When Major General Manuel Quevedo became head of Venezuela’s oil industry last November, the former housing minister and national guard chief promised to boost oil output by a million barrels a day via “a complete restructuring” that would root out corruption. Six months later, though, managers at state oil company PDVSA are quitting en masse, theft has increased, and workers shout in company cafeterias that Mr Quevedo should go. Allies such as Russia and China agree.
Meanwhile, western partners such as Total and Chevron are worried, and oil output has fallen an astonishing 23 percent, or 450,000 bpd. The decline in the prospects of the world’s largest oil reserves looks set to continue. Venezuelan oil production could fall by another 500,000 bpd this year, analysts believe, boosting global oil prices further. That is especially so if the US imposes sanctions on Caracas after the May 20 presidential election, and foreign joint venture partners continue to struggle or even pull out. “There is a lack of machines, there is a lack of tools, there is a lack of everything,” Patrick Pouyanne, chief executive of French energy company Total, which has operations in Venezuela, told analysts in a call last week. Other executives agree.
Schlumberger, the world’s largest oil services company, has described Venezuelan oil production as being in “freefall”. Mr Quevedo, who like most of PDVSA’S board of directors is a military man faithful to President Nicolás Maduro but without relevant industry experience, recently won sweeping powers in a special decree that allows him to restructure all contracts, almost at will. One result of that came last week when two Chevron executives were arrested on charges of treason after they reportedly refused to sign over-priced supply contracts. Chevron produces a net 50,000 barrels per day in Venezuela but allow for its majority joint venture partner PDVSA and gross production could be as much as 150,000 bpd.