Finmin: Windfall oil revenue will not be spent until 2006

Any windfall oil revenue Venezuela receives this year will not be deposited in a "rainy day" fund for social programs until 2006, finance minister Nelson Merentes told reporters after testifying before the finance commission of the national assembly. Merentes said a windfall is expected this year, but declined to say how much could go into the fund. "It's very likely that we'll have a windfall in 2005 and that some of it will be saved for execution in 2006," he said. "We budgeted [the oil strike price] at US$23/b and now we are seeing prices over US$40/b, but we will only know for sure on December 31 2005 how much can be put in that fund." The minister noted that in 2001 the finance ministry was expecting a large windfall and then the September 11 attacks on the World Trade Center in New York happened and the price of oil dropped. "We'll only know for sure at the end of the fiscal year whether we registered an excess," he said. Merentes described how other oil-producing countries are using their revenues. "My dream is to do in Venezuela as they do in Norway, where [revenues] from oil go to savings and an investments' fund," the minister said. "Or Russia, that's lowering debt and increasing its reserves." State oil firm PDVSA posted net profits of US$6bn on revenue of US$63bn in 2004, according to company president and energy and oil minister Rafael Ramírez, and is expected to do even better this year, if not in terms of production at least in terms of prices. But if 2004 is any indication, there might not be any windfall this year. Despite budgeting oil exports at US$20/b for the year and receiving US$33.22/b, PDVSA told the government it received no windfall revenue last year. Merentes said oil production must average 3.4 million barrels a day (Mb/d) in 2005 to earn windfall revenues. However, depending on who you ask, PDVSA is producing from 2.1M-3.26Mb/d, but not even the most optimistic estimates place production anywhere near 3.4Mb/d.