Petróleos de Venezuela, S.A. (PDVSA, ; English: Petroleum of Venezuela) is the state-owned oil and gas company of Venezuela. It has activities in exploration, production, refining and exporting of oil, as well as exploration and production of natural gas. Since its founding on January 1, 1976, with the nationalization of the Venezuelan oil industry, PDVSA has dominated the petroleum industry of Venezuela, one of the world's largest oil exporters.
Oil reserves in Venezuela are the largest in the world, and the state-owned PDVSA provides the government of Venezuela with substantial funding resources. Following the Bolivarian Revolution, PDVSA was mainly used as a vital source of income for the Venezuelan government. Profits were also used to assist the presidency, with funds directed towards allies of the Venezuelan government. With PDVSA focusing on political projects instead of oil production, mechanical and technical statuses deteriorated while employee expertise was removed following thousands of politically motivated firings. Incompetence within the company led to serious inefficiencies and accidents, as well as endemic corruption; at least US$11 billion was stolen between 2004 and 2015. Jorge Giordani, the minister of planning until 2014, estimated that $300 billion was simply stolen. Due to infrastructure and management struggles, PDVSA has seen production decline from 3.5 million barrels per day in the 1990s to approximately 800,000 barrels per day in the 2020s. In 2018, thousands of workers left PDVSA, especially after the company was put under military control.
Reserves and capacity
As of 2003, Venezuela had of conventional oil reserves according to PDVSA figures, the largest in the Western Hemisphere and making up approximately half the total. This puts Venezuela as fifth in the world in proven reserves of conventional oil. By also including an estimated of tar-like extra heavy crude oil in the Orinoco Belt region, Venezuela claims to hold the largest hydrocarbon reserves in the world. Venezuela also has of natural gas reserves. The crude oil PDVSA extracts from the Orinoco is refined into a fuel eponymously named 'Orimulsion'.
PDVSA has a production capacity, including the strategic associations and operating agreements, of per day (600,000 m3). Officials say production is around although most secondary sources such as OPEC and the EIA put Venezuela's output at least lower.
During the presidency of Hugo Chávez the organization's payroll tripled, while oil production fell steeply, a drop of 700,000 barrels per day. Soaring oil prices began in 2002 and peaked in 2008 at $147 per barrel.
Politicization
In 2002, many PDVSA employees went on strike against the policies of Chávez, who in response fired over 19,000 workers from the company. As of 2014, Intevep, the research and development arm of PDVSA, reportedly lost 80% of its workers, severely damaging PDVSA's ability to innovate and compete in the global petroleum market."Brain Haemorrhage; Venezuela's Oil Diaspora." The Economist, 19 July 2014, p. 31(US). World History in Context. Accessed 11 Oct. 2018. PDVSA saw stagnant growth in the following era which was defined by a boom in oil prices. Between 2002 and 2012, incapacitating injuries to employees rose from 1.8 per million man hours to 6.2, extremely high compared to 0.6 per million man hours for Pemex in 2012, highlighting the company's struggle to optimize. Several former PDVSA employees moved to Alberta, where the oil consistency was similar to that of the Orinoco. As a result, the number of Venezuelans in Alberta has risen from 465 in 2001 to 3,860 in 2011. Other PDVSA workers migrated to Colombia, joined Ecopetrol, and were credited with helping the company attain huge profits throughout the 2010s.
In 2006, Rafael Ramírez, the energy minister, gave PDVSA workers a choice: Support President Hugo Chávez, or lose their jobs. The minister also said: "PDVSA is red [the color identified with Chávez's political party], red from top to bottom". Chávez defended Ramírez, saying that public workers should back the "revolution". He added that "PDVSA's workers are with this revolution, and those who aren't should go somewhere else. Go to Miami".Storm over Venezuela oil speech, BBC News,4 November 2006. Accessed online 7 November 2006. In 2012, PDVSA focused in hiring only supporters of the president and PDVSA revenue was used to fund Venezuela's socialist revolution.
History
1970s: Nationalization
Under the presidency of Carlos Andrés Pérez, whose economic plan, "La Gran Venezuela", called for the nationalization of the oil industry, Venezuela officially nationalized its oil industry on 1January 1976 at the site of Zumaque oilwell 1 (Mene Grande). This was the birth of Petróleos de Venezuela S.A. (PDVSA). All foreign oil companies that once did business in Venezuela were replaced by Venezuelan companies, such as Lagoven (Standard Oil), Maraven (Shell), and Llanoven (Mobil). Each of the former concessionaires was simply substituted by a new 'national' oil company, which maintained the structures and functions of its multi-national corporation (MNC) predecessor.Vegard Bye, "Nationalization of Oil in Venezuela: Re-defined Dependence and Legitimization of Imperialism", Journal of Peace Research, 16, no. 1 (1979): 67, accessed December 3, 2014. With the 1976 nationalization, each previous multinational operator was converted into an affiliate of PDVSA; these affiliates were grouped into an administrative structure underneath both PDVSA and the Venezuelan Ministry of Energy. With this absorption, PDVSA became the employer of engineers with comprehensive technical training from the old multinational corporations“PDVSA." The National of Venezuela, 3 Feb. 2017. General OneFile. Accessed Oct 25, 2018." and promptly took advantage of their newfound expertise. Within 25 years of nationalization, PDVSA would become the largest company in Latin America and the tenth most profitable in the world. In that 25-year span they went from 18 billion barrels to over 80 billion barrels worth of oil reserves, with a similar increase in production capacity.
