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LATINPETROLEUM LatAm NRGProspector

4Q:14

Venezuela’s Position Within OPEC Non Impactful PDVSA’s Eulogio Del Pino Leads Purge of Ramirez Appointees

Venezuela Cutting Back On Petrocaribe Shipments Oil Companies Could Pull Back On Investments In Venezuela

PDVSA UBCP Schematic EF 0-16 ⁄ J-20 Citgo Debt Offerings May Be Back Door Way To Divest Of Company

HEARD ON THE STREET LATAM RIG COUNTS

IN THIS ISSUE 15.Jan.2015

SAMPLER 14-PG VERSION OF LATAM NRGPROSPECTOR ORIGINAL 31-PG VERSION AVAILABLE VIA SUBSCRIPTION. ON THIS PAGE: ORIGINAL TABLE OF CONTENTS

5-7 ….. OPINIONS

Venezuela’s Position Within OPEC Non Impactful Shift In Taxes Or Royalties Would Represent Paradigm Shift In Venezuela PDVSA President Eulogio Del Pino Leads Purge of Ramirez Appointees

7-9 ….. NRG REEL: VENEZUELA

Venezuela Gradually Cutting Back On Petrocaribe Shipments Relations Between Venezuela And Petrocaribe Members Must Change Oil Companies Could Pull Back On Investments In Venezuela CITGO Debt Offerings May Be Back Door Way To Divest Of Company Harvest Natural Resources Announces Filing Of Request For International Arbitration Against Venezuela

12-23 ….. NRG UPDATE: LATAM

Countries covered: Bolivia (Table: LPG Production (2006-2016), Brazil, Colombia, Cuba, Dominican Republic, Haiti, Mexico, Trinidad and Tobago and Venezuela

23-24 ….. @ EAI TWEETS

Argentina, Bahamas, Bolivia, Brazil, Colombia, Mexico, Peru, Venezuela

25-27 ….. TABLES

-Venezuela Refined Product Demand (2001-2013) -Venezuela: PDVSA UBCP Schematic EF 0-16 ⁄ J-20 -Venezuela Gasoline (95 and 91 octane) and Diesel Pricing

28 ….. DIVESTMENT TRACKER 28 ….. EQUITY/DEBT TRACKER 28 ….. M&A TRACKER 29-30 ….. ROTARY RIG TRACKER LatAm oil, gas and misc. breakdown LatAm land (onshore) and offshore breakdown

ON THE COVER

9-10 ….. QUOTES 10 ….. COMPANY PROFILES BPZ Energy and Valero Energy Corp.

10-11 ….. HEARD ON THE STREET Petrocaribe shipments from Venezuela, Trinidad and Tobago cross border energy deals, Chevron in Trinidad and Tobago and Venezuela, rumors of Citgo divestment by PDVSA, Colombian-Venezuelan oil pipeline, CNPC, oil production from mature fields in Venezuela, Orinoco heavy oil belt, PDVSA Intevep, Sinovensa in Venezuela.

Work activities at the Castoro-10 ship offshore Venezuela in Sucre state: Photo credit: LatinPetroleum.com

ABBREVIATIONS HYDROCARBON SECTOR B/d: Barrels per day Bbls: Barrels Bcf: Billion cubic feet Bcfe: Billion cubic feet equivalent Bcm: Billion cubic meters Bln: Billion Boe/d: Barrels per day equivalent EHCO: Extra heavy crude oil E&P: Exploration and Production Faja: Venezuela’s Orinoco heavy oil belt Ft: Feet JV: Joint venture LNG: Liquefied natural gas LPG: Liquefied petroleum gas M3: Cubic meters M2: Square meters M: Meters Mbbls: Thousands of barrels Mcf: Thousand cubic feet Mcfe: Thousand cubic feet equivalent MMbbls: Millions of barrels MMBtu: Millions of British thermal units MMcm: Million cubic meters MMcf: Million cubic feet MMcfe: Million cubic feet equivalent Mscf: Thousands of standard cubic feet MMscf: Millions of standard cubic feet MMscf/d: Millions of standard cubic feet per day MTPA: Million tons per annum MTPY: Million tons per year NGLs: Natural gas liquids PPM: Parts per million Tcf: Trillion cubic feet Tcfe: Trillion cubic feet equivalent Tcm: Trillion cubic meters WTI: West Texas Intermediate Note: All monetary figures are in USA dollars unless stated otherwise.

STATE OIL ENTITIES (COUNTRY) ANCAP: Administración Nacional de Combustibles, Alcoholes y Portland (Uruguay) Cupet: Cubapetróleo (Cuba) Ecopetrol: Empresa Colombiana de Petróleos S.A. (Colombia) ENAP: Empresa Nacional de Petróleo (Chile) Eni SpA: Ente Nazionale Idrocarburi (Italy) PDVSA: Petróleos de Venezuela S.A. (Venezuela) PEMEX: Petróleos Mexicanos (Mexico) Petrobras: Petróleo Brasileiro S.A. (Brazil) PetroEcuador: Ecuador PetroPeru: Peru Petrotrin: Petroleum Company of Trinidad & Tobago Ltd. YPFB: Yacimientos Petrolíferos Fiscales Bolivianos (Bolivia)

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OPINION VENEZUELA’S POSITION WITHIN OPEC NON IMPACTFUL As a founding member of OPEC, Venezuela was always an important country for the organization.

With production that once topped 3 million barrels per day, Venezuela was a significant producer and surely a rightful member given the oil reserves the country has.

