Op-Ed
Commentary
Gustavo
Coronel:
The
collapse of Chavez’s Petroleos de Venezuela
In 2004,
from Bahia to Rio, from Aberdeen to London, from Paris to Washington,
the top management of Petroleos de Venezuela,
PDVSA, and the then Minister of Energy and Petroleum, Ali Rodriguez,
went before worldwide audiences to explain and sing the praises
of the company’s Business Plan for 2004-2009.
This plan, said PDVSA and top Venezuelan Embassy officers to
the United States Senate in March 2004; “is both ambitious
and realistic. By 2009 we will be producing over 5 million barrels
per day. The investments will be of $37 billion, most of the
money coming from PDVSA and only some $9 billion coming from
foreign companies.
Our plans provide tremendous opportunities
for U.S. companies…we welcome the involvement of the U.S.
companies in the Orinoco Belt and in the Venezuelan energy industry….
In fact, we anticipate greater involvement by U.S. companies
in both the oil and natural gas sectors in the future… “
We are now in mid-2007. The oil production capacity of PDVSA
according to the plan would have been 4,580,000 barrels per day,
75% of this total, this is, some 3,200,000 barrels per day coming
from PDVSA’s own capacity. What is the reality? Venezuelan
production capacity is below 3 million barrels per day and PDVSA’s
own capacity is below 2.5 million barrels per day. We are talking
about half of the planned production capacity. This is not a
normal deviation or even an abnormal deviation. This is a major
collapse and one that would have produced, in normal times, the
immediate dismissal of the Directors and managers in charge of
the company.
Why is this not taking place? Because the managers of PDVSA are
the same politicians that have provoked the collapse. They have
no one to blame but themselves. PDVSA is an oil company managed
by the president of the republic, a former paratrooper who is
not very knowledgeable about the oil industry. In the inauguration
of last OPEC’s meeting in Caracas, in June 2006, Chavez
explained to the marveled audience how petroleum had “appeared” in
Venezuela. “It was in the Venezuelan Andes, in the last
year of the 19th Century,” he said, “when a violent
earthquake shook the earth. Before the eyes of our peasants,
a black liquid started to flow”. This oil, he explained, “Went
on to be produced and exported to neighboring countries ‘by
Venezuelans”. This picturesque explanation forgot all about
the facts of commercial oil discovery in Venezuela, made possible
after a team of geologists led by California’s Ralph Arnold
conducted a three-year investigation throughout the whole country
in the first decade of the 20th century.
The presentation by PDVSA to the U.S. Senate also predicted that
U.S. companies would increase their involvement in the Venezuelan
energy industry. In reality they have been kicked out of the
electricity sector and its assets and investments in the oil
sector are being forcibly taken over, possibly confiscated, by
the Chavez regime.
The significant investments mentioned have not materialized.
By this time, more than half of the amount mentioned in the plan
should have been invested, for the plan to be on track. This
means that accumulated investments since 2004 should now be of
the order of $20 billion. In reality they are less than half
of this amount.
Chavez is sacking the company for his own plans
of political expansion and for his policies of handouts to poor
Venezuelans. As highly subsidized domestic consumption already
reaches almost 700,000 barrels of oil per day and Chavez gives
100,000 barrels per day of practically free oil to Fidel Castro,
national oil income has dropped almost 40% during the first quarter
of 2007, as compared to the same period of 2006 and the fiscal
situation of the country has become extremely fragile.
In 2004 the vice-president of PDVSA, Felix Rodriguez, would say: “Venezuela
is due to become a world power in the gas business….we
have the certainty that our Business Plan is totally realistic”.
As a result of his “certainties” Rodriguez was promoted
to the presidency of Citgo and only recently was demoted to an
obscure corner of Germany. As for the gas, Venezuela will soon
start to import gas from Colombia and has witnessed the emergence
of neighboring, tiny Trinidad and Tobago as the world power in
gas that Rodriguez predicted for our country.
So much for PDVSA’s strategic planning. Ramirez is probably
getting ready to travel around the world in one of the regime’s
private jets to present an updated version, even more grandiose,
of PDVSA’s Business Plan. I wonder what Mickey Mouse, the
chief strategist of PDVSA, will cook up next, but one thing is
certain. Audiences will not be so gullible this time around.
Gustavo Coronel is a 28 years oil industry veteran, a member of
the first board of directors (1975-1979) of Petroleos de Venezuela
(PDVSA), author of several books. At the present Coronel is
Petroleumworld associate editor and advisor on the opinion
and editorial content of Petroleumworld. Petroleumworld not
necessarily share these views.
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Petroleumworld
News 06/04/07
Copyright© 2007
Gustavo
Coronel .
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