Oil
Venezuelan oil diplomacy curbed by economic crisis
CARACAS — The late President Hugo Chavez’s dream of leveraging Venezuela’s oil wealth to spread revolution across Latin America is crumbling under the weight of an economic crisis that is forcing his hand-picked successor to cut back on generous foreign aid.
Signs of the country’s waning influence are becoming more apparent. In early November, Guatemala withdrew from the Petrocaribe oil alliance launched by Chavez, saying it didn’t receive the ultra-low financing rates it had been promised by Venezuela when it first sought to join the 18-nation pact in 2008. Also in recent weeks, representatives of Brazil and Colombia have held meetings with their Venezuelan counterparts to collect overdue payment for food, manufactured goods and other imports.
While Venezuela has fallen behind on payments before, the latest cash crunch is more severe, and the economic outlook more uncertain, than any time in 15 years of socialist rule.
The reason is a dependence on oil, which accounts for 95 percent of exports. Although Venezuela sits atop the world’s largest reserves, production has steadily declined in recent years. Global prices for crude are also lower as hydraulic fracturing technology boosts supplies in the U.S. at a time that Europe’s economic woes and weaker growth in China limit global demand.
The result is a hemorrhaging of Venezuela’s foreign currency reserves, which are down 27 percent this year, according to the country’s central bank.
To meet its obligations, the government is quietly scaling back the subsidies, investments and aid programs that were the cornerstone of Chavez’s plan to curb the influence of the U.S. “empire” in Latin America and that total an estimated $100 billion since 1999.
While President Nicolas Maduro’s government has yet to acknowledge the shift toward austerity, central bank data show that foreign trade credits, consisting mainly of loans and subsidies under Petrocaribe, fell to $1.7 billion in the first nine months of this year, compared with more than triple that amount for the same period last year.
“It’s a lot easier to reduce foreign aid than cut wages or fire workers,” said Francisco Rodriguez, an economist in New York for Bank of America-Merrill Lynch.
The country most hurt by the pullback is Nicaragua, which receives $600 million in annual transfers from Caracas. Starting next year, former guerrilla leader Daniel Ortega’s government will begin funding monthly $30 “socialist” cash transfers to poor Nicaraguans that until now have been paid for by Venezuela. Construction of Central America’s largest oil refinery has also stalled as Venezuelan investment has dried up.
Analysts said Venezuelans are now feeling the financial stresses that worsened seven months ago, after Maduro defeated Gov. Henrique Capriles by a razor-thin margin to succeed Chavez following his death from cancer. Faced with growing spending demands spurred by 54 percent inflation, the state agency that administers the nation’s dollars has been restricting access to hard currency to pay suppliers overseas. That’s pushed the value of the dollar in the black market to 10 times its official rate and led to record shortages of everything from toilet paper to cooking oil.
Maduro blames it on his opponents in Venezuela and the U.S., saying they’re conspiring to sabotage the economy.
Trading partners grew more concerned after the government proposed paying for imports with bonds issued by state-run oil company PDVSA. In October, Brazilian Trade Minister Fernando Pimentel met with Maduro to discuss the unpaid bills, according to a Brazilian official who insisted on speaking anonymously because the talks were private.
The delays pose a much bigger risk for smaller Panama and Colombia. Business in the Colon Free Zone adjacent to the Panama Canal is down about 10 percent this year, due to declining Venezuelan purchases, said Severo Sousa, who represents exporters in talks with the Venezuelan government.
Sousa estimates Venezuela owes Panamanian companies about $1 billion, of which only 10 percent has been recovered.
“The results of talks have been very limited,” said Sousa.
It’s not just less economic muscle that is freezing Venezuela’s outreach, said Carlos Romero, an international relations expert at the Central University of Venezuela. Maduro’s inability to replicate Chavez’s charisma and a rapprochement with the West by Iran and Syria, whose previous hard-line stance Chavez embraced, are undermining the politics of confrontation that the late Venezuelan leader relished, Romero said.
– US NEWS
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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