Venezuelan Oil Would Still Flow Should Power System Collapse - Ramirez

CARACAS (Dow Jones)

Venezuela, one of the top five suppliers of petroleum to the U.S., would continue producing crude oil even if its ailing electricity system were to suffer a collapse, the country's oil minister said Friday.

"We will not stop producing oil," Oil Minister Rafael Ramirez told reporters, adding that he doubts there will be any catastrophic failure of the national electricity system, so long as energy-conservation efforts continue.

Venezuela has been in a self-declared "electricity emergency" for months due to a long-running drought that has reduced the capacity for the country's hydroelectric plants to supply the national grid. Venezuela, though rich in oil, relies on water-driven hydropower for more than 70% of its electricity needs.

President Hugo Chavez has repeatedly warned that a collapse of the electricity system is possible if the drought were to continue and if residents don't cut back on power usage.

The government has forced drastic measures to prevent any possible collapse, including rolling blackouts in parts of the country for up to four hours a day. It has also forced government offices, shopping malls and other major consumers of power to close early, and is ordering steep fines on households that use more than their fair share of electricity.

Ramirez said the oil and gas sector in Venezuela relies on the national grid for half its electricity needs, while the other half comes from generators maintained by the oil companies themselves.

If the national grid were to suffer some type of collapse, Ramirez said there are ways to ensure that energy would continue to reach the oil sector so that production continues.

Oil accounts for more than one-third of Venezuela's gross domestic product, more than half of government revenue and about nine-tenths of the country's exports.

While Venezuelans, on average, use less electricity than people in developed nations, they are at the top of the list of energy consumers in Latin America, and demand is rising each month.

Chavez squarely blames the drought for the country's electricity problems, but many analysts say the dearth of rainfall merely exposed the lack of sufficient investment in the sector, which could have safeguarded against cyclical weather patterns including drought.

Copyright (c) 2010 Dow Jones & Company, Inc.


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