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Chavez programs cripple Venezuela oil giant PDVSA: experts
By Francoise Kadri
AFP
CARACAS
Petroleumworld.com 06 01 06Venezuela oil giant PDVSA is the spearhead of President Hugo Chavez's revolution, but his ambitious development projects have weakened the state-owned company, industry experts told AFP.
Oil production in Venezuela, which hosts the OPEC summit this Thursday, is far below its official cartel quota because Petroleos de Venezuela still hasn't recovered from crucial manpower losses after a 2002 strike, and because it has been used to fund Chavez's social and political development projects.
Caracas has an official OPEC oil production quota of 3.2 million barrels per day (bpd), and has set an ambitious target of 3.4 million bpd for the end of 2006, of which 2.38 million barrels should come from PDVSA.
But according to the International Energy Agency and OPEC, current total Venezuela production sits at just 2.6 million bpd, far below the target.
PDVSA does not publish independently audited corporate reports, making estimates difficult, and AFP was unable to interview PDVSA officials despite requests to the company.
But analysts estimate its own production at just 1.5 million bpd. The rest of the country's production comes from joint ventures and domestic "strategic associations" with multinational oil companies.
PDVSA has succumbed to the political hurricane brought on by Chavez's ascent to power in 1999, and was especially crippled by the large anti-Chavez protests of December 2002-January 2003, organized in part by PDVSA officials.
During the strike oil production was suspended and oil industry infrastructure damaged. According to Mazar al Shereidah, an academic oil industry expert, "400,000 barrels a day have been lost forever, and the loss to the oil sector has been 12.5 billion dollars."
In retaliation for the strike, more than 18,000 PDVSA staff, half of the massive agency's workforce, were sacked.
"With such a hemorrhage, it is not possible to fully recover production. They have recovered 80 to 90 percent of the level then, but without any progress since," said a European expert.
"Why have production and capacity plunged? Because of the lack of qualified personnel, and also due to insufficient investment and an endemic corruption," said Robert Bottome, an economist at the magazine Veneconomy.
Like many of those exiled by "Chavism", Horacio Medina, a former senior PDVSA manager now living in Miami paints a somber picture of the oil giant.
He sees it "in fundamental decline, controlled by ideological agents and having lost its position in the oil market."
Medina said PDVSA "has hardly made any investment these recent years in maintenance and in drilling wells, while it should be spending four billion dollars a year just to maintain production."
Another sign that PDVSA is in bad straits is the rising number of accidents, explosions and deaths, said a European oil industry official who noted PDVSA used to be within international averages for accidents.
"The problem resides also in the actual completion of announced projects, at only about 25 percent" he said.
The supposed sensational success of the government's "Siembra Petrolera" (Sowing the Oil) plan, investing 56 billion dollars to push national production up to 5.8 million bpd by 2012, is "an illusion", he said.
To analysts, PDVSA's weakening is driven not only by its use to finance Chavez's sweeping social development efforts and his aggressive "oil diplomacy" across Latin America, but also the employment of the company's own technology and engineers to handle these programs.
The "missions" created in 2003 -- offering health care, housing and subsidized shops for the poor, Chavez's electoral base -- are getting 8.2 billion dollars this year from PDVSA, up from 4.8 billion in 2005 and 4.3 billion the year before.
By holding oil prices at around 50 dollars a barrel for certain "friends", Chavez has accumulated also their obligations -- some 17-19 billion dollars worth, according to oil expert Alberto Quiroz Corradi.
Chavez ships discounted oil to Caribbean allies like Cuba and to cities like Managua. He has also proposed to help develop Bolivia develop its gas resources and to refine Ecuador's oil.
"That is all possible with a current margin of over 40 dollars (a barrel), but it will suffer if oil prices fall from 60 to 40 dollars" because subsidized operations will collapse and they will start losing money, according to the European oil industry official.
AFP 31 1037 GMT 05 06
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