LETTERS

April 24, 2000
I have a brief comment regarding the recent 5-page article (OGJ, Apr. 10, 2000, p. 27) about Venezuela's New Constitution.

Future oil and gas investment

I have a brief comment regarding the recent 5-page article (OGJ, Apr. 10, 2000, p. 27) about Venezuela's New Constitution.

In the late 1990s, Venezuela realized that it needed immediate massive external capital and technology-to overcome the failing infrastructures, halt falling production and find new "light crude reserves," and expand enhanced production capacity to meet ever-increasing national "dependency" on oil revenues. The only way it could be done, as smartly calculated by Dr. Luis Giusti and his hand-picked US educated fine management team, is to follow a so called "La Apertura" policy, i.e., to invite into the country those who once were kicked out by the Perez presidency following a "Pro-Castro" model of "resource nationalization" in 1975.

This "invitation" to the western oil industry to get heavily involved in turning around the Venezuelan oil industry-once the shining example of the world's successful E&P and industrial development, was again short-cut by the rise of "Chavezism," which basically "re-nationalized" the oil industry in 1998 by putting PDVSA under "complete control" of the Ministry of Mines and chopping off all the independence it had in running the oil industry as a business. In fact, in Venezuela the only industry belonging to the state that was managed efficiently in western style and made substantial profit was PDVSA.

Now, the 1999 Constitution basically declares and reminds everyone that everything in Venezuela is "patrimonial or Bolivarian." The problem with such philosophy is that such politics were very good 250-300 years ago when this hemisphere was fighting to get independence from accute "imperialism." But now with "global economic" ambiance and massive cross-ocean trading and investment, such nationalistic or regionalism (or say any "ism") would rather take the country spiraling downward. It is self-defeating and will make the poor even much poorer.

I hope the readers will recall the euphoria we saw when "Bid Rounds" were announced by PDVSA and about 350 companies from around the world put their names in to participate. PDVSA itself made tons of money from cash bonuses, but so far those other companies have yet to make any money on investment in Venezuela's "contract operation" models. In fact right now there are several companies that would rather be free from their "holdings" in Venezuela.

This new regimen of unclear, untested vocalism in politics of Caracas is hard to overlook, and if the recent example of "cold-shouldering" by energy companies towards the gas development plans of PDVSA is an indication of things to come, we the old cadres of energy-profession with serious goodwill for Venezuela, would not be surprised if Venezuela is once again left behind while the other oil-producing nations march forward with global perspective and possibilities.

S.K. Bhattacharjee
President
Sita Oil Exploration House Inc.
Houston