Pdvsa's goals get farther away because of losing efficiency

Petróleos de Venezuela and the domestic hydrocarbons industry are one of the cornerstones of the socialist project of the Government of President Hugo Chávez. The financial and logistic muscle of Pdvsa, mirrored in its economic and political capacity, is of the essence to nail down the new model proposed by the Executive Office.

Premised on that, in 2002 the Government realized that it should take hold of Pdvsa as this company supplies 96% of the country income. After the conflict in 2002-2003, in 2005, the then minister of Energy and Petroleum ordered to enforce the provisions set forth in the current Hydrocarbons Organic Law, in force since 2001.

In 2005, the Government struck the first blow to reduce the private interest in the oil industry. In ordering Pdvsa to "put an end" to operating agreements (undertaken in the nineties during the Oil Opening), another period started of quite a few struggles among Pdvsa, the Republic and oil transnational companies. The latter have filed charges against Venezuela in several arbitral courts by pleading unilateral breaking of contracts and expropriations to the detriment of their rights and assets.

In 2007, operating agreements and strategic partnerships were old story. A total of 32 operating agreements turned into 21 joint ventures, with at least 60% of shares and decision-making in Pdvsa's hands. Add to this the migration of strategic partnerships which, after the traumatic seizures, left unsettled disputes with Conoco Phillips and ExxonMobil.

The socialist Pdvsa

Politics has taken precedence over technical matters in Pdvsa's management criteria, even in the preparation of the pivotal Oil Sowing Plan. The appointment of ships at the Orinoco Oil Belt, formerly through bidding, has been lately discretionary against a higher profile of oil companies from countries that are also political allies and minor stakeholders in drilling areas.

A shareholding majority also implies for Pdvsa the commitment of placing most investments. "With the previous numbers, Pdvsa did not put or barely put money. Today, under the concept of joint venture, it should provide 60% in the partnership, versus 40% for private companies. And this 40% let companies have as part of their assets the crude oil reserves that stand for the business, which make financiers stronger. Pdvsa lacks enough money to fund what it should, estimated by the government at USD 200 billion," explained Nelson Hernández, an energy advisor who worked for almost 30 years at the Ministry of Petroleum and Pdvsa in the area of planning.
The model of "full control" of oil operations has caused problems out of inefficiency and bureaucracy inside Pdvsa, where decision-making lingers long. Add to this lower output and dwindling cash income for exports in the light of schemes such as funding of Petrocaribe or the Chinese Fund (accounting for more than 500,000 barrels per day of the exports), which deteriorates its cash flow.

"Pdvsa ought to invest about USD 120 billion in the Belt. Where will that money come from? Still, Pvdsa itself has asked its partners to invest on its behalf and pledged to pay with oil; but private partners are weary of making any investments that may be not acknowledged at the end of the day. Hence, few strides have been made with the projects," Hernández commented.

After seven years of reversed Oil Opening, Petróleos de Venezuela has witnessed how the Venezuelan oil output went from 3.25 million bpd in 2006 down to 2.99 bpd ending 2011, an 8% drop. Concomitantly, exports slid 2.61 million bpd in 2006 to 2.46 million bpd in 2011, a 5.7% plunge.

In Hernández's words, "the oil industry has not gotten stronger, but lost ground and power." On the Oil Sowing Plan, initially foreseen for 2005-2012, "its postponement hinders the goals for having lost levels in production of oil, gas or petrochemicals. To sum up, to carry out the plan, the private interest should be allowed."

Translated by Conchita Delgado