Chavez to sell China oil currently going to US

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September 24, 4:42 PM

by John Ryden, Global Warming Examiner

 

 

Hu Jintao (L) and Hugo Chavez

A few years ago, Chavez kicked Exxon Mobil and Conoco out of the country for refusing to give up their rights to oil fields that they had developed. When he kicked them out, they took with them the technical expertise that Venezuela needs to develop this oil. He has made attempts in the past to find other foreign companies to replace Exxon and Conoco, but has had little success with countries like Iran and Russia because they don’t have the needed expertise and been given little incentive to tackle this difficult oil region.

China is willing to take on the challenges, even for little financial benefit, as a means to gain access to the future oil they will need to fuel their rapidly growing economy. They recently signed a deal with Iraq to develop oil resources in that country under very favorable terms to Iraq.

The problem for the US is that we currently import about 1.2 million barrels of petroleum products from Venezuela each day. They are our 3rd largest supplier of oil.

Since Chavez took power in Venezuela, oil production has been dropping. Chavez has been diverting money from oil development in his country to fund his social and political agenda including weapon sales from Russia. He is like a farmer who is eating his seed corn. Many petroleum engineers from Venezuela have left the country to work in countries like Canada who are willing to pay the going rate for their services. China is about the only country that is willing to help develop his oil without market based compensation because of their need to secure future oil supplies.

The refineries that are specifically designed to refine his heavy sour crude are mainly located in the US and will eventually belong to Exxon and Conoco as compensation for Chavez’s seizing of  their property in Venezuela. Venezuela is expecting that China will construct new refineries that will be able to process his crude. China will also be expected to transport the crude half-way around the world. This will be much more expensive that just shipping it north to the US. Financial impracticality doesn’t seem to bother Chavez.

The bottom line is that there will be less oil available to the US from Venezuela. Either China will buy this oil or Chavez will continue to watch his production fall each year because of a lack of investment. In three years we may loose our 3rd largest supplier of crude oil. Mexico, our 4th largest supplier is also seeing its production dropping at a rate that may make it a net importer by the year 2012.

The leftist Congress in Mexico has refused to consider changes to the law to allow Pemex to partner with foreign oil companies to develop Mexico’s oil resources, even though their oil field production is declining at an alarming rate. Every time their President has proposed new legislation, they hold political rallies to demand that Mexico not give up its oil riches to foreigners. Pemex does not have the financial resources or the technical expertise to devevelop Mexico’s oil fields which are located mostly off-shore in deep water.

With our leaders in Congress looking for ways to derail legislation that would allow us to drill for oil off-shore, the energy crisis could easily come back with even higher prices for crude oil in the next couple of years. (I am looking for the Democrats to adjourn Congress after their sham energy bill fails to pass so they can blame it on greedy Republicans who want only to ‘unfairly enrich the oil companies’.)

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