VENEZUELA - Petrochemical Sector.

The petrochemical sector and the natural gas industry are the top economic priority of the current regime in Venezuela, under populist President Hugo Chavez. The country's production of petrochemicals and chemicals including fertilisers should rise from 8.8 million tons/year now to 21 million t/y by 2010, with an investment of $10 bn, under a new ten-year plan unveiled in June 1999.

In his inauguration speech on Feb. 2, 1999, newly elected President Chavez said: "When I hand over this government, Venezuela should have a powerful chemical and petrochemical industry". He has since made the gas and petro-chemical sectors wide open to private participation by both Venezuelan and foreign companies.

The full range of incentives to private investors in petrochemical and gas ventures is yet to be known, with the government working out new rules to be announced during the first half of 2000. But the advantages to foreign and local investors already available for petrochemical ventures are very good. They include cheap and abundant gas feedstocks, which state-owned PDVSA can produce at only $0.52 per barrel of oil equivalent, compared with an average of $0.95/barrel oe for the 141 gas producers in the US. Plant gas for the major JVs in Venezuela's basic petrochemical industry is being supplied at $0.50/m BTU, adjusted by inflation, the lowest price for this feedstock in the world compared to $0.75/m BTU in Saudi Arabia and other gas-rich countries of the Arabian Peninsula.

The value of the country's total petrochemical sales in 1999 is expected to be higher than the $2.88 bn recorded in 1998, when world chemical prices were lower, but local demand remains weak. Venezuela had record sales of $3.14 bn in 1997. Total chemical production in 1999 is expected to exceed 8m tons, compared to 7.9m tons in 1998, 7.85m tons in 1997, almost 7.7m tons in 1996 and 6.76m tons in 1995. In 1995 production came to 5.316m tons. The value of sales is expected to rise rapidly in the coming years as a result of an improvement in prices, with a better cycle anticipated to begin shortly, and a big expansion in capacities planned.

In the massive restructuring of the hydrocarbon sector completed by early 1998, PDVSA became a holding company. Under this group new operating units now include PDVSA-Oil & Gas (controlling PDVSA E&P, PDVSA Gas, PDVSA M&M and PDVSA Services), and PDVSA-Chemicals. Under the latter come Pequiven, in charge of the petrochemical sector, and Pequiven's downstream units which are in charge of a variety of chemical production streams.