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Venezuela: Energy overview

Gas pipeline near Maracaibo
Energy production dominates the Venezuelan economy

Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere. It also has vast deposits of extra-heavy crude oil and bitumen.

Venezuela consistently ranks in the top four sources of oil imports to the United States, meeting around 15% of US requirements. As the world's fifth largest net exporter, oil accounts for about half of total government revenues.

Venezuela has been producing oil for nearly a century and was an Opec founder-member.

OIL

Under President Hugo Chavez, there has been a shift in oil policy and Venezuela now strictly adheres to its Opec production quotas. According to official Venezuelan figures, state-run energy firm Petroleos de Venezuela SA (PDVSA) currently produces 3.3 million barrels a day.

The country appears to have recovered from the oil strike of 2002-2003, when anti-government protests shut down production right across the country.

In December 2002, nearly half of PDVSA's staff downed tools and thousands of workers - including many skilled technicians - were subsequently sacked.

The dramatic effects on the nation's economy were relatively short-lived thanks to soaring world oil prices. The same high prices are expected to continue driving GDP growth in 2006.

Regional deals

As well as delivering 1.5m b/d of oil and by-products to the USA under long-term agreements, Venezuela also supplies oil to a number of countries in the region.

Cuba, for example, receives cheap Venezuelan oil under an agreement signed by President Chavez and Cuba's Fidel Castro in 2000.

Under the San Jose Accord, Venezuela and Mexico together supply 11 countries in Central America and the Caribbean with crude oil, also at preferential rates.

More recently Citgo - PDVSA's refining and retail arm in the USA - began to sell subsidised heating oil to deprived communities in six US states. This was seen as an overtly political move by Mr Chavez, who often claims the Bush administration neglects poor Americans.

NATURAL GAS

Although Venezuela has the ninth largest gas reserves in the world, inadequate transportation and distribution infrastructure has prevented it from making the most of its resources. Moreover, the petroleum industry consumes more than 70% of domestic production.

In 2003, Venezuela signed an agreement with neighbouring Colombia to construct a 130-mile pipeline, which will carry Colombian gas from Punta Ballenas to the Maracaibo oil fields in Venezuela.

It is also planning a huge project to build a gas pipeline to Patagonia, to supply demand for gas in other countries.

ELECTRICITY

Hydropower provides the bulk of Venezuela's electricity supply - accounting for 66% in 2003, according to the International Energy Agency.

Production is centred on the Caroni River in Guayana State, site of the Guri dam. Guri is the second-largest hydroelectric plant in the world after Itaipu in neighbouring Brazil.

ENVIRONMENT

Prolonged oil production has taken its toll on the country's environment. There is significant oil pollution along the Caribbean coast and Venezuela is the region's top emitter of carbon dioxide.

Another side-effect of the oil business can be seen at Lake Maracaibo in north-western Venezuela. The eastern shore of South America's largest lake is subsiding at a rate of around 8 cm per year. Subsidence commonly occurs when hydrocarbons are extracted in large quantities, as they have been for decades in mature fields of the Maracaibo basin.

This poses a threat not only to the oil sector and the economy, but also to the people living in towns and cities around the lake who have already been affected by severe flooding.

BBC Monitoring selects and translates news from radio, television, press, news agencies and the internet from 150 countries in more than 70 languages. It is based in Caversham, UK, and has several bureaus abroad.



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