A disturbing report on the "new" PDVSA....
<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, May 13, 2003 By: Gustavo Coronel
VHeadline.com commentarist Gustavo Coronel writes: An investigative report by journalist Mery Mogollon (El Nacional, page B1, 05-11-2003) poses serious questions on the financial and operational viability of the Venezuelan State-owned petroleum company. Some might be highly tempted to dismiss it entirely on the perceived grounds that anything published by El Nacional is bound to be false. I would advise against that passionate approach if we really care about the situation of the petroleum industry in our country. What seem to be Mogollon's main findings?:
- PDVSA is no longer accountable...
By law PDVSA must hold a Shareholder Assembly twice a year ... the first to present budgets and operational programs, the second to approve or disapprove financial and operational results. This is not being done. No meetings have been held, or announced. At this point in time no one knows what is being done by PDVSA and/or how ... or how much is being spent and on what. No one knows if accounts receivable have been received or the accounts payable paid. This, in spite of the fact that graffiti all over the city read: "Now PDVSA really belongs to the people..." Mogollon adds something more disturbing ... that the auditing firms in charge of analyzing the financial statements are not making much progress due to the existing disarray in the books.
- External controls of PDVSA are no longer in place...
Year after year, PDVSA had been analyzed, observed, examined by numerous other organizations: The Ministry of Energy, the Ministry of Finance, the Ministry of Planning, the Central Bank, the National Budget Office, the National Tax Collecting Agency, the National Assembly, the General Comptroller ... you name it. But not anymore. These checks and balances ... occasionally excessive and repetitious ... have disappeared completely. All of those organizations are in the hands of the revolution ... so, why bother to investigate a company which they now control as well? Even President Chavez is being left in the dark. This is very dangerous for his plans since he is counting on PDVSA's money for the financing of the revolution.
- Operational efficiency is in severe decline...
The lack of sufficiently experienced technical staff only allows the "new" PDVSA to conduct the less complex operations. This means that exploration and secondary recovery production programs (water driven and steam injection) are essentially paralyzed. Some of the natural flowing reservoirs are probably been overproduced which will diminish optimum total recovery. The epidemics of oil spills suggest that supervision of oil transport systems is not being properly done. Refinery fires and explosions, with loss of lives, is something that had not happened for many years in the industry. Sales of hydrocarbons in the international markets is being done at discount, at great loss to the nation, due to poor quality control and to inexperienced traders. Poor maintenance and insufficient investments are rapidly leading to a significant decline of production capacity and, therefore, to loss of competitiveness in the world markets. Training and research have disappeared from the industry.
- The international petroleum community is starting to shy away from this PDVSA...
Ali Rodriguez and his assistant Bernardo Alvarez ... now Ambassador to Washington ... have tried to interest multinational companies in operating oilfields as contractors. So far, the reception has been cold, and the reason is simple. These offerings can not be made by these men without proper legal requirements being met, and without the necessary transparency. Shoddy deals would be subject to disqualification by any future government and the companies know it.
Mogollon goes on to list some examples of the organizational collapse suffered by PDVSA, among others: the need to keep importing gasoline to supply the local market, at considerable loss to the nation; the dismantling of the tanker fleet, training center, research center, of the local market division and the coal producing company; Acquisitions of equipment and materials for millions of dollars without any bidding process; an increasingly obsolete Registry of Contractors; the illegal sale of PDVSA's equipment and the considerable increase in the Corporation's debt.
Frankly, if only 10% of these charges are true, PDVSA is in real trouble.
But it looks as if most of the charges are reasonably accurate ... this leaves little doubt that we are witnessing a major crime being committed against the nation by the current rulers of PDVSA.
All I can do, on a personal basis, is to call the attention of the Venezuelan and international public opinion to this disaster ... and to hope that someone listens.
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 gustavo@vheadline.com