Venezuela: The decline of an oil giant in crisis

Leaks, rusting pipes, broken pieces of equipment strewn about and stairs leading nowhere: the Lake Maracaibo field is a metaphor for Venezuela’s once-thriving oil industry that is now on its knees.

More than a century ago, the Maracaibo basin in northwestern Zulia state was the birthplace of a company that transformed the country into one of the 10 largest oil producers in the world. world and a heavyweight in the Latin American economy.

In 2008, the country produced 3.2 million barrels of oil per day.

Just 13 years later, it can only produce 500,000 to one million barrels a day amid a crushing economic crisis marked by years of recession and hyperinflation. Venezuela’s gross domestic product per capita is now similar to that of Haiti.

Despite sitting on the largest proven oil reserves in the world, the country struggles with fuel shortages and frequent breakdowns, and at one point even had to import fuel from Iran.

The Maracaibo Basin was once a flurry of oil activity, with a halo of light over the complex visible at night from a good distance.

Today it is a wet swamp that reeks of oil from leaking pipes floating on the water.

Virtually no one is likely to go to this area “for fear of a gas explosion”, a fisherman told AFP on condition of anonymity.

Oil rigs have long been plundered of anything of value, including taps and valves that control the flow of oil and gas.

“Families have separated”

It’s a stark change from the prosperous 1970s, when Venezuela’s oil industry was nationalized, giving PDVSA a monopoly.

This lasted until the 1990s, when the industry opened up to private capital.

But after Hugo Chavez came to power in 1999, he ordered all private oil companies to merge with PDVSA and made the state institution the majority shareholder.

From then on, the industry was plagued by corruption, bad decisions, maintenance problems and aging equipment, and then financial penalties.

PDVSA did not immediately respond to AFP’s requests for comment on this story.

Many analysts believe the key moment in the industry’s decline came in the early 2000s when Chavez, who died in 2013 while still president, became embroiled in a protracted battle with PDVSA executives.

The clash resulted in a crippling strike from December 2002 to March 2003, during which production fell to a historic low of just 25,000 barrels per day.

Exploding the “sabotage” of Venezuela’s oil production, Chavez fired most PDVSA leaders and thousands of employees, replacing them with people “loyal to the revolution” who often lacked the necessary expertise.

Production rebounded after the strike, but in 2009 70 companies involved in the supply chain were also nationalized.

This has resulted in “a lack of maintenance, and a lack of motivation among employees”, whose wages have plummeted, said a former employee identified here as Carlos (his name has been changed to protect his anonymity).

He started working at PDVSA in the early 2000s, when he was just 18 years old.

But when the Venezuelan government’s former “cash cow” fell on hard times, so did its employees.

“A lot of women left their husbands because they weren’t working for PDVSA anymore. Families broke up. I wasn’t earning enough anymore,” said Carlos, who blamed his own divorce on a loss of income.

At that time, half of the country’s oil wells were paralyzed.

Corruption “fertile soil”

In 2013, the crisis worsened when subcontractors stopped working due to unpaid invoices.

Idle employees began spending their days “fishing for food” because supplies never reached the workers on the rigs, said Maria, who worked for the company at the time and still works (her name has been changed for this story).

The politicization at PDVSA had reached a fever pitch: even the company’s computer screensavers used images of Chavez, and later, his successor Nicolas Maduro.

“Hiring people based on their policy seriously affected production… we got rid of experienced people, and any semblance of meritocracy disappeared,” said Maria, who asked AFP to not explain the work she does for PDVSA.

It has also created “breeding ground for corruption”, with embezzlement at the highest level, she added.

In 2017, authorities launched a major operation aimed at corruption within PDVSA, investigating former executives, including the company’s ex-president, Rafael Ramirez.

“They are seizing public resources and illegally seeking to legalize capital,” Attorney General Tarek William Saab said at the time.

Ramirez, currently in exile in Italy, said the charges against him were politically motivated.

Several witnesses with first-hand knowledge of the situation, including Maria, testified that PDVSA vehicles were used for private purposes, company funds were used for personal purchases, and even televisions and computers had been stolen.

But that was nothing new.

“In God’s Hands Now”

“There is old corruption and new corruption,” said Carlos Mendoza Pottella, professor of petroleum economics at the Central University of Venezuela in Caracas, adding that irregular purchases and illicit practices were already happening in the 1980s. .

With PDVSA in decline, some employees jumped ship and found jobs as taxi drivers or in supermarkets, while engineers and geologists fled overseas in search of opportunities.

Maria stayed, however, and works twice a week for a measly 60 bolivars (less than $15) a month and no benefits. Before, she had a good salary and medical coverage.

“We are in God’s hands now,” she said.

“No oil worker can live off their PDVSA salary,” Maria said, except for those employed by “mixed companies” – joint ventures with Chinese or Russian firms.

Residents pay the price

Venezuela blames U.S. sanctions for its troubles, but those punitive measures only began in 2014, long after the rot had set in.

By the time Donald Trump stepped up sanctions against Venezuela when he took office in 2017, the country’s oil industry was already on its knees, though that certainly made things more difficult.

Once the main customer of Venezuela’s crude oil, the United States is now obstructing the import of necessary spare parts for refineries, as it tries to eviscerate the Maduro government, which it no longer recognizes.

Roy, a 30-year-old fisherman who only gave his first name, recalls how impressed he was with the resort on Lake Maracaibo.

Today, the abandoned facility only pollutes the water, with crude sometimes gushing from the dilapidated platforms.

“One day I saw oil spraying 70 meters in the air. I thought it was water but it was oil,” Roy said.

Some areas of Lake Maracaibo are called “dead zones” because oil slicks, visible in NASA satellite images, have starved them of oxygen.

Local residents bear the brunt of the environmental disaster.

“Oil slicks keep you from working,” said Roy, who added that he had already lost 100 kilograms (220 pounds) of crabs spoiled by crude oil.

The bottom of the lake is criss-crossed by “a hodgepodge of pipes and pipelines spilling biodiversity-killing oil,” Mendoza Pottella said.

But that’s not the only problematic site. Leaks are common wherever Venezuela drills for oil, though PDVSA rarely acknowledges them.

“It pollutes everything”

In the oil areas of eastern Venezuela, near the town of Maturin, residents say cracked pipelines run through farms and private property.

“There is a continuous leak,” complains Eleazar Gonzalez, who grows bananas and papayas in the village of Los Pozos de Guannipa. “It pollutes everything.”

This week, three people were injured in an oil pipeline explosion east of Lake Maracaibo in Naricual, not far from Maturin.

Despite the chronic problems, Maduro nevertheless claimed earlier this month that production had risen back to one million barrels a day and said the goal was to double that figure by 2022.

Over the past year, there has been a “small uptick” in activity, and PDVSA has started to pay its subcontractors, a businessman with unnamed details told AFP on condition of anonymity. decades of industry experience.

At a time when the world is looking to move away from fossil fuels, Maduro has pledged to break the economically crippled country’s reliance on so-called “black gold”.

“We are not going to depend on oil anymore,” he said, calling for more economic diversification.

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