Tension churns Venezuela's state oil company


Venezuela's national oil company is being shaken by claims of corruption and by internal dissent, indicating fissures within the institution largely responsible for financing President Hugo Chávez's array of social welfare programs and foreign aid projects.

The problems at the company, Petróleos de Venezuela, have been compounded by a rare acknowledgment by Rafael Ramírez, the energy minister and president of the company, that it cannot hire enough drilling rigs, raising concern over its ability to halt declines in oil production. “Our sovereignty is at risk if we allow Petróleos de Venezuela to remain in this situation,” Luís Tascón, a pro-Chávez lawmaker, said by telephone. “We cannot allow this company to remain an indecipherable black box.”
Tascón has summoned Ramírez to the National Assembly to respond to accusations of corruption against senior executives. Ramírez has emerged as a focus of criticism amid claims of illegal deals with oil services companies on his watch. The attacks on him are viewed as part of a power struggle among Chávez's supporters, with ideological loyalists clashing with the relatively less radical technocrats in charge of the strained oil industry.

The tension within Petróleos de Venezuela follows other feuds within political institutions under Chávez's control that began earlier this year when several political parties in his coalition resisted his move to gather supporters into a single Socialist Party. The armed forces also experienced an internal uproar after General Raúl Isaías Baduel delivered a speech as he prepared to step down as defense minister this month saying that Chávez's socialist-inspired transformation of Venezuelan society should not be contaminated by Marxist orthodoxy. But the depth of problems within Petróleos de Venezuela, which is responsible for about half of total government revenues and three-quarters of Venezuelan export revenues, illustrates how feuds within Chávez's coalition may weaken his ability to carry out his plans.

In comments that jolted global energy markets last week, Ramírez acknowledged that Petróleos de Venezuela had hired 40% fewer drilling rigs than its target for this year, in part because of new rules requiring contractors to donate 10% of the value of their contracts to social welfare projects. While difficulty finding drilling rigs is not limited to Venezuela at a time of growing exploration internationally, the oil company is also grappling with internal labor disputes. Union leaders, sensing vulnerability among senior executives and complaining that management had reneged on various employment benefits, said they were planning protests at production facilities across Venezuela this week. Work stoppages could make the company's production difficulties more acute. Speaking before the National Assembly last week, Luis Vierma, vice president of exploration and production at Petróleos de Venezuela, described the company as being in an "operational emergency." A company spokesman did not respond to requests for interviews with Ramírez and Vierma.

Venezuela, with some of the largest oil reserves outside the Middle East, officially claims to produce almost 3.1 million barrels of oil a day, but institutions like the International Energy Agency in Paris put output at 2.37 million barrels a day, down about 230,000 from a year ago. Part of the strain on Petróleos de Venezuela relates to Chávez's efforts to assert greater control over the oil industry, following decrees enabling the takeover of oil projects from companies like Exxon Mobil and Chevron. That has raised fears that employees of those companies who have been critical of Chávez's actions could be fired.

A report last week in Tal Cual, an opposition daily newspaper, cited documents showing how Petróleos de Venezuela had evaluated the political sympathies of engineers at Sincor, a venture whose control was recently ceded to the government from Total of France and Statoil of Norway. Several engineers deemed disloyal to Chávez were fired, according to the report. With newer oil fields in the Orinoco Belt facing high production costs and technical challenges because the oil there is high in impurities, the transition to government control must be smooth to keep production levels from falling. “We're finishing a complex process,” Bernardo Álvarez, Venezuela's ambassador to the United States, said by telephone, referring to the nationalizations. So far, Chávez has not publicly intervened in Petróleos de Venezuela. Instead, he seems to be placing his faith in rising oil prices, which hit an 11-month high of $78.40 a barrel last week. “Oil is going straight to $100; no one can stop it,” Chávez said last week during a visit to Nicaragua. (

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