VENEZUELA - The Latin American Operations.

For years, PDVSA has been making efforts to buy into downstream ventures in Latin America. Unlike in the US, however, PDVSA had limited success in these areas, until populist President Chavez came to power in early 1999. His vigorous nationalist drive so far has led to agreements for energy cross-investments with several Latin American states. An agreement with Brazil on June 29 called for PetroAmerica, a JV which should grow into a pan-Latin American company that could lead to energy integration in the Latin world. Caracas is promoting a pipeline to supply gas to northern Brazil and access for Venezuelan gas to other Latin American markets through the pipeline network of Colombia. But energy integration of Venezuela and Brazil is difficult; their population centres are far apart. A a $1.8 bn, 100,000 b/d JV with Petrobras in Pernambuco state (N-E Brazil) to process PDVSA crude fell through in 1996 as both said it was not feasible. A plan for PDVSA and Petrobras to buy into the 210,000 b/d Aruba refinery of Coastal fell through in September 1997 as the Brazilian company decided to end the talks. PDVSA's 170,000 b/d of exports to Brazil are refined products. Monomeros Colombo-Venezolanos is a JV in Colombia to build a downstream and marketing business.

PDVSA's refining in the Caribbean is limited to Refineria Isla at Curacao, leased under a 1986 deal, and a 50% stake in Amerada Hess' 545,000 b/d St. Croix plant in the Virgin Islands taken in Nov. 1998. Talks continue with Coastal on its Aruba refinery, Trinidad's Petrotrin for a 100,000 b/d refinery at Pointe-a-Pierre, and the 65,000 b/d Cienfuegos refinery in Cuba proposed to be upgraded as a JV with PDVSA. St. Croix is an important supplier of reformulated gasoline to the US east coast. PDVSA and Tosco market in the US Atlantic coast and Caribbean 0.3-2.2% sulphur fuel oil from the St. Croiz refinery, under a one-year deal signed in late 1998.