<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?:

1. 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.

2. 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.

3. 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.

4. 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

<a href=www.vheadline.com>Venezuela´s Electronic News Posted: Monday, May 12, 2003 By: Patrick J. O'Donoghue

During his stay in Bolivar State, President Chavez Frias met the Petroleos de Venezuela (PDVSA) board, Energy & Mines (MEM) Minister Rafael Ramirez and Development & Planning (Cordiplan) Minister Jorge Giordani to discuss the second phase of PDVSA restructure.

Chavez Frias says the second stage will pursue the objective of placing the company at ther service of the country and not "the elites that kidnapped the industry" during the Fourth Republic.

PDVSA production is placed at 2.6 million bpd compared to 3.4 million bpd before the national stoppage. But PDVSA currently has the largest debt in its history with $3-5 billion owed service companies, oil carriers and suppliers.

Meanwhile, in a Houston Chronicle editorial hatchet job by Michael J. Economides and Ronald E. Oligney, both "old" and "new" PDVSA attended the Offshore Technology Conference (OTC) in Houston.

The writers criticized the new crowd consisting of some retirees and ex-employees and a majority that has no credentials, except revolutionary fervor.

However, the fact that none of the delegates spoke or understood English is seen as a major block for anyone attending a major international oil business meeting ..."it was a struggle for some to get their first-time US business visas for the OTC show" ... the extremely negative editorial calls President Hugo Chavez Frias a "Fidel Castro wannabe" and a friend of other nose-thumbers at the USA: Saddam Hussein, Cadafe and Khatami ... Illich "Carlos the Jackal" Ramirez Sanchez' brother in a high-ranking official at MEM Ministry.

<a href=www.vheadline.com>Venezuela's Electronic NewsPosted: Friday, May 09, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: The Offshore Technology Conference is held every year and brings together hundreds of technicians, managers and executives of petroleum producing, service and consultancy companies from all over the world. This year the OTC was held in Houston, Texas ... the event chosen by Ali Rodriguez, the current president of PDVSA, to promote the "new" company to the international petroleum community.

To this effect he ordered the preparation of a presentation on PDVSA's plans and opportunities for foreign investment in the Venezuelan petroleum sector. The objective was to generate enough interest to attract up to $20 billion in new private investments for the next five years or so.

Off they went to Houston ... a group of some 75 persons led by Rodriguez who, as president with his immediate collaborators traveled in private jets, with the lesser mortals in commercial airline, taking advantage of a special fare of about $500 round trip per person.

Half of the group checked into the Hotel Saint Regis, $320 per person, and the other half into the Houstonian Hotel, $270 per night or so.

Meeting rooms were arranged for several events: A Monday morning breakfast, the presentation, a luncheon with Venezuelan students and a press conference, at a cost of some $60,000. The staff made preparations for the limousines, cocktails, documents to be distributed and the Mont Blanc fountain pens to be given as gifts to senior managers of important companies, duly engraved with their names. All in all the costs involved were of the order of some $600,000.

This would not be an inordinately high amount if the objectives of the trip were fulfilled. But this was not to be the case but, according to independent reports which I have received from four people in attendance, the event took off on the wrong foot for Rodriguez, when the "Houston Chronicle" published an op-piece by two University of Houston professors in which a very unfavorable evaluation of the technical level of the PDVSA delegation was given.

This was followed by poor reception given by the audience to the PDVSA presentation Monday, May 5.  The reasons were the low quality of the presentation and the exaggerated political flavor of its contents ... while insufficient commercial and technical data were presented.

To make things worse, at the Wednesday lunch there was a presentation by Luis Vielma (former Director of PDVSA Exploration & Production and one of the dismissed managers).  Rodriguez desperately tried to block the presentation without success, since Vielma has an impeccable reputation in petroleum circles. Vielma's presentation was in front of a full house and I would like to quote literally an email received from a US manager at a front-ranking consultancy firm:

Today, at lunch time I had the great fortune of witnessing a truly great performance by your fellow countryman Luis Vielma. His presentation at OTC was just absolutely superb; sensitive, informative, clear and truly professional. You would have been very, very proud ... I was there, as a friend and as a Society ... Board member. He received a standing ovation on more than one occasion ... the room was packed... It was clearly evident why he was a leader of the great PDVSA. Kind regards,

This was more than Rodriguez Araque could handle. According to analyst Alexandra Beech, mbeech@nyc.rr.com, he immediately pulled the entire PDVSA delegation out of the conference and cut their stay short ... he failed to appear in a meeting where he was supposed to talk about investment opportunities in Venezuela and left his Trinidadian counterpart on the panel to cover all bases ... he also failed to appear at the luncheon for Venezuelan students ... which was cancelled ... as well as the press conference, equally cancelled.

Such an abrupt retreat from this important conference places the "new" PDVSA in a very unfavorable light in the eyes of the international petroleum community. It is one more example of the mess the revolutionary managers at PDVSA have created.

This is why I insist that the mentioning of these embarrassing events is not what causes the discrediting of the company and of the country abroad ... the damage has been done by the incompetence and mediocrity of Ali Rodriguez Araque and his collaborators.

The successful presentation by Luis Vielma contributed to compensate for the disastrous performance of the "new" PDVSA and ... at least ... made it known to the audience that there are Venezuelans who can be professional and competent.

I hope it will be sometime before Ali Rodriguez dares to appear again in front of true oil managers.

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

By Nadja Rogoszynski

Caracas, May 6 (<a href=quote.bloomberg.com>Bloomberg) -- Petroleos de Venezuela SA, the state oil company, plans to boost production by about 2 million barrels a day by 2008, the Houston Chronicle said, citing Chief Executive Ali Rodriguez at a conference in Houston.

Oil production in Venezuela, the Organization of Petroleum Exporting Countries' third-largest producer, is now 3.2 million barrels a day, the paper said, citing Rodriguez. This number includes discoveries, such as a field south of Lake Maracaibo that could hold as much as 1 billion barrels, according to Rodriguez.

Petroleos de Venezuela is in the midst of a five-year plan intended to boost its production capacity to 5.1 million barrels a day, the Houston Chronicle said, citing Rodriguez.

Venezuela's oil exports were slashed when nationwide strikes began on Dec. 2, aimed to forcing President Hugo Chavez from office. Petroleos de Venezuela fired more than half of its pre- strike employees of 33,000 during the work stoppage.

(Houston Chronicle 5-6) Last Updated: May 6, 2003 20:18 EDT

By Peter Wilson

Caracas, May 6 (<a href=quote.bloomberg.com>Bloomberg) -- Venezuelan National Guardsmen used tear gas to disperse pro-government protesters who were demonstrating for jobs in front of the state oil company's El Palito refinery, El Nacional reported.

About 200 protesters gathered to try to force Petroleos de Venezuela SA to honor a commitment to offer them permanent jobs that was made when a nationwide strike began Dec. 2. During the strike, Petroleos de Venezuela employed many temporary workers outside the industry to replace strikers.

Protesters claim that they are now being passed over for permanent jobs being offered at the refinery. Protesters said jobs are being handed out as political patronage by President Hugo Chavez and his close ally, Freddy Bernal, the mayor of the Libertador section of the Venezuelan capital.

El Palito is Petroleos de Venezuela's third-largest domestic Refinery, processing about 130,000 barrels a day. Petroleos de Venezuela fired more than half of its workforce of 33,000 in a bid to break the strike.

(EN 5/6 B3)

To see El Nacional's Web site, click on {NCNL } Last Updated: May 6, 2003 09:04 EDT