+ Venezuelan oil industry in 1976 Petroven operating company Former principal concessionaire Wells drilled 1,000 barrels per day Company Owned by / Affiliation Crude oil Refined Refinery capacity Amoven Amoco Venezuela Oil Co Standard Oil of Indiana 13 24 Bariven Sinclair Venezuelan Oil Co Atlantic Richfield Co 19 30 45 Boscaven Chevron Oil de Venezuela S.A Standard Oil of California 22 32 61 CVP CVP Government of Venezuela 36 60 15 25 Deltaven Texaco Maracaibo Inc Texaco 7 60 2 10 Guariven Soc. Anonima Petrolera Las Mercedes Venezuelan investors 7 2 Lagoven Creole Petroleum Corp Exxon Corp 132 1,004 425 740 Llanoven Mobil Oil Co de Venezuela Mobil Oil Corp 7 67 88 106 Maraven Cia. Shell de Venezuela Ltd Royal Dutch/Shell Group 10 531 259 404 Meneven Mene Grande Oil Co. C.A Gulf Oil Corp 109 364 127 159 Palmaven Venezuela Sun Oil Co Sun Oil Co 8 104 Roqueven Phillips Petroleum Co Phillips Petroleum Co 6 36 5 4 Taloven Talon Petroleum Co. C.A Venezuelan investors 3 3 Vistaven Mito Juan Concessionaria de Hidrocarburos C.A Venezuelan investors 2 Total 333 2,294 984 1,554
1980s–1990s: Apertura In the 1990s, Venezuela opened the company to global cooperation. The opening up of the Venezuelan oil industry, or Apertura, was initialized with a Venezuelan Supreme Court decision which removed older laws prohibiting cooperation with multi-national corporations on Venezuelan land. From 1993 through 1998, PDVSA split extraction rights with multiple multi-national companies in special arrangements called "strategic associations", in effect trading Venezuelan crude oil for the efficiency that came from outside expertise and technology. These "strategic associations" were controversial: Venezuela was able to maximize profits at the cost of lenient taxation on the multinational companies and the loss of control over domestic resources. With Chávez's election in 1998, Venezuela's attention became increasingly focused on complying with OPEC. As oil prices collapsed in the late 1990s, however, keeping the special arrangements while conforming to OPEC regulations became impossible, leading to an end of the Apertura arrangements for Venezuela.
Before the election of Hugo Chávez, PDVSA ran autonomously, making oil decisions based on internal guidance to increase profits. Chávez, once he came to power, started directing PDVSA and effectively turned it into a direct government arm whose profits would be injected into social spending. The result of this was the creation of "Bolivarian Missions", oil funded social programs targeting poverty, illiteracy, hunger, and more. With the Apertura, PDVSA many of its managers become active in Venezuelan politics and served as national representatives in economic summits. Chávez continued this trend, further incorporating PDVSA into the government's structure, but made social welfare the priority. During his campaign, Chávez repeatedly said that PDVSA was previously too autonomous and powerful, and that its managers acted subversively to Venezuela. Chávez turned the post-Apertura PDVSA into a political rallying point for his mostly lower-class supporters by associating its Apertura liberalization policies with the country's ruling groups, energizing his working class supporters against the companies former special arrangements.Wiseman, Colin and Daniel Béland. “The Politics of Institutional Change in Venezuela: Oil Policy During the Presidency of Hugo Chávez.” Canadian Journal of Latin American and Caribbean Studies, Vol 35, No. 70 (2010), pp. 141-164. JSTOR. Accessed 3 Nov. 2018. In 1998, PDVSA produced 3.4 million barrels of oil a day and had 40,000 employees. By law, it deposited its revenues in the sovereign fund accounts in the Central Bank of Venezuela.
2000–2010: Social spending
In December 2002, the Venezuelan general strike of 2002-2003 saw many of PDVSA's managers and employees, including the CTV trade union federation, join to pressure Venezuelan president Hugo Chávez to call early elections, and virtually stop oil production for two months. Nearly 19,000 employees, most of them seasoned professionals, were summarily dismissed, and production resumed with employees loyal to the government. The International Labour Organization (ILO) called on the Venezuelan government to launch "an independent investigation into allegations of detention and torture," surrounding this strike. The company has since formed its own militia, which all employees join on a voluntary basis, to ward off a potential "coup" by the government. It considers itself virtually indistinguishable from the state, its social programs more or less running the country's "socialist revolution".German Zambrano, head of communications, cited in
In 2005, PDVSA opened its first office in China, and announced plans to nearly triple its fleet of oil tankers, to 58. In April and May 2005, PDVSA, per an agreement signed between the governments of Venezuela and Argentina, sent 50 million tonnes of fuel oil to the latter to alleviate the effects of an energy crisis due to a shortage of natural gas.
In November 2005, PDVSA and its subsidiary in the United States, Citgo, announced an agreement with Massachusetts to provide heating oil to low income families in Boston at a discount of 40% below market price. Similar agreements were later set up with other states and cities in the US Northeast, including New York's Bronx, Maine, Rhode Island, Pennsylvania, Vermont and Delaware. Under the program, Citgo offered a total of around of heating oil at below market prices, equivalent to a discount of between 60 and 80 cents a gallon.