Pdvsa worries

Patrick Crow
Washington, D.C.
[email protected]

Concern is rising in Venezuela that the new government of President Hugo Chávez is interfering too much in the management of Petroleos de Venezuela SA (Pdvsa).

Since taking office last February, Chávez has named three persons with limited oil industry experience to the Pdvsa board and has assigned all but two board officers to line responsibilities within the oil company, one of the world's largest.

Eyebrows also were raised when the government named an army officer with limited experience to be Pdvsa's chief financial officer and a former oil industry employee with no senior management experience to a critical planning position.

VenEconomy newsletter, Caracas, reported May 19 that the Chávez administration is planning to assign about 80 persons, all presumably with stronger political than professional credentials, to senior management positions in Pdvsa.

During his campaign last year, Chávez repeatedly attacked Pdvsa's management, pledging a major overhaul of the company and the end to its role as "a state within the state."

Low morale

Pdvdsa employees were concerned when Luis Giusti-the former Pdvsa president who had an international reputation as a first-rate executive-resigned rather than be fired by the new administration.

The Chávez team also made a political decision to keep tight controls on retail gasoline prices, forcing international oil companies to scale down planned multimillion-dollar investments in Venezuelan marketing.

Pdvsa employees also have been worried by persistent rumors that thousands of them would be laid off.

That prompted Chávez to deliver a 2-hr talk to employees in late April in an attempt to calm their rattled nerves.

Chávez told them he did not intend to sell Citgo Petroleum Corp., Pdvsa's U.S. refining subsidiary, nor its stake in a refining joint venture with a German firm-despite promises he made in his election campaign a year ago to dispose of noneconomic assets.

Sound moves

The Chávez government has made some positive moves, too.

Despite questions raised during the presidential campaign, the government has declared it will honor existing agreements between Pdvsa and international energy companies.

Chávez also appointed a highly respected oil industry veteran, Roberto Mandini, to be Pdvsa's president. And the Minister of Energy and Mines, Alí Rodríguez, has been earning high marks.

Rodríguez is directing an aggressive counterattack against allegations from small U.S. producers that Venezuela has "dumped" crude on the U.S. market to stifle U.S. production (see related article, p. 28).

More than half of Venezuela's 2.72 million b/d of oil production goes to the U.S., and the government needs those revenues to finance ambitious social programs that are the cornerstones of Chávez's "peaceful revolution."

Few in Venezuela dispute the government's authority to set general policy for Pdvsa, but past governments have been careful to limit their political interference in the company's management.

It's still unclear how far the Chávez administration is willing to mix politics with oil.