Today, Venezuela's reserves are more than those of Saudi Arabia and the largest in the world however the country's production is just around just 2.5-2.6 million barrels per day, according to estimates by LatinPetroleum.com.

Venezuela's clout within OPEC has been declining in recent years as the country does not have the capacity to increase production if OPEC calls for a production increase. Likewise, Venezuela, which is always pushing for other countries and OPEC as a whole to reduce production, never seems able to contribute to the production cuts, opting instead to count on $100 barrel oil prices to generate sufficient revenues for the nation coffers.

Economic Problems And OPEC What we are seeing now is not so impressive economic growth in Europe, China and other major economies, all of which could and should affect energy deman.

In the case of China, which is a large importer of oil, any slowdown in its economy has potential to affect financial markets. That coupled with the fact that the United States of America (USA) is producing an enormous amount of oil thanks in part to fracking and a shale boom, the market is now in a scenario where there is too much oil on the market. As such, reasons why prices were starting to come under pressure.

The price war that we are seeing today was basically started when it was known to the market that Saudi Arabia and other big OPEC producers were offering oil to Asian and other clients at discounts to maintain market share. Saudi Arabia has recently said it is prepared to allow oil prices to fall to whatever price level necessary to drive high-cost producing countries out of the market. As such, Saudi Arabia has indirectly said it will allow the price of oil to fall in an attempt to halt the growth in the higher-cost shale production in the USA.

In this sense it could be surmissed that the price war is basically between Saudi Arabia and the USA to see who will remain standing and producing the most oil as oil prices collapse. In this battle, Venezuela can do nothing but stand and watch.

Again, that is why Venezuelan President Nicolas Maduro's recent trip to China, Africa and the Middle East was a failure. Venezuela doesn't have enough production to really impact the markets. Further, it can't immediately increase production as it doesn't have the capacity and is unwilling to reduce production since it would be too costly to try to bring that production back on line without incurring significant costs.

As such, when prices fall the producing countries, usually OPEC countries, are the ones to feel the negative effects on their revenue generating potential since they mainly produce and export oil while consuming nations like the USA and others that rely on oil imports to fuel their economies benefit the most as their costs are drastically reduced.

The oil war will have a negative impact on the Venezuelan economy, which has already been affected by a scarcity of products, the world's highest inflation, and now a high propensity to default on its international debt obligations, according to investments banks such as Jefferies, Barclays, among others.

Venezuela's federal budget for 2015 was established with an estimated oil price of $60 per barrel. So, Venezuela will really feel the effects of lower oil prices this year and maybe next year as well.

As such, Maduro's trip to China, Russia, Iran, Saudi Arabia, Qatar and Algeria was a failure for two reasons. First, he did not win a consensus to reduce oil production. Second, because he only announced financing of $20 billion from China which will most likely not be given to Venezuela in its entirety in cash.

Besides, the details are still not clear and somewhat suspect. The financing from Qatar is also suspect. So, all in all, the tour was a failure in our opinion.

[LatinPetroleum.com, 15.Dec.2014] SHIFT IN TAXES OR ROYALTIES WOULD REPRESENT PARADIGM SHIFT IN VENEZUELA As part of Venezuela's nationalization process in 2007 backed by former President Hugo ChĂĄvez, the country raised royalties to 30 percent from 1 percent to 16.66 percent, income taxes to 50 percent from 34 percent and Venezuela's interest in oil projects to a minimum 60 percent from 18 percent to 49.9 percent.

As such, any backtracking on any of the matters would represent a paradigm shift.

[LatinPetroleum.com, 16.Dec.2014] PDVSA PRESIDENT EULOGIO DEL PINO LEADS PURGE OF RAMIREZ APPOINTEES Almost three months after his appointment as the president of PDVSA, Eulogio Del Pino has yet to officially call a press conference that has included the presence of international media. While Del Pino has been praised in the Venezuelan oil-patch for this technical know-how, the Stanford University trained oil man with a master’s degree in exploration, prefers to avoid the big crowds and bright lights as was preferred by his predecessor, Rafael Ramírez.

While it is quite obvious that Ramírez and Del Pino differ when the lights are on and the videos are rolling, Del Pino's decision to shy away from the cameras and press raise doubts about the transparency within PDVSA in regards project financing and updates on existing as well as new projects.

Many dubbed Ramírez the best straight-faced liar in Venezuela for his ability to tell a lie without flinching. At his career peak, Ramírez was Venezuela's OPEC representative, oil minister, the president of PDVSA and the economy vice president. His recent demotion to Venezuela's U.N. representative for all purposes removes him from the day-to-day financial, economic and political operations and is a silent way for President Nicolas Maduro to neutralize what was once a major force, good or bad, within his government.

Del Pino's immediate challenge at hand entails attracting investments to Venezuela's faltering oil sector during a time of declining oil prices and during a time of high political and economic uncertainty in Venezuela.

PDVSA’s business plan aims to increase oil production to 6 million barrels per day by 2019 from 2.9 million barrels per day in 2013 with estimated investments of $302 billion.

Under this plan the company also aims to increase heavy oil production in the Orinoco Heavy Oil Belt or Faja to 4 million barrels per day from 1.2 million barrels per day, respectively, build six heavy oil upgraders and increase gas and LPG production.

U.S. Oil Exports to Venezuela Rise Amid PDVSA Refinery Issues Venezuela, the country with the world's largest oil reserves, is importing more crude oil and products from the USA as maintenance and unexpected down times at the country's key refineries has reduced PDVSA's domestic refining processing to almost half of its capacity.

