Venezuela to Diversify Energy Markets

By Andrea R. Mihailescu
Energy Correspondent

Venezuela to diversify oil markets
Aug. 4, 2005 at 2:00PM

Venezuela will sell six oil shipments to Uruguay this year under preferential terms as President Hugo
Chavez aims to diversify oil markets and possibly spread his political influence in the region.

Although critics say Chavez is using oil to acquire support for his policies, the Venezuelan leader maintains
he aims to improve living standards in the region.

Since taking office in 1998, Chavez has realigned state-owned PdVSA's mission to make the oil company
provide more direct financial support to the bulk of Venezuelan society.

State-owned Petroleos de Venezuela committed $1.7 billion out of its 2004 $15 billion budget to fund
social programs. Industry experts predict these social outlays could compromise the country's oil
production, as Venezuela's oil sector reportedly has been suffering from under-investment, according to
the Energy Information Administration country brief.

"This year we will buy a maximum of six cargoes," said Sergio Lattanzio, director of Uruguay's state-owned
Administracion Nacional de Combustibles, Alcohol y Portland.

Uruguay will receive a 900,000-barrel per cargo from Venezuela's Mesa, Santa Barbara and Leone
medium grade crude. "It should get here in mid-August," Lattanzio added.

Under the terms, Uruguay will pay for 67 percent of the oil with export products, and the rest under
low-interest financing.

Venezuela sells oil to dozens of countries in Latin America and the Caribbean under similar terms. Chavez
has been active in making energy cooperation deals with South American countries.

PdVSA recently opened an office in Cuba that became the company's headquarters for its Caribbean

"It is important for the Caribbean leaders to keep in mind that oil is more than a commodity; it is a tool for
economic growth," Vincent DeVito, president of International Energy Strategies and former Acting Assistant
Secretary of the U.S. Department of Energy, told United Press International Thursday. "Jobs will bring
stability and unity to the region more than rhetoric."

Under the Commission for Assistance to a Free Cuba, the Bush administration aims to move forward a
comprehensive strategy to prepare Cuba for a peaceful transition to democracy apparently after the death
of Fidel Castro, the island's longtime Communist leader. The United States plans to invest $59 million for
development, including energy technology.

"Cuba can be a stronger energy player in the region and the citizens of Cuba will eventually receive the
benefits of that development if it is done in a fair and transparent fashion," DeVito said.

In addition to Venezuela, Cuba has forged deals with energy firms around the globe including Brazilian,
French, Canadian and Spanish companies.

An energy development project so close to the United States could indicate these companies have the U.S.
demand market in mind.

Venezuela is also sponsoring the creation of PetroCaribe, an oil company that would allow Caribbean
nations access to Venezuelan oil under preferential terms.

Chavez also aims to create PetroSur, a similar venture to PetroCaribe, as part of an energy cooperation
agreement between Venezuela, Brazil and Argentina.

Venezuela has been supplying Argentina with emergency fuel oil since last year to help it cope with energy
shortages in exchange for cash and agricultural products. Argentina and Venezuela are also looking to
construct a $2.5 billion oil refinery in Brazil.

Venezuela, the world's fifth-largest oil exporter, is looking to diversify its market. In addition to adding 10
new clients, Petroleos de Venezuela said gas sales to South American markets increased by 15 percent
since late 2004.

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