Third World Solidarity? Petronas Ditches PDVSA

Just when you thought things could not get worse for Venezuela's economic situation, they do. In recent times, Venezuela has sought to partner with other developing countries for exploiting its energy reserves in the likely belief that they would be more understanding of its political-economic situation. Having offended American oil giants through forced nationalization, it arguably had little choice but to look East.

Today's case in point is Malaysia. Just as Venezuela uses its control over a state-owned oil firm to further national objectives, so does Malaysia. Alike that of Venezuela, Malaysian leadership has also been accused of despotic tendencies--especially its perennial party in power UMNO. Allegations of electoral irregularities? Check that too. Despite similarly relaxed attitudes towards Western-style platitudes about good governance, however, it appears Malaysia has its limits and is now fed up with Venezuela. As a result, Malaysia's state-owned oil firm Petronas wants to sell its stake in a partnership with Venezuela's counterpart PDVSA:

Malaysian oil company Petronas said it is exiting one of the biggest petroleum projects in Venezuela's Orinoco belt, after what sources close to the venture and within the firm said were disagreements with Venezuelan authorities and state-run PDVSA. The flagship project, called Petrocarabobo, has planned investments of about $20 billion over 25 years and calls for building a 200,000 barrel per day upgrader to convert heavy crude into light crude oil.

When the venture was formed in 2010, Venezuela touted it as a sign that oil companies were willing to put up with demanding fiscal conditions in exchange for access to the world's largest oil reserves. Petroleos de Venezuela (PDVSA) has 60 percent of the project. Petronas belongs to a consortium that holds 40 percent. Its other partners are Spain's Repsol, India's ONGC and two smaller Indian firms, Oil India and Indian Oil Corp. Petronas holds an 11 percent stake. Sources close to ONGC and Oil India said on Wednesday they were unlikely to buy the stake being shed by Petronas. 

I wonder why there are no takers. To begin with, Venezuelan crude in the Orinoco is heavy and sour, which makes it difficult to refine unlike light, sweet crude oil. On top of this challenge, you have the Venezuelans constantly changing revenue-sharing arrangements adding to the confusion:

"This should not come as a surprise. We have not been excited about this project for the past two years because of the dealings with the government," said the source, who requested not to be identified as he was not authorized to speak to media [...]

One source close to the project told Reuters that frequent changes in the fiscal framework, disagreements with the government of Chavez's successor - Nicolas Maduro - about the business terms, and long delays led to the decision to withdraw. 

So much for third world solidarity since even Malaysians are no longer willing to put up with the arbitrariness of Chavez's successor Maduro. If even the Chinese withdraw next given their unconcern over Western conceits alike transparency and good governance, who will be left to provide the technical capabilities to extract this heavy and sour crude?