Analysts: Financial impacts after Venezuela blast

CARACAS, Venezuela (AP) ? The deadly blast and fire at Venezuela's biggest refinery are prompting critics to question whether the state oil company has been neglecting maintenance while helping fund government programs under President Hugo Chavez.

Analysts say the disaster at the Amuay refinery could also mean a financial hit for state-run Petroleos de Venezuela SA by forcing it to further increase imports of fuel for domestic consumption.

The refinery remained shut down Wednesday, a day after firefighters put out the last of the blazes that had raged in fuel tanks since the explosion early Saturday. Officials say the blast killed at least 41 people and injured more than 150.

In recent years, Chavez's government has increasingly used a share of earnings from the state oil company, known as PDVSA, to bankroll social programs known as "missions." Its contributions to such programs rose from less than $1.6 billion in 2004 to $10.4 billion last year.

The government's pressure on the company to generate funds for programs that shore up Chavez's support has led to a "deterioration that PDVSA has had in its refining activities," said Asdrubal Oliveros, an economist and director of the consulting firm Ecoanalitica.

He said the state oil company has concentrated bigger investments in oil production to prevent output from slumping "but has neglected other activities, among them refining."

He and other oil industry experts say insufficient maintenance made disasters likelier. Government officials counter that PDVSA has invested $6 billion in maintaining refineries during the past five years.

It remains unclear how much money the disaster may cost PDVSA.

"That is evidently going to generate bigger supply problems in the country than those that already exist," said oil expert Juan Carlos Sosa, who heads the Venezuelan consulting company Petroleo YV.

He said he expects the refinery shutdown will lead to increased fuel imports, meaning more government spending on fuel at international prices.

Sosa said rising imports of gasoline and other refined fuels even before the disaster reflected problems at Venezuelan refineries that have prevented them from keeping up with demand.

In the first half of this year, fuel imports by PDVSA reached $4.9 billion, up 86 percent from the $2.6 billion in imports during the same period last year, according to official figures.

That included 54,000 barrels of gasoline per day that Venezuela imported from the U.S. in April, the last month for which figures were available. That monthly average was 38 percent higher than what Venezuela was buying from the U.S. during the same month last year, according to the U.S. Energy Information Administration.

Sosa and other analysts say Venezuela has been importing more fuel in recent years both because people are using more and because refineries aren't keeping up. Sosa said that's partly due to maintenance problems.

In other countries, such a refinery disaster would likely bring higher costs at the pump for customers. But Venezuela has for decades offered its citizens highly subsidized gasoline at the cheapest prices in the world: about 9 U.S. cents per gallon (2 U.S. cents per liter).

Oil Minister Rafael Ramirez has said Venezuela has plenty of fuel on hand to meet domestic demand in the aftermath of the disaster, but he has not discussed the possible financial impacts for the state oil company.

Source: http://news.yahoo.com/analysts-financial-impacts-venezuela-blast-181341084--finance.html

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