USA exports of crude oil and products to Venezuela rose to 92,000 barrels per day in October of 2014, U.S.-based Energy Information Administration (EIA) data showed, their second highest monthly level last year as PDVSA, as the Caracas-based company is known, struggles to procure capital or necessary equipment for its domestic refineries, oil union official Ivan Freites said in an interview in Caracas.

The U.S., which has seen production rise due to a shale boom, exported 82,000 barrels per day to Venezuela a month earlier and 63,000 barrels per day to the country in October of 2013, EIA data showed.

PDVSA's four major refineries: Amuay, Cardon, Puerto La Cruz and El Palito, are running at 51 percent of their combined 1.3 million barrel per day capacity, said Freites said.

Venezuela's demand for refined products reached 703,000 barrels per day in 2013, representing a cost of $15.2 billion for sales into the domestic market, according to data compiled by PDVSA. Venezuela's domestic market consumed 681,000 barrels per day in 2013 and 432,000 barrels per day a decade ago, according to PDVSA data.

“Inventories of gasoline, gasoil, diesel, LPG and lubricants are insufficient to cover domestic demand,” said Freites. “A lack of investment in the refineries on the behalf of PDVSA has resulted in frequent work stoppages and other delays as we await the arrival of necessary equipment.”

Upgrader Issues Venezuela's Orinoco heavy oil belt contains the largest unconventional oil deposit in the world.

Production of the high vicosity oil, which is normally diluted with naphtha or lighter oils, is forecast to increase to 4 million barrels per day by 2019, up from 1.2 million in 2013, according to PDVSA, and represent 67 percent of Venezuela total production in that year.

Asset expropriations, non-payment of dividends and allegations of corruption at PDVSA are primary reasons, among others, why foreign oil partners have held back on investment amid deteriorating economic conditions and ensuing arrears.

Venezuela's four key upgraders -- Petropiar, Petromonagas, Petroanzoategui and Petrocedeno -can process 632,000 barrels per day of extra-heavy oil which is converted into 562,000 barrels per day of syncrude, according to PDVSA data. However, the first three are only operating at 40 percent of their capacity and the last is still undergoing maintenance and not expected to be fully operationaly until early January, Freites said.

The price for Venezuela’s oil, which accounts for more than 95 percent of the country’s exports, has plunged by more than half from this year’s peak in June to $47.05 a barrel, according to data posted to the country's Oil Ministry website.

Harvard University professor Francisco J. Monaldi said December 9 during a webinar hosted by the Institute of the Americas that Venezuela was producing between 2.6 and 2.7 million barrels per day.

“More pragmatism might lead to some increase in investment but production is unlikely to increase much in the next year or two,” said Monaldi.

PDVSA has in the past used naphtha to dilute heavy crudes produced in the Orinoco oil belt. Amid falling production, the company has been looking for cheaper alternatives to importing naphtha after a lack of investment and maintenance reduced its ability to produce the material in Venezuela.

[LatinPetroleum.com, 21.Dec.2014]

NRG REEL: VENEZUELA VENEZUELA GRADUALLY CUTTING BACK ON PETROCARIBE SHIPMENTS “Venezuela appears to be gradually cutting back on Petrocaribe shipments and tanker data shows that exports to Cuba and rest of Petrocaribe members is down 20 percent to 25 percent this year compared to last year,” Eurasia Group analyst Risa Grais-Targow said from Washington.

Cuba received about 100,000 barrels per day (b/d) while internal demand in Venezuela is around 40,000 b/d. The remaining 60,000 b/d is most likely sold on the open market and the government is having it as a subsidy, said Grais-Targow.

According to the analyst, the Venezuelan liquidity crisis means Venezuela may have to scale back what it sends to Cuba and to everyone else.

The process was probably already underway but to the extent that Cuba now has access to multilaterals, seeing that they have increased commercial ties with the USA, it appears to be a good substitute for Cuba for what was essentially Venezuelan aid.

Venezuela will continue to send about 40,000 b/d to Cuba and maybe other smaller shipments to other more vulnerable countries like Jamaica and will have to be more aggressive with cutting it back next year, the analyst said.

“In some sense it´s a win-win for everyone. On the one hand it gives Cuba some alternatives and then on the other hand it also gives Venezuela the potential to increase its cash generating exports,” said GraisTargow.

“My concern is more that the exports that Venezuela hasn't been sending to Cuba and others is just being consumed by the domestic market,” said Grais-Targow. “When I think about how much cash that could actually generate for Venezuela. I do think there is a concern that the kind of benefits they get from scaling back Petrocaribe are eroded by lower oil prices, lower production in Venezuela, and then increasing demand in the domestic market. I think all of those factors do erode somewhat the benefits that they would get from cutting back Petrocaribe.”

It has been negative for Cuba that Venezuela was in an increasingly difficult position and that process was already happening. So to the extent that Cuba can substitute or has alternatives, it is definitely positive for them, she said.

To the extent that there is some type of implosion in Venezuela and they cannot maintain the 40,000 b/d, then obviously it is negative for Cuba. “Losing what support they have had from Venezuela is definitely negative but to the extent that the process has already been happening and now they seem to have found a semi-solution at least, there’s the possibility of other sources of financing and another way to keep their economy limping along,” according to Grais-Targow.

The issue for Cuba is that Venezuela replaced the USSR but they don't have access to financial markets, they don't have acccess to multilateral lenders, said the analyst. A really important key here is that with normalized relations with the USA, they will be able to access multilateral financing which is also important becuase they literally had no other real cushion other than Venezuela.

So in that sense its a smart move for Cuba to establish relations with the USA.

