A "downdate" on Petroleos de Venezuela (PDVSA)
www.vheadline.com Posted: Sunday, March 09, 2003 By: Gustavo Coronel
"A clear vision without action is a dream. But action without a clear vision is a nightmare" Japanese Proverb.
VHeadline.com commentarist Gustavo Coronel writes: To give an update on Petroleos de Venezuela one has to invent a new word, because there is nothing up about our company nowadays ... everything is down.
PDVSA president Ali Rodriguez and Energy & Mines Minister Rafael Ramirez just visited Washington, D.C., to "reassure" the US government that Venezuela was, as always, a reliable and stable petroleum supplier to that country.
They were met with cold stares and an official statement: "Conflict in Venezuela has damaged its reputation as a reliable oil supplier ... it has been clearly demonstrated that Venezuela's democratic institutions and its reputation as a reliable supplier appear no longer matters of primary importance to President Chavez. We are disturbed by measures taken by President Chavez and the government of Venezuela that can only be seen as polarizing the conflict and eroding Venezuela's democratic institutions." (Undersecretary of State Alan Larson, March 4, 2003).
They came back home empty-handed ... knowing that what they had been doing to PDVSA had a high cost in terms of national prestige and in terms of their own good names, now pretty much devalued in the international community. The Venezuelan Ambassador in Washington had organized a luncheon for the visitors with 14 organizations, but the event had to be cancelled as 11 of them were "unable to attend."
The most recent government show (March 5) in connection with PDVSA was put on in the Paraguana Peninsula where PDVSA has one of its largest refining centers in the world. President Chavez announced the lifting of the 'Force Majeure' clause they had invoked back in December when the "strike" started ... this means that PDVSA should now be able to supply all customers.
Time will rapidly tell the truth about this announcement of the Supreme Oil Commander of PDVSA, as current production levels and (the more so) current refining levels make it physically impossible to make good on that promise. In his obsessive military lingo, Chavez said that "whoever wins the battle of Paraguana wins the petroleum war."
A bulletin dated March 6 and published by Veneconomia (a respected publication on Venezuelan economics) adds that "the President should worry, as only 20-30% of the plants are operating and producing leaded gasoline at 25% of normal output. Unleaded gasoline and lubricants are not being produced." Veneconomia also mentions the total administrative chaos prevailing in the refining complex. Workers are being paid in cash, something we had not seen since the 1940s. Nobody is being asked to sign a receipt, rendering the cash outlays impossible to audit. According to the Veneconomia report, the show included a TV take of PDVSA staff at work ... which was not real, as the workers were contractors who were told that, in order to get paid, they had to lend themselves to the charade. The disorder is such that most of the dismissed workers are still receiving their pay, while those who did not rebel are not getting paid.
The new Board of PDVSA ... number 6 or 7 in the last 4 years ... is made up of modest middle-level managers, none of whom is well-known or respected in the international petroleum community. It is a Board that sadly fits the diminished size and importance of the "new" PDVSA.
Specially damaging is the struggle for power going on between three rival groups inside the company ... one group is led by Ali Rodriguez, the former dynamite expert of the urban guerrillas of the 1960s. The second is led by Adinas Bastidas, also a former urban guerrilla during the 1960s. (A recent publication in El Universal reports that Mrs. Bastidas was "captured by the Caracas police in January 1964, after trying to rob, at gun point, the equivalent of $15,000 from a lady, outside a Bank.") A third is totally anarchic and labels Rodriguez as a "traitor to the revolution," asking for the takeover of PDVSA by the Tupamaros, a terrorist group, and the revolutionary army. To confuse the matter further now ... Chavez is the Supreme Oil Commander and claims that "PDVSA no longer will be able to build on its own agenda," meaning that PDVSA will no longer be an autonomous entity but a simple appendix of a President drunk with power.
Contrary to the claims by Chavez about the recovering oil production and refining .... the truth is that, during February, the government had to import 5.7 million barrels of finished gasolines from Trinidad, the US and Canada, Argentina, the Arab Enirates and ... most of it ... from Europe. Crude exports during February were only 61 cargoes averaging 1.1 million barrels per day ... 30% of normal output. Exports of products were limited to only 12 cargoes representing only a 20% of normal levels. The Paraguana refining center, the site of the show, has only 12 plants in operation out of 83. Conversion units for the production of gasolines are still paralyzed and outputs represent about 20% of normal levels. The El Palito refinery is totally paralyzed after a major fire scare interrupted the efforts to reactivate it during the last week of February. The Puerto La Cruz refinery is the only one operating normally, at some 90% capacity. The Isla refinery in Curazao is out of operation. The Bajo Grande refinery is not producing at all since it has no crude oil input.
Oil production is placed by the government at close to 2.5 million barrels per day. Our information is that only 1.1 million barrels per day are being produced, as follows: 409,000 barrels per day from Eastern Venezuela; 574,000 from Western Venezuela; 90,000 barrels per day from the South of the country and only 15,000 barrels per day from associations with foreign companies ... this represents 33% of normal output.
The local gasoline market is largely being supplied by imports, while there are important shortages of lubricants, paraffins, asphalts and industrial solvents. As a result, the construction and industrial manufacturing sectors are partially paralyzed as well.
Loss of direct petroleum income for the government is now over $3.5 billion ... roughly the same amount of money illegally diverted from the Economic Macrostabilization Fund by President Chavez to pay Christmas bonuses and other un-reproductive and populist expenditures.
The money criminally wasted then, would have been required today to overcome the financial crisis.
As a result, the national government is not sending the regional governments the money that they legally should receive ... prisoners are starving to death, teachers are not being paid, hospitals are being closed down.
The collapse is widespread and this, in turn, worsens the political crisis as Chavez is desperately trying to control all of the financial resources to guarantee the survival of his "revolution."
- But, there are so many holes in the dike, appearing at every moment, that the President is running out of hands to plug them.
And he is not getting much help from his increasingly reluctant followers who, like rats, sense the sinking of the ship.
Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983. In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort. You may contact Gustavo Coronel at email ppcvicep@telcel.net.ve