[Congressional Record Volume 144, Number 38 (Monday, March 30, 1998)]
[Senate]
[Pages S2777-S2778]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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         VENEZUELA'S IMPORTANCE TO HEMISPHERIC ENERGY SECURITY

 Mr. MURKOWSKI. Mr. President, recently some of my colleagues 
on the Energy Committee and I traveled to Venezuela to tour some of the 
oil and gas operations run by the state-owned oil company, Petroleos de 
Venezuela, S.A. (PDVSA), and to learn more about the U.S.-Venezuela 
relationship on energy matters. Not many weeks prior to our trip, I had 
traveled to Venezuela for the first time to attend and address the 
Hemispheric Energy Conference in Caracas, which was co-chaired by 
Energy Secretary Federico Pena.
  As Chairman of the Committee on Energy and Natural Resources, I 
believe my colleagues should know the important role Venezuela plays in 
U.S. and hemispheric energy security. And, as a Senator strongly 
committed to preserving and strengthening the U.S. oil and gas 
industry, I believe it is essential that we understand to the fullest 
extent possible the relationships between our countries and energy 
industries, and how we stand in relation to the rest of the world. I 
think it is safe to say, Mr. President, that very few people in our 
country appreciate Venezuela's importance in the global energy picture.
  Our visit to Venezuela was particularly timely in light of the recent 
drop in world oil prices and the agreement among OPEC and non-OPEC 
members to curtail production to halt the downward fall in prices. 
Venezuela is a member of OPEC, and is a country others are looking to 
for cooperation in scaling down production.
  What my colleagues and I learned about Venezuela's energy industry 
from our brief visit, Mr. President, is very impressive. I want to 
share some of the information we gathered with the rest of our 
colleagues in the Senate.
  The United States and Venezuela have a long history of cooperation on 
energy matters. Venezuela has continuously provided oil to the U.S. for 
more than 70 years. During World War II, the Korean War, the conflict 
in Vietnam, and more recently the oil embargos and Persian Gulf War, 
Venezuela has been a stable and reliable source of oil for the United 
States. The U.S. presently imports just under 1.5 million barrels of 
oil a day from Venezuela, making Venezuela the largest supplier of 
crude. Venezuela, Mexico and Canada are the leaders in the Western 
Hemisphere in supplying oil to the U.S., which imports 52 percent of 
its daily production from that region.
  Because of the proximity of our two countries, and certain synergies 
in our energy industries, the U.S. and Venezuela now enjoy a robust 
energy relationship that is triggering economic development and opening 
new trade and investment opportunities in both countries. To date, 
Venezuela's oil company has invested $2 billion in the U.S., and is 
importing hundreds of millions of dollars in U.S. goods and services 
used for energy production in Venezuela. A new bilateral investment 
protection treaty presently being negotiated between the two countries 
will afford U.S. investors greater safeguards in such important areas 
as capital transfers, international arbitration, intellectual property 
rights and others, and will put U.S. investors on an even playing field 
with investors from other countries.
  Venezuela has 75 billion barrels of proven conventional crude oil 
reserves, ranking fifth-largest in the world and first outside of the 
Middle East. By comparison, U.S. crude oil reserves are three times 
smaller. In Venezuela's Orinoco Belt, which we visited, there are 1.2 
trillion barrels of extra-heavy oil in place. Using a conservative rate 
of recovery of 20 to 25 percent at today's technology, it is estimated 
that 270 to 320 billion barrels of this resource could be recovered and 
used as a boiler fuel. In addition, Venezuela has 146 trillion cubic 
feet of natural gas reserves, which rank seventh-largest in the world. 
The U.S. is sixth in the world with 165 trillion cubic feet of natural 
gas reserves.
  Mr. President, Venezuela is prepared to share its abundant oil 
resources with the rest of the world, and is implementing plans to 
almost double oil production from 3.7 to 6.5 million barrels per day by 
the year 2007. In order to do so, PDVSA plans to invest $65 billion in 
the next 10 years, $37 billion of which will come from its own revenue 