Editor’s Note: Grais-Targow says she wasn't seeing the necessary changes in the Venezuelan oil sector to move forward the large oil projects and that she didn't see that changing unless the government implemented a fundamental shift in oil sector policy.

[LatinPetroleum.com, 18.Dec.2014] RELATIONS BETWEEN VENEZUELA AND PETROCARIBE MEMBERS MUST CHANGE “Relations between Venezuela and Petrocaribe members has to change and the changes will likely provoke anger among countries that have been receiving Venezuelan oil under preferential terms,” said Energynomics President Carlos Rossi from Caracas.

Whatever happens between Cuba and the USA is a sign that Venezuela cannot help Cuba anymore.

Venezuela needs cash and could export less oil to Cuba and potentially more to the USA, said Rossi.

“Venezuela needs all the money that it can get right now and will likely shift a lot of the oil that its exports to Cuba and Petrocaribe to the USA because the USA pays them better,” concluded Rossi.

Since Petrocaribe's inception, members ranging from the Bahamas to Guyana have been buying oil from PDVSA at market rates, paying under today's formula 40 percent in cash or foodstuffs and the remainder over 25 years with a 1 percent loan interest. [LatinPetroleum.com, 18.Dec.2014] VENEZUELA GOVERNMENT TO RATION MORE DOLLARS IN 2015 The Venezuelan government will have to ration more dollars in 2015 than it did in 2014 and 2013, and this could lead to a deepening of economic difficulties related to the recession and even then the government will most likely still have to look for dollars, said Sintesis Financiera analyst Tamara Herrera during an interview on Caracas radio station 99.9.

The government has two dissimilar objectives that are very important. The fundamental objective of the government is to maintain and increase control over everything. All the laws appear to indicate that the government will continue to increase this control over the economy. This objective is absolutely opposite of the objective to strengthen the economy.

[LatinPetroleum.com, 16.Dec.2014]

VENEZUELAN GOVERNMENT NEEDS TO TAKE DRASTIC MEASURES Venezuela needs to take drastic measures and there will be no easy short-term solutions. The next two to three years will be complicated for whoever governs the country, lead oil and gas specialist at the Energy Division of the Inter-American Development Bank (IDB), Ramón Espinasa, said during an interview on Caracas radio station 99.9. [LatinPetroleum.com, 16.Dec.2014] OIL COMPANIES COULD PULL BACK ON INVESTMENTS IN VENEZUELA As a result of the recent decline in oil prices, companies will likely slow down investments in Venezuela and that may utlimattely translate into declining production as they simply defer maintenance or don't drill new wells, said Lipow Associates President Andy Lipow from Houston.

Clearly we are seeing major oil companies cut their capital expenditure budgets by 15 percent to 20 percent and that's including companies like ConocoPhillips, Shell is reducing its budget, BP and Halliburton are laying off people, Rosetta Resources, a small producer in the USA has cut their budget by 21 percent.

“So my expectation is that you are going to see an across-the-board reduction in capital expenditures of 15 percent to 20 percent from the exploration and production companies and clearly that is going to affect some future investments in Venezuela,” said Lipow.

The political environment in the USA is far more stable than in Venezuela and one reason that you do see a lot of investment in the USA is because exploration and production companies know their assets will not be nationalized, said Lipow “It seems to me that at these lower prices Venezeula will run out of money in the next couple of years,” concluded Lipow. [LatinPetroleum.com, 17.Dec.2014] CITGO DEBT OFFERINGS MAY BE BACK DOOR WAY TO DIVEST OF COMPANY “The only reasons Citgo would issue this much debt, because that's against the covenants, is if they're going to default on it,” said Russell Dallen, Miami-based managing partner at Caracas Capital Markets. “And then the bank or the company they issued it to would be able to foreclose and take the property. It's a back door way of Venezuela selling the company. ”

In July 2014 Citgo Petroleum announced plans to raise $2.3 billion, comprised of a $1 billion revolving credit facilty, a $650 million secured term loan B, and a $650 million senior secured note. The proceeds were used to refinance existing debt and fund a $300 million dividend to parent company PDVSA. Houston-based Citgo is capable of refining 749,000 barrels of oil a day at facilities in Texas, Illinois and Louisiana, and has almost 6,000 independently owned gasoline stations.

Citgo is owned by PDVSA through PDV Holding Inc. and its subsidiary PDV America Inc., which are incorporated in Delaware. While the board members are appointed by Venezuela’s president, the Venezuelan government is not liable for the obligations of PDVSA or the obligations of its subsidiaries, according Citgo’s bond prospectus.

[LatinPetroleum.com, 17.Dec.2014] HARVEST NATURAL RESOURCES ANNOUNCES FILING OF REQUEST FOR INTERNATIONAL ARBITRATION AGAINST VENEZUELA Harvest Natural Resources, Inc. announced that its affiliates, HNR Finance B.V. (Harvest BV) and Harvest Vinccler S.C.A. (HVSCA), have submitted a Request for Arbitration against the Government of the Bolivarian Republic of Venezuela before the International Centre for Settlement of Investment Disputes (ICSID) regarding Harvest BV's interest in Venezuela and violations by the Government of Venezuela of the Netherlands - Venezuela Bilateral Investment Treaty.

ICSID is an international arbitration institution sponsored by the World Bank in Washington D.C. The Harvest BV equity owners unaffiliated with the company, including Petroandina Resources Corporation N.V. and Oil & Gas Technology Consultants (Netherlands) Cooperatie U.A. are not parties to the Request for Arbitration.

