It’s the end of the Oil Industry as we know it (and PDVSA feels fine)

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Right now, PDVSA faces an existential crisis. With its number one customer considering sectoral sanctions that would cut off the bulk of the flow of dollars to the company, you’d expect it to be all hands on deck: a company mobilized to come up with a contingency plan to adapt to radically new circumstances.

According to this staggering Reuters piece, though, PDVSA is more interested in turning its employees out to march than in planning for The End of the World:

Political appointees are gaining clout at the expense of veteran oil executives, while employees are under mounting pressure to attend government rallies and vote for the ruling Socialists. The increasing focus on politics over performance is contributing to a rapid deterioration of Venezuela’s oil industry, home to the world’s largest crude reserves, and to a brain drain at the once world-class company.

What Alexandra Ulmer and Marianna Parraga describe is simply unbelievable. It’s as though the dinosaurs had advance notice the asteroid was going to hit and just couldn’t be bothered to do a damn thing about it. Different factions of chavismo continue to struggle for key positions inside a company that’s slowly dying, its infrastructure crumbling and its production levels low and falling.

You should check the full report. It’s not the type of thing you want to read about the most important company in the country, especially if that company has the risk of being sanctioned by the United States.

31 COMMENTS

  1. The increasing focus on politics over performance is contributing to a rapid deterioration of Venezuela’s oil industry, home to the world’s largest crude reserves, and to a brain drain at the once world-class company.

    Not exactly news. The above would have accurately described PDVSA in 2003,2004,2005……
    In response to CC’s 2007 posting on the burning rig in Anaco, I emailed a petroleum consultant who informed me that in his inspection trips to Venezuela, he had in recent years seen a great deterioration in maintenance of its infrastructure. That was 10 years ago.
    What is news is that the deterioration of PDVSA will now take years to reverse- if it can be. One thing for sure: Chavista control of PDVSA will not put a stop to the deterioration of PDVSA.

  2. It seems that money and muscle that holds the government in place is consumed by the spreading cancer that Chavismo is.

    As PDVSA fails and the world oil supply keeps plentiful, the hard currency that is needed to keep the military behind it becomes scarce. I presume the military will take over in due course. My fear is that it may be Chavismo in a pure miltary expression, historical unaware that military governments failed all through Latin America.

  3. From 2-3 days to a month in delay in doing the ONE thing that is the lifeline of money for the country.

    On top of everything else, the day Venezuela gets rid of them it will then have to spend years undoing all the damage they did to the infrastructure of the country. Staring stuff from zero because whatever is left is rotten or collapsing. Which means a lot of money to invest not in the Venezuela of the future, but to go back to the Venezuela of the past at least. Paying twice to get PDVSA to were it was, paying twice to have Guri working as before… once in the past and now again.

  4. Wow, did you see the story that is linked to the above-mentioned? “Rosneft says lent Venezuela’s state oil firm a total of $6 billion”

  5. I just put money down on a new Tesla Model 3. At Yorkdale Shopping Centre in Toronto Tesla has a showroom and you can test drive their cars. I am an instant convert. The performance is excellent.

    That is the future and PDV and the nut jobs in PSUV have missed the boat. They keep saying that Venezuela has the largest proven reserves of oil in the world and now most of it will never be exploited.

    • CC,

      I contend that U.S. shale oil has obliterated OPEC. OPEC cannot manipulate prices anymore. Their dream is facing a free market. The Venezuela trillion dollar income over the last 18 years was wasted and will never return.

    • Would you buy the Tesla without the CAN$14,000 subsidy? Any industry can be made “successful” with sufficient government assistance.

      So far, there is very little evidence that anyone would buy Tesla cars for what they actually cost,

        • Global fossil-fuel subsidies exceed those for renewables: $523 billion to $88 billion, according to the Paris-based International Energy Agency

      • The $ 14,000 CAN is certainly a big factor in deciding to buy which brings the drive away price of the Model 3 to just over $ 21,000 CAN. But this is the start of a wave that will slowly bury fossil fuels for many uses and I firmly believe that Venezuela has already been left behind and that this will continue to become more and more apparent over the next few years.

    • Actually, in the last 10+ years, Quico and others HAVE posted numerous times on the deterioration of PDVSA. It’s been a long-running story at CC. Such as the 2007 posting, which I mentioned in a previous comment. “I’ll take the gunbao chicken, some springrolls, and 32,000 b/d, please…” I also note that Quico is the author. (Unfortunately, the comments got erased in a change of software platforms.)The deterioration of PSVSA is not exactly news for CC readers and posters.

      The following passage comes not from Quico’s pen, but from Reuters, which Quico QUOTED.

      Political appointees are gaining clout at the expense of veteran oil executives, while employees are under mounting pressure to attend government rallies and vote for the ruling Socialists. The increasing focus on politics over performance is contributing to a rapid deterioration of Venezuela’s oil industry, home to the world’s largest crude reserves, and to a brain drain at the once world-class company.

      I can understand one’s getting upset at what Reuters wrote. I did. But Quico was merely quoting Reuters. The deterioration of PDVSA may be new information for Reuters- at least that impression may be given by the phasing in the article- but it is NOT news for Quico.

  6. Maybe they know that if the sanctions hit PDVSA the Russians and the Chinese will take over and own everything so why bother doing anything now. I think the Cubans and the Chavistas probably thought about this scenario and are prepared for it. I don’t think they care about giving all the oil in Venezuela as long as they can stay in power…

  7. Many years ago I employed a young lady who managed my human resouces department. She knew little about the oil industry. After selling the company, I spoke with her one evening at a local mall and she told me she was working the PDVSA office in Maturin. Human resources? No. Head of the perforating department. I almost broke my jawbone when it hit the floor.

