Pdvsa launches first major organizational restructuring

State-owned Petroleos de Vene- zuela SA (Pdvsa) has launched a dramatic restructuring that will align main operating units by core business function for the first time in the company's 22-year history.

The move creates three new companies to handle upstream, downstream, and corporate services functions.

Since its creation in 1975, Pdvsa's organizational structure has featured several vertically integrated companies, each of which had a role in different segments of the industry. Venezuela nationalized its petroleum industry in 1976.

At the company's formation, the idea behind this organization was to create companies that would compete effectively with one another. That hasn't proven to be the case, industry observers say.

New structure

Starting in January 1998, Pdvsa's main operating units Lagoven SA, Maraven SA, and Corpoven SA will be eliminated, giving way three new units known as PDV Exploration & Production, PDV Manufacturing & Trade and PDV Services.

The E&P unit will handle oil, gas, and coal operations, participate in profit-sharing agreements for exploration and production in new areas, and manage the manufacture of Orimulsion, Venezuela's patented boiler fuel, by Pdvsa unit Bitumenes del Orinoco SA (Bitor). In addition, the E&P unit will create a special-purpose subsidiary to act as partner in the existing joint ventures for developing the vast resources in the Orinoco oil belt. It also will oversee affiliates Pdvsa's coal company Carbozulia SA and Corp. Venezolana del Petroleo SA (CVP).

PDV Manufacturing & Trade will be in charge of refining, petrochemicals, maritime transportation, hydrocarbon industrialization projects, and marketing and supply both domestically and internationally. Units it will manage include Interven SA, which handles overseas downstream operations, as well as Pdvsa's Deltaven, PDV Marina SA and Proseca units. International operations-including Citgo Petroleum Corp. and PDV Midwest Refining LLC in the U.S., and joint ventures with Germany's Veba Oel AG and Finland's Neste Oy in Europe-will not be directly affected by the restructuring, Pdvsa said.

PDV Services will centralize supplies of goods, materials and services, information technology support, and other corporate-shared services. Among the units it will manage are Bariven SA, Intesa, and agricultural/environmental unit Palmaven SA.

The parent company Pdvsa also will be restructured into four areas to manage planning, finance, human resources, and external affairs.

Savings expected

"Our past success does not guarantee success in the future," said Pdvsa Pres. Luis Giusti. "To be successful, we must change."

Giusti said the restructuring will create substantial value for Pdvsa in coming years.

The move is expected to generate about $10 billion in savings during the next decade through new efficiencies and elimination of competition among Pdvsa's vertically integrated subsidiaries.

The restructuring will start with linking up the Lagoven-operated Amuay refinery and Maraven-operated Cardon refinery next month, creating a plant with combined processing capacity of about 940,000 b/d, making it the world's largest.

Pdvsa has created a steering committee made up of the parent corporation's leadership and the presidents of Corpoven, Lagoven, and petrochemical unit Pequiven SA, to move ahead with the restructuring plan.

Giusti said, "The world around us is changing rapidly. Our competitors are transforming themselves to become more efficient." He also noted that "new environmental and sociopolitical trends progressively widen the complexity of our business.

"The global nature of our business has led us to open a wide two-way channel that ensures us a growing participation in markets, promoting new international investments, and proving incentives for the opening of space domestically for private participation that provides us with markets, technologies, capital, and added value in general.

"On the home front, the new times require us to define policies and put in place strategies that ensure expansion plans as we approach the third millennium."

Pdvsa had 1996 revenues of $33.9 billion. Its proven oil reserves are 72.6 billion bbl., more than triple the U.S.'s. Pdvsa processed more than 2 million b/d of crude worldwide last year, and became the largest exporter of crude oil and refined products to the U.S., its biggest market.