stream. $18 billion will come from PDVSA's foreign partners, and $10 
billion will come from strategic alliances with foreign firms. Of the 
$65 billion total investment, PDVSA plans to invest $1.5 billion in the 
U.S.
  To expand production and improve operating efficiency, PDVSA has 
undertaken several rounds of ``oil openings,'' a process in which 
participation of companies operating around the world is solicited in 
an open bidding process. In the first round of bidding, ten light- and 
medium-crude fields were opened to foreign investment. Eight of the ten 
successful bidders were companies operating in the U.S.--Amoco, BP 
America, Benton Oil and Gas Company, Dupont Conoco, Enron Oil and Gas 
Company, Louisiana Land and Exploration Company, Maxus Energy Corp., 
and Mobil Corp.
  PDVSA is involved in five joint ventures with U.S. companies to open 
Venezuela's extensive heavy oil reserves in the eastern Orinoco Belt 
and the western Boscan field. Those companies are Arco, Chevron, 
Conoco, Mobil and Total, N.A.
  In addition, PDVSA has issued more than a dozen contracts to 
companies to develop marginal and inactive oil fields that contain 
approximately 2 billion barrels of light and medium crude oil. Those 
companies include Amoco, Benton Oil and Gas Co., Chevron, Mosbacher 
Energy Company, Occidental, Pennzoil, Total, and Shell.
  Similar opportunities for investment in Venezuelan joint ventures lie 
ahead for U.S. companies.
  Mr. President, the harsh reality is that the U.S. will import greater 
and greater amounts of oil to meet its domestic energy needs in the 
coming decades, notwithstanding our efforts to maintain a viable 
domestic oil and gas industry. Presently, the U.S. is importing about 
54 percent of its daily crude oil needs, and that level is expected to 
exceed 60 percent in a few short years.
  I believe U.S. government policies should favor reasonable oil and 
gas exploration and production efforts, fair royalty and tax treatment, 
and balanced environmental and conservation measures so that we can 
produce our own energy for our growing economy. Unfortunately, the 
Administration does not have those goals in mind, and does not see the 
importance of setting a national energy policy.
  In my State of Alaska, we have potentially large untapped crude oil 
reserves in the ANWR and on the Alaska Outer Continental Shelf. The 
Administration does not support environmentally responsible exploration 
of ANWR, however. Elsewhere in the lower 48 states, the Administration 
is frustrating exploration and production activities on federal lands 
by removing promising acreage from inventory of lands accessible for 
exploration purposes, and is making more difficult the job of producing 
energy by imposing onerous economic and regulatory requirements.
  Now, at a time when world oil prices are plummeting to record lows, 
it will be more and more difficult for American companies to produce 
oil at a reasonable price. While this is good news

[[Page S2778]]

to the people of the U.S. because gasoline is at its lowest price ever 
when adjusted for inflation, it is not welcome news to small and 
independent oil and gas producers who will be especially hard hit, or 
to the larger energy producing companies.
  It stands to reason, Mr. President, that the U.S. economy and 
industrial sector will benefit during times of low energy prices. The 
bad news is that there is a down-side to lower energy prices, and one 
that few people fully appreciate. When world oil prices fall below a 
certain level, as they have recently, the U.S. stands to lose 
production from stripper wells and marginally economic wells, along 
with the jobs associated with those wells. That, in turn, has ripple 
effects elsewhere in the economy through loss of jobs in the industries 
that supply goods and services to producers, and in the communities 
where they operate.
  While we can take comfort in knowing that Venezuela is prepared to 
meet our oil import needs now and in the future, Mr. President, our 
trip served to bring more clearly into focus the U.S. energy situation 
and the need for policies and programs to preserve domestic production 
so that the current price situation does not cause permanent loss of 
jobs and domestic oil and gas reserves.
  I intend to take important steps in the coming weeks to address the 
U.S. energy situation, Mr. President.

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