    Breaking: more sanctions being announced.

  8. I lived this, from ’02 to ’13, I saw it all. In the JV we constantly booted PDVSA assignees for corruption, sexual harassment, malfeasance, etc. True, there were some talented professionals, even after El Paro. But in ’07 everything changed.. talent left, Chavistas came.. everything started to unravel. New hires were vetted on the Chavista code (most lied, to get a job) and it has been a trip down the shite hole ever since. There was a time when there were opportunities outside, Canada, US, Middle East, even Africa and Asia.. many left, and as shown by the vote 16 July there are talented Venezuelans all around the world, working. But the US shale revolution changed all that, along with increasing alternative energy (the wind farms in W Texas, solar panels on houses in Wyoming.. amazing changes).. there are few jobs left for professionals who want to leave

    Venezuela cannot rely in the future with oil resrves, who is next at the trough. This, more than anything, is what frustrates me about Ve politicians with no world view. Yes PDVSA will need to be rebuilt, but by whom? For what benefit to the country? At what cost? because the world is changing.. you’ve lost 18 years advancement in medicine, health care, hydro electricity development, collapsing education (btw you had some of the best educated engineers in the world,shown by where they work now), failed agriculture converted to an import system financed by oil.. which is declining..

    Have you ever thought to release this resource to more efficient professionals you can tax, who take the hit when oil prices fall. Or are you still stuck on your national pride, while narcocorruptos pillage the contry and people stave? Next up to the trough is?

  9. Im not so sure about the apocalyptic view of oils future , not because it will not cease to be the greatest producer of wealth of all industries . it will, but because even if it takes a big dive in profitability it will be able to sustain itself as an economically viable activity for years to come , lets look at what happened to coal , even if its profits are now very slim and its future uncertain……its maintained a high profile for decades after crude oil displaced it as the primary source of energy.There is however a price to survival , the industry will have to become uber efficient in its operations….. and it must become accostumed to lower profit margins……..Also I think that people underestimte the economic practical attractiveness of natural gas , which generally cheaper to produce, very abundant and with a very low carbon imprint on the environment.

    In the middle ages the great source of wealth was the transportation and trade of exotic spices and other products from the far east to Europe using mostly inland routes controlled by Venetian merchants . Then the Portuguese discovered sea routes that allowed those asian products to be brought via ocean going vessels to Europe . When the news of Vasco de Gama’s vessels arrival at Lisbon laden with asian products became known in Venice people fell despondent , their command of the inland routes had become worthless …not so fast said the ruling Doge , it wont be so easy to replace all of the inland routes with ocean routes , he was onto something , half of all vessels never made it back to lisbon and Venice remained a prosperous commercial city for more than a century……

    • Gee Bill, you are a walking encyclopedia!

      I totally agree, and let’s not forget, oil is a critical feedstock for the chemical industry. No matter where you are at any given moment, you can probably look around and identify 3 or 4 items manufactured from petroleum.

      • Great post Bill! Bottom line, we need to boot the rojo rojitas out first!!! And at least we can get back on our feet in the petro biz.

    • And then came Napoleon and invaded Venice right when the Venetian empire was at its weakest! And that was the end of it! An easy pick by the way.

  10. I like Lazarus post.

    The people in power in Venezuela now are only interested in the drug traffic and money laundering (I lived and worked for PDVSA from 1995 – 2001. I witnessed then). They don’t care about maintaining PDVSA facilities

    The get so media hype say “USA / CIA is to take over Venezuela for oil”. No, we got too many people with finger their nose in northern hemisphere to take of. There oil just makes covers up for all the activity,

    There are many people looking for the “promised land”. They always wind with the likes of Chavez / Mad Enrie / Castro / Statin, (Sanders and Corbyn – possible), et al. Read Kafka, Beckett, or Jonathan Swift’s “A Modest Proposal to figure out reality. .

  11. “Largest oil reserves in the world” sez Maduro, but “we need to build a post-petroleum economy” and not a single chavista scratches his head and sez WTF?

    For those of you writing petroleum’s obituary, take a deep breath. Never in man’s history has he been more dependent on the stuff and while secondary recovery means have flooded the market with the stuff, when we cross the top of the bell curve and start down the other side, the shit will hit the fan like never before.

  12. Sanctions out today after lots of expectations. The same ole stuff: punishment on more high-ranking chavistas -which by the way is great (Escarra will have to enjoy his new luxury car somewhere else) – but nothing of an economic nature so far. Will tougher sanctions impacting the country as a whole come along? Or is the US getting “cold feet”? I wonder.

  13. Alex, I think the Trump administration’s plan is to slowly but surely ratchet up the pressure. I certainly haven’t had any feelings that they’re getting cold feet. And while I would like as much as the next guy to see a ball-buster NOW, this is being handled by people with far more experience and less emotional investment than I.

    Apparently other latin countries are on board with the program and doing their part to keep the pressure on as well.

    Read today’s Miami Herald article on the subject. It’s a good one.

  14. It’s as though the dinosaurs had advance notice the asteroid was going to hit and just couldn’t be bothered to do a damn thing about it.

    More like the dinosaurs were too busy making “Welcome To Earth!” signs to think about the consequences

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