James A. Edmiston, President and CEO of Harvest, said: “Over the past decade, the Venezuelan Government has violated Harvest's rights as an investor by systematically thwarting the development of Harvest's investment in Venezuela as well as the company's ability to sell its interests there. Since its initial investment in Venezuela, Harvest has acted in good faith, complied with its contractual obligations and supported the operations of both our pre-existing Operating Service Agreement and Petrodelta while attempting to resolve our disputes with the Venezuelan Government and PDVSA affiliates.

To date, Harvest's efforts to resolve these disputes in a manner that would allow us to realize the value of our investment in Venezuela for the benefit of our stockholders have been unsuccessful.

Harvest's two attempts to sell its remaining interests in Venezuela, both of which were fully vetted with the appropriate authorities prior to undertaking either transaction, ended in the imposition of wholly unreasonable and extracontractual conditions on the sale by Venezuela authorities, directly leading to the failure of both transactions.”

Edmiston continued: “Having exhausted all alternatives to protect Harvest's shareholders, we are now regrettably forced to exercise our right to submit this dispute to ICSID arbitration to protect the value of Harvest's investment in Venezuela. This is not the outcome of our 22 years in Venezuela that we envisioned or desired, but is the only means left to Harvest to protect our investment. As always, we remain receptive to an urgent solution, reached in good faith dialogue, between the parties. However, the recent failure of our latest sale of our interests in Venezuela requires that the company take urgent action with respect to our Venezuelan investments, and to the company's liquidity and strategy as a whole. In addition to exercising Harvest's rights for protection under the Treaty, Harvest will take any legal action necessary to protect the company's investment and assets against possible actions by third parties or agents who are not directly involved with the company's interests in Venezuela.” [Harvest Natural Resources, Inc., 16.Jan.2015]

HEARD ON THE STREET Information in this section, provided by LatinPetroleum.com, is hearsay and thus should be treated as such.

REGARDING PETROCARIBE * Venezuelan oil exports to Petrocaribe are supposedly down 15 percent to 20 percent while exports to Cuba are down 25 percent to 30 percent during 1H:014 vs. 1H:13. * Petrocaribe member nations could face hard economic times if Venezuela cuts off oil support to them; many nations in the Caribbean trying to brace for future cuts under Petrocaribe.

* USA refineries looking at Caribbean region as potentially attractive region for exports of USA shale either in the form of oil or refined products.

NRG BRIEFS

The block also contains an estimated 1 Tcf of gas.

Bolivia's actual certified proved were 10.45 Tcf at year end 2013, according to reserve estimates from Canada's GLJ Petroleum Consultants.

Positive results in the Lliquimuni area could allow Bolivia to expand exploration activities to Beni and Pando. Bolivia is already conducting 3D activities in the two areas.

Petroandina SAM has been assigned five areas in the La Paz department, including Lliquimuni, Sécure, Madidi, Chispani and Chepite. All the areas are in nontraditional petroleum regions. The Sécure area is shared with Beni and Chispani with Cochabamba.

Lliquimuni has 675,000 hectares and is located in area 19 of contract agreement.

If Bolivia confirms the existence of oil in Lliquimuni, the well could allow the country to become selfsufficient in the production of diesel oil, which is currently imported.

YPFB had planned investments of $3.029 billion in 2014 of which $131 million where to be destined for the La Paz department. Of this amount, $50 million were destined for exploration activities in Lliquimuni.

[LatinPetroleum.com, 29.Dec.2014]

BOLIVIA (BOL)

COLOMBIA (COL)

BOLIVIAN PRESIDENT EVO MORALES INSPECTS LQCX1 RIG IN LLIQUIMUNI AREA Bolivia's President Evo Morales inspected the Lliquimuni Centro X1 (LQC-X1) rig which will drill an exploration well in the northern region of La Paz, the first in the Lliquimuni area. Lliquimuni, is lcoated in the Teoponte municiapl in the La Paz department, according to the daily newspaper La Razón.

YPFB and PDVSA signed an agreement on April 3, 2008 to conduct exploration activities in the area. The well was initially programmed for the the second quarter of 2012.

Liquimuni, operated by Petroandina SAM, which is comprised of partners YPFB (WI 60 percent) and PDVSA (WI 40 percent), is an important geopolitical project for the development of the department and the nation.

Interpretation of 2D seismic confirmed the pressence of oil and gas in the Lliquimuni area.

The area has potentially 50 MMbbls, which represents 23 percent of Bolivia's certified proved oil and condensate reserves of 211.45 MMbbls at year end 2013.

GAS NATURAL FENOSA EXPANDS LPG BUSINESS WITH PURCHASE OF CGE Grupo Gas Natural Fenosa (GNF) agrees to buy Chilean electric company CGE for $3.3 bln. GNF is an indirect owner of Electricarine, among other companies while CGE, via Gasco, controls 20.5% of Colombia's LPG market.

Gas Natural Fenosa, which assumed control of CGE onNovember 30, 2014, said it has no plans to sell the assets it inherited from CGE and instead has plans to grow the assets. CGE is the major gas and electricity distributor in Chile. [LatinPetroleum.com, 22.Dec.2014]

* A number of Petrocaribe members have used flexible financing from Venezuela to buy the items that they send to Venezuela as part of Petrocaribe barter deals. * Many Petrocaribe nations have not been utilizing the flexible financing to develop their industries, thus many have to buy products to give to Venezuela in the form of barter. * Still a mystery as to why Honduras did not enter Petrocaribe over proclaimed higher interest rate (4 percent vs. 2 percent) as financing is still cheap. * Venezuela appears to have reduced its maximum quotes for a number of nations to the amounts that they have been sending in recent years.

