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INFO RUEHHH/OPEC COLLECTIVE
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RHEHAAA/WHITEHOUSE WASHDC
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RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 CARACAS 003041 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
ENERGY FOR CDAY, DPUMPHREY, AND ALOCKWOOD 
NSC FOR DTOMLINSON 
 
E.O. 12958: N/A 
TAGS: ECON ENRG EPET EINV VE
SUBJECT: PDVSA RELEASES 2005 FINANCIALS 
 
 
¶1.  (U) SUMMARY:  PDVSA released its 2005 financial results 
on October 3.  According to a presentation by PDVSA President 
and Minister of Energy and Petroleum (MEP) Rafael Ramirez, 
PDVSA had worldwide revenues of USD 85.73 billion in 2005 and 
USD 6.483 billion in profits.  These results shed a little 
light on PDVSA activities, though most of the Venezuelan 
state oil company's activities remain opaque.  END SUMMARY. 
 
¶2.  (U) According to an October 3 presentation to the board 
of directors of PDVSA and a PDVSA publication in El Universal 
(leading Venezuelan daily), PDVSA had worldwide revenues of 
USD 85.73 billion in 2005, during which time the average 
price for the Venezuelan oil basket was USD 46.15.  (Note: 
For 2006, the average price has been USD 58.26.  End note.) 
USD 81.105 billion in revenues came from exports and 
activities outside of Venezuela, USD 1.408 billion from 
domestic sales, USD 2.040 billion from petrochemical sales 
and USD 1.177 from PDVSA affiliates.  Revenues were not 
broken out by activity or subsidiary and PDVSA reported a net 
profit of USD 6.483 billion.  (Note: PDVSA's net margins 
(revenues/profits) were 7.6 percent in 2005, a decrease from 
8.3 percent in 2004. The average price for the Venezuelan 
basket of oil increased USD 13.15 during this time period. 
End note.) 
 
¶3.  (SBU) PDVSA reported spending USD 32.979 billion (38 
percent of total revenue) to purchase petroleum and petroleum 
products in 2005. (Comment: While PDVSA does need to import 
some products to refine gasoline, the amount is nowhere near 
USD 33 billion.  PDVSA does not export enough oil to fulfill 
demand by its foreign subsidiaries and it is probably 
purchasing oil and gasoline to supply these subsidiaries, 
including CITGO.  PDVSA may also be buying oil and gasoline 
to cover its production declines and refining problems, which 
will be covered in septel.  End Comment.)  Operating costs 
for 2005 were USD 14.645 billion, exploration costs were USD 
118 million and depreciation and amortization accounted for 
USD 3.334 billion. 
 
¶4.  (SBU) PDVSA reported contributing USD 17.738 billion to 
BRV coffers in 2005, divided between income tax (USD 5.069 
billion), royalties (USD 11.327 billion) and dividends (USD 
1.342 billion).  In addition, PDVSA contributed USD 3.762 
billion for social programs, USD 2 billion to the Fund for 
Economic and Social Development (FONDESPA) and USD 1.525 
billion to the Fund for Economic Development (FONDEN).  Total 
funding for government programs (including taxes and social 
contributions) from PDVSA was USD 25.025 billion in 2005. 
(Comment:  These numbers are "on the books" amounts and most 
probably under-represent actual PDVSA support for the BRV. 
In addition to supporting BRV missions and social programs, 
handling aid and development projects around the world and 
hiring tens of thousands of excess employees, PDVSA has been 
accused of storing proceeds abroad.  End Comment.) 
 
¶5.  (SBU) According to PDVSA, average oil production in 2005 
was 3,274,000 barrels/day.  Of this amount, 2,170,000 
barrels/day were produced by PDVSA (this includes 61,000 of 
orimulsion), 502,000 by the operating service agreements 
(OSA) and 602,000 by strategic associations in the Orinoco 
belt.  (Note: According to the published statement, the 
production from the OSAs and strategic associations could not 
be independently verified by the auditors.  End note.)  PDVSA 
invested USD 3.878 billion during 2005, of which USD 2.830 
billion went to oil and gas production.  (Comment:  Most 
analysts agree that PDVSA is not investing enough to maintain 
current production levels, which we believe to be around 2.6 
- 2.7 million barrels per day, let alone meet its ambitious 
goal of producing 5,847,000 barrels/day in 2012.  End 
 
CARACAS 00003041  002 OF 002 
 
 
Comment.) 
 
¶6.  (SBU) COMMENT:  PDVSA only released its statements for 
2004 in June of this year and it remains doubtful as to 
whether the release of information foreshadows a fuller 
release of financial documents (including long overdue 
submissions to the SEC).  Post compared the June release with 
the one this week (which listed 2005 and 2004 data) and there 
appears to be about a billion dollar discrepancy between the 
two publications.  There has been speculation in recent weeks 
that PDVSA would issue USD 2.5 - 3.5 billion in 
dollar-denominated bonds on the local market to help the BCV 
soak up liquidity and reduce inflation.  PDVSA bonds are now 
trading at a discount to BRV bonds due to uncertainty as to 
PDVSA's finances (the first time in recent history that this 
is the case) and it is possible that PDVSA could not find 
underwriters for the issue without first releasing its 
financial results for the past few years. 
 
¶7. (SBU) Ramirez ended his presentation noting that the 
annual results were a product of the sustained efforts and 
"high moral character of the workers of the petroleum 
industry, society, and the armed forces to make the new PDVSA 
a fundamental instrument for combating poverty and exclusion, 
and an essential tool for the construction of socialism in a 
free, just and unified nation."  END COMMENT. 
 
BROWNFIELD