Outlook uncertain following Chavez’s death in Venezuela

The outlook remained uncertain both inside and outside Venezuela following President Hugo Chavez’s death from cancer on Mar. 5. Venezuelan government offices worldwide closed Mar. 6-8 as the South American oil-producing country began a national mourning period. Current and former US leaders expressed hope that elections for a permanent successor to Chavez would be held soon.

“At this challenging time of President Hugo Chavez’s passing, the United States reaffirms its support for the Venezuelan people and its interest in developing a constructive relationship with the Venezuelan government,” US President Barack Obama said on Mar. 5.

“As Venezuela begins a new chapter in its history, the United States remains committed to policies that promote democratic principles, the rule of law, and respect for human rights,” Obama continued in an official statement.

Policy prospects

Some observers said that Vice-President Nicolas Maduro, who officially announced Chavez’s death on Mar. 5 and became acting president until elections are held, will likely continue Chavez’s policies, including selling some of the country’s crude oil to some neighboring countries at below-market prices.

“Toward Latin America, Chavez embarked on a generous ‘oil diplomacy’ strategy, selling millions of heavily subsidized barrels to energy-poor Cuba, an important ally; and to Argentina and Bolivia,” said Daniel Greenberg, a history professor at Pace University in New York and founder of its Institute of Latin American Service and Studies.

In 2002, Chavez also installed new leaders at state oil firm Petroleos de Venezuela SA after firing 18,000 employees who walked off the job to protest his program of using oil revenue to finance social reforms. Venezuela remains the fourth-largest foreign supplier of crude oil and products to the US, but has been losing its market share ever since, the US Energy Information Administration said.

“As a strong nationalist, Chavez had attacked ‘US Imperialism’ and nationalized the holdings of US-based oil giants like Exxon,” said Greenberg. “But he was smart enough never to cut trade with Washington, Venezuela's most important trading partner. And with the rich profits from the oil trade, Chavez carried out ambitious projects to build what he called ‘20th-Century Socialism’.”

Alex Choinski, a project finance and energy lawyer specializing in Latin America in McDermott Will & Emery LLP’s Washington office, said it will take time to determine whether the Chauvismo party will splinter or become pragmatic and soften its nationalistic approach on the economy, foreign investment, oil, and infrastructure.

PDVSA’s deterioration

PDVSA’s internal and managerial capabilities have deteriorated since 2002, according to Sarah A. Ladislaw, co-director of the Center for Strategic and International Studies’ Energy and National Security Program, and CSIS Senior Vice-Pres. Frank A. Verrastro, who holds the James R. Schlesinger Chair for Energy and Geopolitics there.

“Increasingly, PDVSA relies on contractors, as well as other private company partners, to keep the fields in production but reports state that contractors have not been paid in months and that the political uncertainty in the country has even driven routine decision making to a halt,” they said in a Mar. 6 commentary.

Sustained political uncertainty also has stifled outside investment in Venezuela’s oil sector, Ladislaw and Verrastro noted. Russian and Indian companies planning to invest in the country’s oil fields have withheld incremental new money, and China has not announced a new line of credit or extensions on its development-linked financing since last April, they said.

In Venezuela, Oil and Mining Minister and PDVSA Pres. Rafael Ramirez said on Mar. 1 that PDVSA plans to increase its expenditures to $25 billion in 2013. Cooperation between PDVSA and Russia’s Rosneft consortium also has been growing, Ramirez said on Jan. 31.

“Even under the best of circumstances, reform in the energy sector will take a long time to emerge,” Ladislaw and Verrastro said. “The damage that has been done to not only PDVSA but to the institutions of the state and civil society could take years to rehabilitate.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Senate passes Defense bill with BLM drilling permit program provision

12/15/2014 The US Senate approved a Department of Defense appropriations bill on Dec. 13 containing a provision extending and making permanent a drilling perm...

Cook to head DONG Energy E&P group

12/15/2014 David B. Cook has been named group executive vice-president and chief executive officer for exploration and production at DONG Energy, Fredericia, ...

Sunshine Oilsands appoints chief executive officer

12/15/2014

Sunshine Oilsands Ltd., Calgary, has appointed Luo Hong as chief executive officer and Jiang Qi as president and chief operating officer.

Woodside to buy Apache’s interests in Wheatstone, Kitimat LNG for $2.75 billion

12/15/2014 Woodside Petroleum Ltd. has agreed to acquire interest in the Wheatstone LNG and Kitimat LNG projects, respectively in Western Australia and Britis...

MARKET WATCH: OPEC basket price closes below $59/bbl

12/15/2014 The average crude oil basket price for the 12 members of the Organization of Petroleum Exporting Counties closed below $59/bbl on Dec. 12 while cru...

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected