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VENEZUELA - The Power Sector.

Like most South American countries, Venezuela depends on hydro-electricity for the bulk of its power needs. But the drought in the past three years and a growing shortage of natural gas means the country is burning more crude oil and diesel to meet domestic power demand. Yet Venezuela remains acutely short of electricity. Because of this, there are still frequent black-outs.

Venezuela normally relies on hydro-power for more than 70% of its electricity needs. President Chavez in the first quarter of 2010 repeatedly warned that a collapse of the electricity system was possible if the drought were to continue and if residents did cut back on power usage. The government then enforced drastic measures to prevent any possible collapse, including rolling black-outs in parts of the country for up to four hours a day. It then forced government offices, shopping malls and other major consumers of power to close early, and ordered steep fines on house-holds which used more than their fair share of electricity.

Petroleum Minister and PDVSA President Raphael Ramirez in March 2010 said the petroleum sector in Venezuela was relying on the national grid for half its electricity needs, while the other half came from generators maintained by the oil companies themselves. Ramirez said if the national grid were to suffer some type of collapse, there were ways to ensure that energy would continue to reach the petroleum sector so that production continued.

Oil accounts for more than one-third of Venezuela's GDP, more than half of state revenue and about nine-tenths of the country's exports. While Venezuelans, on average, use less electricity than people in developed nations, they are at the top of the list of energy consumers in Latin America, and demand is rising each month. Chavez in March 2010 squarely blamed the drought for the country's electricity problems, but many analysts then said the dearth of rain-fall merely exposed the lack of sufficient investment in the sector, which could have safeguarded against cyclical weather patterns including drought.

Venezuela has over 23.7 GW of installed generating capacity, up from 22.1 GW in 2005. Venezuela has the installed capacity to generate 100bn kilowatthours (Bkwh), up from 99.2 Bkwh in 2005, and normally consumes 80 Bkwh (up from 73.4 Bkwh in 2005). The country has the capacity to generate 79 Bkwh of hydro-power, up from 74.3 Bkwh in 2005; but the current output is said to be a little over half of this capacity. Before the drought, Venezuela used to be a net exporter of electricity, with the majority of exports sent to Brazil.

State-owned firms dominate the power sector. The largest is Electrificacion del Caroni (EDELCA), a unit of the state-owned mining firm Corporacion Venezolana de Guayana (CVG). EDELCA normally supplies around 75% of Venezuela's power needs. There is a high degree of vertical integration in the power sector, with the largest generating companies also acting as the main distributors.

OPSIS is a state regulator of the sector and manages the national transmission grid. In 2007 the state nationalised La Electricidad de Caracas (EDC), which used to be majority-owned by AES of the US. EDC had been the largest private electricity generator in Venezuela, supplying around 10% of the country's power needs.

Hydro-electricity normally provides the bulk of Venezuela's power supply. The Caroni River in Guayana state has long been the centre of the country's hydro-power production. But the river's level has declined, causing a shortage of water supplies as well as power. EDELCA operates the 8,900MW Guri (Raul Leoni) station of Caroni, the second-largest hydro-power plant in the world, after Itaipu on the Paraguay/Brazil border. EDELCA also operates the 2,900 MW Macagua and the 2,200MW Caruachi plants in Caroni. EDELCA has built a fourth plant in Caroni, the 2,200MW Tocoma dam, in operation since early 2011.

In July 2009, Repsol/YPF agreed to sell to PDVSA for $85m its remaining shares in the power plant Termobarranca as part of a government move to nationalise the energy sector. PDVSA also bought for $100m Repsol's gas-drilling rights in Barranca.

Natural gas normally powers around half of thermal power generation in Venezuela, followed by fuel oil and diesel. There has been increasing investment in thermal capacity as a means to reduce reliance on hydro-power and utilise domestic hydrocarbon resources.
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Publication:APS Review Downstream Trends
Geographic Code:3VENE
Date:Nov 7, 2011
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