported the daily newspaper El Nacional, citing Leonardo Figueroa, president of the Ranchers Association of Táchira state.

"We don't have gasoil or gasoline,” said Figueroa during an interview with Union Radio. “Transport operations are paralyzed and if the situation isn't resolved soon it could cause a crisis worse than what we are living due to the scarcity [of just fuel]."

Táchira state is a major producer of milk in Venezuela, he added.

[Jared Yamin, Energy Analytics Institute, 19.May.2017]

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VZLA OIL RESERVES (Bln Bbls) - 2015 World Ranking 1 2 3 4 5 6 7 8 9 10

Venezuela Saudi Arabia Canada Iran Iraq Russia Kuwait UAE USA Libya

300.9 266.6 172.2 157.8 143.1 102.4 101.5 97.8 55.0 48.4

Note: PDVSA reported YE:15 oil reserves of 300.878 bln bbls in its 2015 annual report.

Source: BP Statistical Review of Energy, June 2016. Data at YE:15.

VZLA GAS RESERVES (Tcf) - 2015 World Ranking 1 2 3 4 5 6 7 8 9 10

Iran 1,201.4 Russia 1,139.6 Qatar 866.2 Turkmenistan 617.3 USA 368.7 Saudi Arabia 294.0 UAE 215.1 Venezuela 198.4 Nigeria 180.5 Algeria 159.1

Source: BP Statistical Review of Energy, June 2016. Data at YE:15.

Note: PDVSA reported YE:15 gas reserves of 201.349 Tcf in its 2015 annual report.

VENEZUELA FACES LIQUIDITY CRISIS

[Piero Stewart, Energy Analytics Institute, 20.May.2017]

Petroleum production below historic average levels, economic distortions on all fronts, the problem with Venezuela, which is clear for the financial markets, is the liquidity crisis, according to an economist in Caracas.

“The Venezuela debt is considered one of the most attractive for those willing to assume the risk, said Peruvian Economist José Gonzáles during an interview broadcast by Globovision. As they say in the financial markets, “the Venezuelan debt is not for the weak of heart.”

The Venezuelan bonds are very attractive but also very volatile, he said.

The returns on the Venezuelan bonds [are demonstrating to some extent] -- because the perception continues to be that the payment conditions are critical in terms of liquidity and if this economic situation continues -- that it could led to insolvency, said Gonzáles.

[Piero Stewart, Energy Analytics Institute, 20.May.2017]

PDVSA DETERIORATION ON ALL FRONTS In recent weeks PDVSA has reported at least three accidents: Petrotrin oil spill in Sucre state and incidents at its Cardon and Curaçao refineries. The writing on the wall continues to point to a cashstrapped state oil co. with an inability to make investments, retain top talent, organically grow oil production, and let alone take on the leadership role in Venezuela’s upstream, downstream, or midstream sectors.

The stand-alone events at PDVSA’s Cardon and Curaçao refineries demonstrate conditions at the co.’s refineries continue to deteriorate as expected due to a lack of investments, upgrades and maintenance by the state oil entity.

[Pietro Donatello Pitts, Energy Analytics Institute, 22.May.2017]

PDVSA GUARANTEES SUPPLY OF FUELS

HIGH INFLATION OR HYPERINFLATION “This government doesn’t want to reduce inflation because this government, generating inflation uses it to finance itself,” said opposition lawmaker and Economist José Guerra. “The inflation is a financing mechanism of the government and that is why they don’t want to stop it,” he said.

“When there is high inflation or hyperinflation, the solution is very simple: stop the issuance of inorganic money that is carried out by the Venezuelan Central Bank,” said Guerra.

Photo source: PDVSA PDVSA continues to guarantee the supply of fuels across the country despite ongoing protests, reported PDVSA in an official statement, citing Commerce and Supply Vice President Ysmel Serrano.

PDVSA guarantees it will deliver more than 50 mln liters of fuel including 91 and 95 octane gasolines, diesel, domestic gas, and marine fuel, among others, announced Serrano without providing a specific period.

[Ian Silverman, Energy Analytics Institute, 20.May.2017]

LATAM BRIEFS ARGENTINA BRIEFS TOKYO ABOUT ENERGY The Argentine finance minister led a presentation on his country's growth prospects and its ambitious investment potential in infrastructure and energy projects in the Japanese capital. [Efe]

BRASKEM SEEING STRONGER DEMAND Braskem SA has seen an improvement in Brazilian demand for its plastics and other petrochemical products, especially in the automotive and construction industries, Chief Executive Fernando Musa told journalists. [Reuters]

BRAZIL ACTS TO PROTECT ETHANOL PRODUCERS Brazil is toughening requirements for ethanol importers to protect domestic producers from an incoming surge of U.S. corn ethanol, a minister said, adding that he opposed the idea of new tariffs that could trigger costly retaliation. [Reuters]

PETROBRAS NET INCOME R$4.45 BLN IN 1Q:17

MANAGING GUYANA’S $$ WINDFALL

Petrobras’ net income reached R$4.45 bln in the 1Q:17, reversing the loss posted in the 1Q:16. This reflects the co.’s operating performance, despite the lower demand for oil products on the Brazilian market. [Petrobras]

