Venezuela oil industry: "The new PDVSA belongs to the people"

Fred Feldman ffeldman at bellatlantic.net
Fri Sep 19 03:17:40 MDT 2003


The revolutionary process in Venezuela has not been characterized by
major nationalizations of industry -- with one exception.  The battle
over the formally nationalized oil company has so far resulted in the
essential re-nationalization of the oil company, and a blow to both US
imperialist and local big capitalists.

The comments by the oil industry specialist indicates some hope that
the present situation, in which the profits of oil come into the hands
of a government that bases itself on the people, may still be turned
around.
Fred Feldman


STEPHEN IXER, Associated Press Writer, Wednesday, Sept. 17, 2003:
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CARACAS, Venezuela (AP) -- By some accounts, Petroleos de Venezuela
SA, one of the world's biggest oil companies, is unrecognizable from
its former self after months of political turmoil and restructuring.

Gone are nearly half the people who worked for PDVSA a year ago, fired
by President Hugo Chavez after joining a two-month general strike
against his leftist government. Also banished are the symbols of
PDVSA's corporate opulence -- its impressive corporate art collection
is being donated to national museums and its fleet of chauffeur-driven
cars has been reduced from hundreds to just 50.

Chavez began overhauling the state-owned monopoly to fund and serve
his leftist "revolution" for Venezuela's majority poor. And with oil
prices still high, PDVSA hands over bumper amounts of cash to Chavez's
government.

But the oil company is still recoiling from the upheaval and
restructuring, which cost 18,000 people their jobs, and some observers
are concerned about its future.

"It is amazing what they have accomplished in light of the number of
people they lost," said Larry Goldstein, president of the Petroleum
Industry Research Foundation in New York. "But we don't know at what
long term cost."

Much of the uncertainty centers around PDVSA's production levels.

The strike had slowed the company's output from 3 million barrels a
day to a trickle of 25,000. PVDSA beat all analysts' predictions in
restoring its production, which returned to pre-strike levels in
April. But PDVSA president Ali Rodriguez has boasted that the company
was slashing costs, including reduced drilling of new wells, and
independent reports suggest Venezuela's production has fallen since
April to just 2.6 million barrels a day.

Venezuela still supplies about 15 percent of U.S. oil imports. But if
PDVSA loses 400,000 barrels a day in production capacity this year, as
some analysts predict, both countries will be worse off in 2004.

Rodriguez insists production is higher than before the strike and that
PDVSA is investing enough to keep output well over 3 million barrels a
day. PDVSA's investment plan is to spend $43 billion to raise
production to 5 million barrels a day by 2008, he said.

"We have normalized all operations and production after the tremendous
blow of the strike, which is an impressive feat," Rodriguez said. "Now
we are consolidating our results and continue to reduce costs."

The restructuring began in January, in the midst of the strike. PDVSA
was split into East and West divisions, based on Venezuela's main oil
producing regions. This eliminated the need for most of PDVSA's
administrative offices in Caracas, where thousands of strikers worked.
It also demolished entire departments that dealt with the complexities
of international marketing and company financing.

The split helped PDVSA succeed in cutting costs, a move Rodriguez
called critical for a state-owned industry that must answer to
Venezuelans, most of whom live in poverty.

"PDVSA used to be an enclave company, devoid of any real connection or
relationship with society and its problems, particularly poverty,"
Rodriguez said.

PDVSA has already relinquished two of its three main office buildings
in Caracas. One is being turned into a public university and the other
into a military academy.

"Our (goal) is to optimize the fiscal contribution so that the state c
an attend to the needs of the population. We are also helping with the
development of national industry using PDVSA's huge service- buying
power," Rodriguez said.

PDVSA's dominance of Venezuela's economy is overwhelming. It accounts
for almost a third of gross domestic product, 80 percent of export
earnings and half the government's income.

Private companies contracted for maintenance or technological support
haven't escaped PDVSA's overhaul. PDVSA managers reportedly were
ordered not to use any service providers which supported the strike.
PDVSA also asked foreign oil companies working here not to hire
workers it fired for striking.

To replace blacklisted companies, PDVSA is promoting popular
cooperatives for many tasks. Gasoline trucks -- repainted with the
slogan "The new PDVSA belongs to the people" -- are being distributed
to such groups at super-low financing rates, bypassing private tanker
fleets that joined the strike.

Goldstein warns that PDVSA's cost savings and social initiatives must
be balanced out by the "real but invisible cost of losing so much
collective institutional knowledge" among the thousands of fired
workers.

Formed after Venezuela's oil industry was nationalized in 1976, PDVSA
was praised as an oasis of efficiency within an often corrupt public
sector. Its engineers and researchers won international acclaim, and
the company was recognized as one of the best run state firms
worldwide.

Fired workers say the new PDVSA is destroying this proud past and will
end up another underperforming, politicized company.

Already, reported political infighting among pro-Chavez factions
inside PDVSA has led to new managers being replaced and rumors that
Rodriguez is on his way out as company president.

Rodriguez suggests another shake-up can be expected as a possible
response to production and labor problems at the decentralized West
and East divisions.

But despite its turbulent transformation, PDVSA is slowly recovering
its international reputation and is attracting foreign investment in
areas like the multibillion dollar Deltana Platform natural gas
project, Goldstein said.

"The strike made everyone very nervous, but it is a symbiotic
relationship. People are willing to look beyond the current situation,
and capital is available and willing to flow into Venezuela,"
Goldstein said.


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