Even Venezuela's Russian and Chinese sugar daddies are dumping the socialist hellhole
Right under the radar, Venezuela is getting dumped by its two sugar daddies, Russia's state-linked Rosneft energy giant, and China's state-linked PetroChina. Bye-bye money, because this is a big blow.
The pair of them were slated to run two of the three of Venezuela's monster-big refineries in the Paraguana complex, Amuay and Cardon, two refineries that were the crown jewel of Venezuela's global oil presence. Back in the 1990s, these were the most advanced and best-run refineries in the world.
Today, they have fallen into such a state of shambles even the Russkis and Chicoms won't touch them. According to a report from Kallish Energy, the repair costs of the Chavista-managed socialist-run rubble is $10 billion with a 'b.' They'd have to shell that out just to get the darn things running and then would get ten years to run them and sell their products before forking them back over, free of charge, to the Venezuelan Chavista government, which ruined them in the first place.
Nope, nobody with a hint of brains would do that. Seriously, $1 billion would be taken right off the top of the roughly 365 million or so barrels of refined oil each year that they would have to sell in a ten-year deal. And Rosneft has already lent Venezuela about $5 billion. With oil prices volatile, and new competitors entering all the time as fracking takes prices lower, it's all but certain this is a zero-profit proposition.
What makes it interesting is that these companies have always been somewhat indifferent to market forces, given that the Russian and Chinese companies are often used as instruments of foreign policy rathan than solely for profits. Venezuela was a sort of voodoo doll to wave at Uncle Sam and annoy the U.S., which is why Russian President Putin and Chinese President Xi have found the place useful to their interests. The Rosneft and Petrochina pullout suggests that involvement with money-pit, howlingly corrupt, socialist-controlled Venezuela is no longer worth it.
Money Whirlpool, by Patrick Hoesley / Flickr
And the mighty refineries, once world's most advanced, are now set to be shut down, with only one or two to remain, according to Kallish Energy.
What can we conclude from the Great Sugar Daddy Exodus from Venezuela? Three things:
- The Chavistas aren't going to be getting whatever money they thought was coming from abroad to bail them out. And this was pretty much their last good thing on the horizon.
- The oil companies view Venezuela as a money pit no market forces can paper over as in the past, and pretty useless as a foreign policy instrument, given the cost.
- The oil companies likely expect a regime change given that they are holding back, and expecting a better deal from successors.
Let it crash. America is back and the sugar daddies are about to go find prettier girls to annoy Uncle Sam elsewhere