Is Venezuela Trying To Hide Oil Assets With This Bizarre Move?

Strange and unsettling developments emerging late last week - from one of the world's key oil-producing countries.

Venezuela.

The Venezuelan government Friday issued a decree that, for the first time, allows the country's military to take direct involvement in natural resources projects. Related: There Will Be No OPEC Cut

The government will do this by creating a new military company. Which is authorized to participate in both oil field services, as well as in Venezuela's mining sector. With the new firm going by the name of Cia. Anonima Militar de Industrias Mineras, Petroliferas y de Gas - or simply, Camimpeg.

The company's board of directors and president will be appointed by Venezuela's defence minister.
The government said that Camimpeg will be authorized to work in activities like maintenance of wells and drilling rigs, transport, and the chemicals business. Suggesting that the new company will have a broad reach across the local natural resource industry.

Analysts surveyed by Bloomberg were split on the reasons for this extremely unusual move. With some suggesting that the new military vehicle could be a place to stash oil assets - with fields to be transferred out of state oil firm PDVSA, in case that firm goes into default and becomes exposed to creditors. Related: Why Today's Oil Bust Pales In Comparison To The 80's

Other observers believe the military firm is more geared toward the mining sector. Which the Venezuelan government has been pushing recently, as a way to diversify away from oil during the current period of low prices.

It was also suggested that the new company could simply be a way to reward key military supporters of President Nicolas Maduro. With Maduro looking for new ways to pay these pillars of his empire, as the economy of Venezuela stagnates.

Whatever the reason, this is a major red flag over the future of Venezuela's resource sector. The military aren't experts in oil or mining - and the move is likely to mean more bureaucracy, inefficiency, and squandered opportunities in Venezuela's already-embattled industry. Related: OPEC-Russia Rumors Persist After Comments From Rosneft Chief

It could even signal the beginning of a steep downturn in productivity of existing assets. As the country sells off its future to prop up today's strongmen. Watch for more announcements on specific projects taken up by Camimpeg.

Here's to knowing what you're good at

By Dave Forest

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