start here

start here

The Daily IKN email digest, get all daily posts sent to you next day (& no ads)

I say things on Twitter


Venezuela: Let the Austerity Begin

Today's lesson in political symbolism

Today PdVSA announced that the new refinery it planned to build in Nicaragua would go ahead, and would be refining 170,000bbl/d of crude by the year 2018.

What? Sorry? What was that? When the first stone was laid in a joint ceremony between Presidents Chavez and Childmolest last year, the thing was supposed to get going in 2011. Then a few months later Chávez mentioned the year 2013 as most likely. So now we have 2018 pencilled in, and that may as well be 2028 for the wants and needs of Nicaraguans.

Yep, the oil price drop has started to show itself in proposed budgets at PdVSA. Quite right, too, as they'd be damned to merry hell by all and sundry if they didn't cut back on some of the more lavish projects in the books.

Coincidentally (?), the $4Bn budget for the Nicaraguan refinery is precisely the same number as the line of credit that RBS cut to PdVSA today (according to CNBC anyway, but I haven't seen any official confirmation of that yet). However that cut line of credit is more of a "errr...yeah....I know we said we'd lend you the money if you wanted it, but now ....errr...we don't want to do that business any more". When bankers refuse finance business you know there's a totally different kettle of fish in play. PdVSA will get on just fine without a relatively piddly (for them at least) $4Bn credit line it hadn't even touched, and it shows the Northern bankers in a far more precarious situation than the the local oil producers.