Oil power to the people is priority for Rodríguez

By Andy Webb-Vidal - news.ft.com Published: December 30 2002 4:00 | Last Updated: December 30 2002 4:00

Cane in hand, Alí Rodríguez cuts a valiant but ghostly figure as he steps gingerly into the control room of the Puerto La Cruz oil refinery in eastern Venezuela.

Inside, a dozen visibly exhausted yet determined technicians rise to their feet and applaud, momentarily turning away from monitoring the console that is ensuring Venezuela's only operational refinery continues to distill a trickle of fuel.

As head of state-owned Petróleos de Venezuela (PDVSA), Latin America's biggest company, Mr Rodríguez rallies the night shift. "The striking managers thought they were the only ones who can run this industry. But you are showing the world that they have failed. The workers are winning the battle now."

Such fighting talk is characteristic of the frail 65-year-old. He is a former guerrilla fighter, reputedly one of the last to lay down his arms at the end of Venezuela's small-scale leftwing insurgency of the 1960s.

Forty years later, Mr Rodríguez faces perhaps his most challenging struggle: to restart what a month ago was the world's fifth-largest oil exporter but is now a virtually paralysed network of derricks, pipelines and oil terminals.

"Armed guerrilla action is one form of combat I've left behind, but this is a war to save democracy," he says as he reaches up with his cane to tap the pilot's window of the executive jet on the runway of an abandoned airfield near the refinery.

A long-time friend of Cuba's Fidel Castro, Mr Rodríguez likens the tightening economic noose that is the oil strike with the long-time US-imposed trade embargo on the Caribbean island.

An anti-government strike by some 30,000 employees at PDVSA, aimed at pressuring populist President Hugo Chávez into resigning and calling early elections, has almost completely severed oil exports from Venezuela since the beginning of December.

Until then, PDVSA and local joint ventures with multinationals were producing 3.1m barrels a day of crude oil, of which 1.45m went to the US, accounting for 15 per cent of daily US crude imports.

But daily output last week was below 200,000 barrels, a reduction that, combined with expectations of an impending US-led military attack on Iraq, has pushed oil prices above $30 a barrel, a 15-month high.

Output of refined products from Venezuela has also plunged, starving the domestic market of fuel and depriving the US of 10 per cent of its daily gasoline imports. Puerto La Cruz was yesterday refining 68,000 b/d, a third of the plant's capacity.

So severe is the strike that Venezuela, which sits on the largest oil reserves outside the Arab world and where drivers normally fill up their tanks for about $2, this weekend took the unprecedented step of importing fuel, from Brazil, to help ease the shortage.

Mr Rodríguez is making the domestic market a priority to keep potential civil unrest at bay. But striking managers at PDVSA say importing fuel will only delay a fresh supply crunch by afew days as Mr Rodríguez does not have the personnel at his disposal to restart the industry.

Yet Mr Rodríguez is adamant that he, and loyalist employees and contract workers, will triumph over the striking managers, many of whom took part in a similar but much shorter stoppage, which triggered the coup that ousted Mr Chávez for 48 hours in April.

"It was an error to have trusted these managers after April and not to have taken disciplinary measures," Mr Rodríguez said.

"They are causing huge damage to the economy and it's causing problems beyond our shores. But the managers' defeat will be the defeat of the political opposition. PDVSA will be stronger after this episode." Ninety executives have been dismissed in the past week.

Radiating confidence, Mr Rodríguez says he is preparing to take on tanker crews from abroad, including the US, to replace sailors from Venezuela's merchant navy, who have been among the most disruptive backers of the strike.

He claimed at the weekend that crude oil output had been ramped up to 1.5m b/d, and that PDVSA would return to pre-strike levels by January 15. However, few neutral observers believed his claims, and he was forced to withdraw them, although there were signs at the weekend of an increase in output.

Luis Marín, recently appointed head of PDVSA's eastern division, said restarted oil wells in the region were yesterday producing 150,000 barrels. Together with a smaller volume from Lake Maracaibo in the west, total daily crude output may now be at 250,000 barrels.

The strikers are firm that they will not return to work until Mr Chávez resigns. The president has ruled out bowing to pressure from those he describes as nothing but "saboteurs trying to bring down the government".

Oil industry analysts say the days ahead will be a crucial test of Mr Rodríguez's will to pull both PDVSA and the Chávez government back from the brink, and that it will be weeks, or even months, before full PDVSA output resumes.

"There is a growing realisation right now that this is going to last, there is no negotiated solution in sight," said Fareed Mohamedi, chief economist at PFC Energy, a Washington-based consultancy.

Vice-President José Rangel, whose comments are often interpreted by local political analysts as an accurate indication of the opposite, said the situation in the country and the oil industry was "excessively normal".

Nonetheless, despite the guerrilla-hardened efforts of Mr Rodríguez, a paralysed oil industry may indeed be "normal" for some time to come.