COLOMBIA SUSPENDS INCREASE IN NATURAL GAS Representatives from the Colombian government, producers and buyers reached an agreement to partially freeze a 15 percent to 25 percent increase in the price of natural gas. The increase in the price of natural gas along the Caribbean coast would affect 7 million users.

Details of the increase where published by Colombia's Regulator Energy and Gas Commission (CREG), in Resolution #089, according to El Tiempo.

The price increase for natural gas contracts up until 5 years will be suspended for 3 months. During this time a commission comprised of government, industrials, producers and buyers will look for alternative formulas to readjust the price of natural gas. Thereafter, CREG will announce a mechanism to make the readjustments. [LatinPetroleum.com, 27.Dec.2014]

CUBA (CUB) FACT SHEET: CUBA’S REFINING POTENTIAL Cuba has three refineries with a combined processing capacity of 289,500 barrels per day, according to LatinPetroleum.com’s Latin American refining report.

The Nico López refinery in Havana has a 122,000 b⁄d capacity and the Hermanos Diaz refinery has a 102,500 b⁄d capacity. The Camilo Cienfuegos refinery, located nearly 155 miles southeast of Havana, has a 65,000 b⁄d capacity and its main products are destined for the domestic and export markets.

Partners in the Cienfuegos refinery include Cuba's Comercial Cupet S.A., with a controlling 51 percent interest, and PDVSA, as the Venezuelan state oil entity is known, with the remaining 49 percent interest. The companies have plans to modernize the refinery and expand its capacity to 150,000 b⁄d to allow the refinery to produce low-sulfur content diesel, according to Cuba officials.

[LatinPetroleum.com, 15.Oct.2014]

MEXICO (MEX) MEXICO OPENING BENEFITS MAINLY LARGER PLAYERS: WOOD MACKENZIE “The fall in oil prices will result in less speculative interest by smaller and newly established companies in Round One,” Wood Mackenzie writes in research report.

Interest is likely to focus on discovered fields rather than exploratory blocks, with the exception of Perdido. Joint ventutes to allow for cost, risk diversification in current price environment, said Wood Mackenzie. “As a result of lower price environment, there will be reduced interest in natural gas, unconventionals, and heavy oil blocks.”

[LatinPetroleum.com, 12.Dec.2014]

VENEZUELA (VEN) BAKER HUGHES REPORTS $12 MILLION FOREIGN EXCHANGE LOSS IN VENEZUELA Baker Hughes Incorporated reported a foreign exchange loss of $12 million before and after-tax in Venezuela was recorded in the second quarter of 2014 as a result of changing from the official exchange rate of 6.3 Bolivars Fuertes per USA Dollar to the SICAD 2 rate of approximately 50 Bolivars Fuertes per USA Dollar.

“The SICAD 2 rate is most representative of the economics in which we operate,” Baker Hughes reported.

Baker Hughes also reported a loss of $23 million before and after-tax in the first quarter of 2013 due to the devaluation of Venezuela's currency from the prior exchange rate of 4.3 Bolivars Fuertes per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar.

[LatinPetroleum.com, 20.Jan.2015] VENEZUELA GOVERNMENT WEIGHS ALTERNATIVES TO SOLVE ECONOMIC PROBLEMS Venezuelan authorities have proposed a number of initiatives to solve the country's economic issues including convergence of the three official foreign exchange rates, increasing the price of gasoline, consolidation of off-budget fund deposits, and the divestment of Houston-based Citgo Petroleum Corp., the USA refining arm of state oil company PDVSA. [LatinPetroleum.com, 16.Dec.2014] MADURO VISITS ALGERIA TO DISCUSS STRENGTHENING OPEC The officials discussed leadership of OPEC in order to stabilize oil market, and importance of oil prices, according to Venezuela’s Information Ministry.

“We need to guarantee that oil is not used as a geopolitical or economic weapon against countries and regions,” said Maduro. “OPEC is a guarantee of independent stability of the world.”

[LatinPetroleum.com, 28.Dec.2014] PDVSA PRODUCTION DIRECTOR PARADA DETAINED ON CORRUPTION CHARGES PDVSA Western Region Production Director José Luis Parada was detained in Zulia state for preassembled administrative irregularities related to the contracting of fuel distribution companies, Venezuela's public prosecutor's office reported in an e-mailed statement.

Parada was arrested by Venezuelan intelligence officers, the office reported. [LatinPetroleum.com, 30.Dec.2014] NO OPEC PRESIDENTIAL MEETING ON HORIZON, SAYS MADURO The most important thing is to arrive at a consensus over the next weeks and months, said Venezuela President. Nicolas Maduro during a state television broadcast.

“We'll evaluate any suggested meeting but that is not the principal initiative that we are developing,” said Maduro. [LatinPetroleum.com, 16.Dec.2014] VENEZUELA OIL REVENUES TO REACH $82 BILLION IN 2014: ENERGYNOMICS Energynomics estimates that Venezuela’s oil revenues in 2014 will reach $82 billion while in 2015 these revenues may see a 30 percent to 40 percent drop.

“The country needs minimum oil prices of $110 per barrel to cover its budget and debt (it is in default on its internal debt) and at least an additional $10 above to start investment in the oil sector,” said Energynomics President Carlos Rossi from Caracas.

Venezuela needs desperately to ramp up its production of 2.4 million barrels per day, Energynomics said.