Guyana is going to be a test case in what to do when a country is faced with a sudden influx of revenue for which it had not planned. [Trinidad Express]

IDB: TT LOSES 3.52% GDP TO CRIME The Inter-American Development Bank’s (IDB) latest study entitled, ‘Restoring Paradise in the Caribbean, Combating Violence with Numbers’, says this country loses between 2.68% and 3.52% of its GDP to crime. [Trinidad and Tobago Newsday]

CHILE TO EXPORT GAS TO ARGENTINA Chile will send some 276 MMcm of gas from June to Argentina to help its neighbor cope with demand in the southern hemisphere winter, Chile's state-run oil and gas distributor ENAP said. [Reuters]

COLOMBIA: STEADY COURSE Like many of its emerging markets peers, Colombia is fighting strong headwinds. The collapse of oil prices was a heavy blow. Although it represented only 3% of GDP, in 2013 it accounted for two-thirds of exports, a sixth of gov’t revenues and about 80% of FDI. [Walter Molano]

ECOPETROL OUTPUT FALLS AT BIG OIL FIELD Ecopetrol reduced output in one of its key production areas due to protests by residents who reject changes to the co.'s hiring policy for local labor.

[Reuters]

EXXON TO IMPORT FUEL TO MEXICO ExxonMobil Corp. will start importing its own gasoline into Mexico by YE:17 to supply the Mobil-brand gas stations it will be opening in LatAm's second largest economy. [Reuters]

EXXON TO OPEN GAS STATIONS IN MEXICO Exxon Mobil Corp. will bring its Mobilbrand gas stations to Mexico, pumping $300 mln in the coming decade as it seeks to gain a foothold in Mexico's retail fuel mkt. [Reuters]

BP SEES GROWING INVESTMENT IN MEXICO BP Plc's first foray into Mexico's recently opened energy mkt is proving more promising than expected, and the gov’t should offer more big projects to lure investment, the British oil major's Mexico boss said in an interview. [Reuters]

FIRE TRIGGERED KILLS 4 IN MEXICO A fire sparked by suspected fuel thieves killed 4 people and forced Pemex to temporarily halt pumping operations along a pipeline in the country's violent eastern state of Veracruz, the co. said. [Reuters]

MEXICO EYES MORE NAFTA CONTENT A modernization of the NAFTA trade deal should protect existing industrial supply chains in North America, but could seek to source more work for future products from the member states to help create jobs, a top Mexican negotiator in the process said. [Reuters]

PRISON FOR PERSONS ENGAGED IN FUEL THEFT

IN THE USA Energy Analytics Institute (EAI) 282 Wilcrest Drive, Suite 540 Houston, Texas 77042 Subscription details: energy-analyticsinstitute@hotmail.com Telephone: 1.346.270.5246 Texas Charter No.: 800624190 EIN: 26-0435194 IN VENEZUELA (REPRESENTATIVE OFFICE) Editores LatinPetroleum, C.A. Avenida Francisco de Miranda Edificio Galerias Venezias, Local 3 Municipio Chacao Caracas, Venezuela

Pemex is celebrating the recent ruling issued by the Supreme Court of Justice of the Nation, which confirms a sentence of eight years in prison for five persons who were arrested in Guanajuato while stealing hydrocarbons from ducts that are the property of Pemex. [Pemex]

JV DEAL TO SUPPLY MEXICAN FUEL STATIONS Glencore is jumping into Mexico's recently opened energy sector, one of the hottest investment tickets in the industry, by setting up a retail station franchise and fuel supply deal with local group Corporacion G500 SAPI (G500), it said. [Reuters]

VENEZUELAN PROBE FIRE AT ISLA OIL REFINERY Venezuelan authorities are investigating the cause of a massive fire that occurred at the Isla oil refinery. The fire at the facility, run

by PDVSA, broke out at one of the refinery’s crude distillation units.

[CMC]

Venezuela RIF.: J-31464958-2 Venezuela NIT.: 0493462636

FIRE AT ISLA REFINERY ON CURACAO NOW OUT

ABOUT EAI

A large fire that occurred at the 335,000-b/d Isla refinery on the Caribbean island of Curacao is now out, according to witnesses and sources. [Reuters]

Energy Analytics Institute or EAI (formerly LatinPetroleum, Inc.) is a Houston-based think tank. EAI, which absorbed the operations of LatinPetroleum, operates in Venezuela under its 100 percent owned affiliate Editores LatinPetroleum, C.A. LatinPetroleum’s LatAm NRG Prospector, formerly the LatinPetroleum Magazine, and the LatAm NRG Brief are publications of EAI. Copyright © 2000-2017. All rights reserved.

FUEL SHORTAGE AGAIN HITS VENEZUELA Pockets of oil-rich Venezuela were suffering gasoline shortages as the OPEC nation's ageing refineries faced more operational problems and protests blocked some deliveries.

[Reuters]

PUTIN SEEKS FOOTHOLD IN US PDVSA recently put up a nearly 50% interest in Houston-based refiner Citgo Petroleum Corp. as collateral

for a $1.5 billion loan from Russian co. Rosneft - raising worries that a Citgo default would allow Russian President Vladimir Putin to get a foothold in the U.S. oil industry. [AP, 21.May.2017]

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