Sunday, August 24, 2003

PDVSA: the once and future Queen (III)
Should we put our hopes on her?
Sunday 24, August 2003

There is no need these days to be an oil industry expert to realize that something is going really bad inside the giant state oil monopoly PDVSA. Since the forcible personnel removal as of December 2002 where about two thirds of workers were summarily thrown out, hints that the mass firing has caused a devastating blow cannot be hidden anymore.

We can skip the fact that there is no serious audit coming from the new authorities of PDVSA. The rectors are finding all sorts of excuses with the December strike to justify all sorts of normally unjustifiable acts. Some examples are the presence of National Guards forbidding any press inquiry inside the installations. More telling is the constant postponing of a full SEC, Security Exchange Comission, report to the US in order to do business there. Eventually some form of report has been submitted but we do not know exactly what was in it or how this one has been received.

Other signs that things are wrong abound. Old and delicate oil fields in Zulia seem to have closed since the strike. And experts know that re-opening them is nearly impossible either technically or because of the prohibitive costs. Meanwhile new oil wells are pumped faster than what they should be in prejudice of their future yields. This can be observed from the road sides. Refineries we are told are back to normal, but no inventories or export tracking are made public. The government claims that we are exporting as much oil as before the strike yet the Wall Street journal and the US government talk of a drop of at least 20% in Venezuelan oil reaching the US. Who to believe?

Three recent incidents really are worrisome.

On his return of Argentina Chavez had a “slip” of the tongue in his press conference, mentioning an oil production of 2.3 million barrels while the official claim is 3.2. Slip of the tongue? The estimated Venezuelan output by international observers is around 2.5-2.7, closer to Chavez slip than to the official numbers.

Venezuelan papers have been reproducing “wanted” ads from newspapers across South America for engineers to work for PDVSA. Acknowledging of course the fact that PDVSA is unable to find local qualified labor force, or that political credentials are not sufficient to pump oil from way below. Perhaps what is more interesting is the fact that the adds were circulated in South American papers. Why? South American workers are cheaper? The new PDVSA management cannot speak enough English to hire qualified International workers? Inquiring minds want to know. Meanwhile “wanted” adds to work in reconstructing Iraqi oil fields at considerable wages are circulating among the fired PDVSA workers.

The third item comes from the August 3 El Universal who published a report on the faulty billing within Venezuela. Apparently, since the military took over the gas distribution depots, and then eventually transferred it to the newly hired workers, there is a deficit of around 50 billion Bs. That is, at the official current rate of 1600 to the US dollar, there are 31 million dollar of unaccounted gas expenditures. Were they billed? Were they cashed? Who cashed? Who authorized the expenditure of that gas?

The conclusion of all this is that recovery of PDVSA is not only far from complete in spite of claims to the contrary. The further and much graver conclusion is that PDVSA has more than likely lost the manpower and financial muscle to keep exploration, drilling and future development of the industry. This puts at risk the future of Venezuela who will depend every day more of the oil industry when one considers the debacle of the private sector.

The government does not seem to mind at all. The private sector is anathema these days. The prospective trade accords that are being negotiated with Brazil for example will have a negative effect on the economy since Venezuela is much less competitive than Brazil in the potential products it could sell there. Meanwhile, Colombia who was the biggest trading partner of Venezuela, and a complementary economy, is shunned. These comments according to several articles in today’s El Universal. In the near future if Chavez remains in power we will depend more than ever of the Queen of Venezuelan enterprises, but a queen now in rags.

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