“Even in the best of circumstances production would take years to come on stream,” said Rossi. “But the eventual news of massive oil investment from foreign oil companies will help a great deal with the confidence levels and investment multiplier in Venezuela.” [LatinPetroleum.com, 14.Dec.2014] LOW OIL PRICES AFFECT VENEZUELA, BRAZIL, MEXICO, COLOMBIA: PALACIOS “Venezuela, Brazil, Mexio and Colombia will need different adjustments and will be affected in some way by the oil price decline,” says Medley Group managing director and head of Latin America research Luisa Palacios during an interview on CNN's Spanish network.

The countries that depend more on oil will be most affected by lower oil prices, she said.

Venezuela oil sector represents almost 30 percent of the economy, 96 percent of foreign export earnings, more than 50 percent of fiscal revenues.

The country in the worst position in the region is Venezuela. As such, the cost for Venezuela is more than other countries.

Mexico is an oil producer but its economy is more diversified than Venezuela’s. Oil exports are just 11 percent of total exports and oil imports are 9 percent of total imports while 35 percent of fiscal revenues come from oil sector, according to Palacios.

Brazil’s production basically is on par with Mexico but could surpass Mexico in 2015. The country’s oil sector represents about 13 percent of GDP and a fall in oil prices helps Brazil with imports, according to Palacios.

Colombia is producing close to 1 MMb/d and oil exports represent more than 50 percent of total exports while the oil sector represents 8 percent to 9 percent of GDP, concluded Palacios.

[LatinPetroleum.com, 12.Dec.2014] VENEZUELA BREAKEVEN OIL PRICE CLOSER TO $85 PER BARREL: JEFFERIES “The latest bounce in oil prices is encouraging; however Venezuela needs an oil price of $63 per barrel to manage through cashflow in 2015 and much higher thereafter and closer to $85 per barrel once Venezuela exhausts non-recurring revenues,” said Siobhan Morden, head of Latin America strategy at Jefferies LLC, in a research note.

The government needs to recognize the need to reduce import substitution and reprivatize domestic industry. We are still waiting for details about a proposed gasoline price hike and promises that will improve foreign exchange flexibility, said Morden.

“It may need to get worse before it gets better to reach consensus among Chavismo for policy adjustment,” said Morden. “We are not assuming a pre-emptive adjustment after 17 years of well entrenched ideology, conditioning of the broader population about the Bolivarian Revolution, and a well-entrenched entitlement system.”

If Chavismo does not reinvent itself, then the military would likely encourage a political transition from either within a moderate faction of Chavismo or from the opposition, said Morden.

Editor’s Note: Jefferies estimates an average oil price of $45 per barrel in 2015. [LatinPetroleum.com, 12.Dec.2014] PDVSA USING NAPHTHA TO DILUTE HEAVY CRUDES PDVSA, as Venezuela’s state producer is known, has been using naphtha to dilute heavy crudes produced in the Orinoco oil belt.

The Caracas-based company has been looking for cheaper alternatives to importing naphtha after a lack of investment and maintenance reduced its ability to produce the material in Venezuela.

[LatinPetroleum.com, 12.Oct.2014] PDVSA BONDS HAVE DECLINED ON FEAR OF INTERNATIONAL DEBT DEFAULT Maduro has announced that he has received the necessary financing he needs to maintain the Venezuelan economy afloat, but the reality is that much more than $20 billion is needed to maintain the historic levels of imports and to cover the countries international debt obligations (principal and interest payments on bonds).

Since Venezuela’s sovereign bonds and the bonds of state oil company Petróleos de Venezuela (PDVSA) have declined drastically this year on fears that Venezuela will default on its international obligations and bondholders, it appears that Maduro is telling the markets he has the necessary financing in an attempt to quiet the negative rumors about the real condition of the Venezuelan economy.

For instance, the Venezuelan government owes around $4 billion to the airline sector and many airlines have reduced their flights to a minimum awaiting payment of their debts. The list includes all the major airlines from around the world: United, American, AirEuropa, LAN Chile, Avianca, among others. [LatinPetroleum.com, 15.Dec.2014] VENEZUELA NEEDS TO UNIFY FOREIGN EXCHANGE RATES Venezuela needs to organize its public spending, unify its foreign exchange rates (Cencoex, Sicad I and II, and Simadi), debate an increase in the price of gasoline, organize public financing and not permit that the Venezuela's Central Bank (BCV) continue to finance the government by just printing money, said Economist José Guerra in an interview broadcast on Venezuela’s Televen.

PDVSA and other oil companies operating in Venezuela need to sell dollars to the central bank so that Venezuela has sufficient dollar supplies to fulfill the high demand for dollars. Otherwise, the parallel dollar rate will continue to exist and rise, said Guerra.

"In Venezuela, the official 6.3 bolivar to dollar exchange rate is for a smaller group of people, food, medicines and corruption," said Guerra.

[LatinPetroleum.com, 14.Jan.2015]

VENEZUELA LOOKS TO PRODUCE 4 MILLION BARRELS PER DAY OF HEAVY OIL BY 2019 “We visualize the Faja as an integral development region due to the context of the petroleum that will be developed,” said Alfonso Arocha, Manager of Land Development for the Faja during the Third Heavy Oil Forum in Venezuela. “We are talking about producing 4 million barrels per day by 2019 compared to 1.275 million barrels per day currently.”

Execution of projects in the Hugo Chávez Faja entails: construction of two industrial complexes, six heavy oil upgraders and two thermoelectric plants, creation of seven new joint ventures, five petroindustrial bases and two refineries, all of which are expected to pomote social, industrial, economic and technological development within Venezuela.

[LatinPetroleum.com, 27.Oct.2014] GASOLINE SUBSIDY COSTS VENEZUELA AN ESTIMATED $12.5 BILLION PER YEAR The gasoline subsidy in Venezuela costs the government an estimated $12.480 billion per year, said Economist Victor Alvarez during a gasoline forum in Caracas hosted by newspaper UltimasNoticias.

An estimated 100 Mb/d of gasoline from Venezuela is smuggled each year into to Colombia.

The gasoline smugglers make about $2,000 per month, according to Alvarez. This smuggling costs Venezuela an estimated $3.650 billion per year.

The 'Just or fair' price for gasoline is estimated at 4 bolivars per liiter. This includes refining, transport and distribution costs and 30 percent profit, which is the minimal limit allowed by Venezuela's government.

It has been 18 years since the last increase in the gasoline price in Venezuela. The last time food and gasoline prices were raised was on February 27, 1989 under the government of President Carlos Andrés Pérez.

The increases, among other neo-liberal measures implemented by Pérez led to the so-called 'Caracazo' riots which unofficially left hundreds, if not thousands dead and gave rise to the political career of Hugo Chávez, who led an unsuccessful coup against the government of Pérez in 1992. [LatinPetroleum.com, 28.Aug.2014]

PDVSA AND ENI EVALUATE ADVANCES OFFSHORE VENEZUELA AND IN THE FAJA PDVSA President Eulogio Del Pino and Eni President Claudio Descalzi evaluated advances achieved at the companies' joint projects in Venezuela including Petrojunín, Petrobicentenario and the construction of natural gas production facilities and a condensates processing at Perla Field offshore in the Cardon IV block of the Rafael Urdaneta project, reported PDVSA in an official statement.

The last time the presidents met they agreed to build facilities to handle early production from the Petrojunin project with financing sources of $1.761 billion aimed for the construction of oil pipelines, drilling clusters and other production installations as well as a development program for the delineation of the reservoir and basic engineering for major projects.

The joint venture company is conducting drilling activities at 5 of 7 constructed drilling clusters with 5 drilling rigs assigned to PDVSA. Additionally, PDVSA acquired 3 last generation rigs that will allow the company to accelerate construction of wells in order to increase the production capacity to the contractual limit of 75 Mb/d in the early production phase.

In terms of offshore developments, the presidents of both companies expressed their satisfaction with the advanced construction of the gas treatment plant that is being built in Tiguadare in the Paraguaná Peninsula in Falcón state that will process 450 MMcf/d of natural gas in the first phase.

[LatinPetroleum.com, 2.Dec.2014]

Venezuela's national electric compnay Corporación Eléctrica Nacional or (Corpoelec), has an estimated 2,862 megawatts of installed capacity, of which 1,694 megawatts is available versus demand of 1,973 megwatts, according to daily newspaper Panorama, citing a study by Comisionaduría.

The generation of energy in Caracas and other parts of Venezuela is costly since the plants should be sourcing domestic natural gas and not the costly imported diesel fuel, said Universidad Central de Venezuela (UCV) energy professor, Nelson Hernández. [LatinPetroleum.com, 23.Dec.2014]

VENEZUELA OIL REVENUES TO DECLINE BY $30 BILLION TO $35 BILLION WITH OIL NEAR $50 PER BARREL Venezuela's oil revenues to be reduced by $30 billion to $35 biilion if oil prices maintain in the $50 per barrel range. Venezuela's government used an oil price of $60 per barrel in 2014 and its 2015 budget is calculated using the same oil price, daily newspaper Panorama reported.

“Venezuela needs a price of $120 per barrel to cover its fiscal deficit. A potential salvation for Venezuela would be a new conflict in the Middle East which could push up prices,” said Economist Leonardo Buniak.

The energy independence of Caracas is not guaranteed since Venezuela's Electric Energy Ministry has not conducted maintenance at the city's thermal plants, said Armando Meleán, former general director at Venezuela's Energy and Mines Ministry.

MARISCAL SUCRE TO PRODUCE 300 MMCF/D IN 2015 Venezuela's Mariscal Sucre gas project located offshore Sucre state is expected to produce 300 MMcf/d in 2015 reported Venezuelan state news agency AVN, citing PDVSA Gas President Antón Castillo.

“The well tests have been very satisfactory and the gas transport system has been finished,” said Castillo.

“We just have to finalize work related to the offshore infrastructure.”

Production from the Mariscal Sucre project will come from the Dragón, Patao, Mejillones and Río Caribe fields offshore.

The production plan for the fields is to produce 1,200 MMcf/d and up to 28 Mb/d of condensates.

[LatinPetroleum.com, 11.Dec.2014]

PDVSA AND PETROVIETNAM DISCUSS STRATEGIES FOR EARLY PRODUCTION FROM PETROMACAREO Petrovietnam President Nguyen Quoc Khanh met with PDVSA President Eulogio Del Pino to discuss the joint venture company, Petromacareo, and plans related to early production. The joint venture is assigned to Junin 2 block in the Orinoco heavy oil belt or Faja, reported PDVSA in an official statement.

The officials expect that activities conducted during 2015-2016 will allow Petromacareo to achieve early production of 50 Mb/d.

During 2013-2014, Petromacareo completed the acquisition and processing of 3D seismic over the entire assigned area and constructed the first drilling cluster to handle production.

Partners in Petromacareo, S.A. include PDVSA with a controlling 60 percent interest and Petrovietnam with the remaining 40 percent interest.

[LatinPetroleum.com, 9.Dec.2014]

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