Venezuela Petroleum
Petroleum dominated the economy throughout the
twentieth
century. In 1989 the petroleum industry provided almost 13
percent of the GDP, 51 percent of government revenues, and
81
percent of exports. Before the sharp drop in international
oil
prices in the 1980s, these ratios were considerably
higher. From
1929 to 1970, the year of the country's peak production,
Venezuela was the world's largest exporter of petroleum.
In 1990
the country ranked as the third leading oil exporter,
after Saudi
Arabia and Iran, and contained at least 7 percent of
proven world
oil reserves.
The country's national petroleum company, the
Venezuelan
Petroleum Corporation (Petróleos de Venezuela,
S.A.--PDVSA), the
third largest international oil conglomerate, owned
refineries
and service stations in North America and Europe. Although
Venezuela was only the third largest petroleum producer in
the
Western Hemisphere, behind the United States and Mexico,
its
proven reserves, at 58.5 billion barrels in 1989, exceeded
those
of both countries. Venezuela exported 54 percent of its
petroleum
to the United States in 1988, representing about 8 percent
of
American petroleum imports.
The first commercial drilling of petroleum in Venezuela
took
place in 1917. After World War I, British and American
multinational oil companies rushed to Lago de Maracaibo to
tap
the country's huge petroleum reserves. Oil jumped from 31
percent
of exports to 91 percent from 1924 to 1934. The industry
proved
extremely lucrative to the scores of foreign companies
that
drilled Venezuelan crude because of the country's low
wages and
nominal taxes, policies supported by corrupt relations
between
foreign oil companies and various military dictatorships.
In the forty-year period after the death of Juan
Vicente
Gómez in 1935, the government and foreign oil companies
engaged
in a tug-of-war over taxation, regulation, and,
ultimately,
ownership. Although Venezuela reaped substantially greater
benefits from its generous oil endowment after 1943,
corruption
and deceit on the part of the foreign companies and
avaricious
caudillos such as Pérez Jiménez still limited the national
benefits of the industry. By the early 1970s, the possible
nationalization of the oil industry became the focus of
debate
among labor, businesses, professionals, government, and
the
public at large. Aware of the conflicts and subsequent
difficulties of Mexico's sudden, dramatic nationalization
of the
entire oil industry in the 1930s, Venezuela pursued its
acquisition of the petroleum sector cautiously and
deliberately.
In December 1974, a national commission created by
President
Pérez delivered a proposal for nationalization. This
proposal
formed the core of the 1975 law that nationalized the oil
industry. The most controversial element of the new law
was
Article 5, which gave the government the authority to
contract
out to multinational firms for various technical services
and
marketing. Despite the controversy, Article 5 provided
technical
expertise that proved crucial to the industry's smooth
transition
to state control beginning on January 1, 1976.
In 1977 the government created a holding company,
PDVSA, to
serve as the umbrella organization for four major
petroleum-
producing affiliates. This process consolidated the
holdings of
fourteen foreign companies and one national company, the
Venezuelan Petroleum Corporation (Corporación Venezolana
de
Petróleos--CVP), into four competing and largely
autonomous
subsidiaries. Industry analysts have credited the
competitive
structure of the subsidiaries with increasing overall
efficiency
to levels well above those of most nationalized companies.
The
largest subsidiary of PDVSA was Lagoven, which was
composed
mainly of the facilities previously operated by the United
States
oil company Exxon. Lagoven accounted for 40 percent of
national
output in 1976. From the holdings of British and Dutch
Shell,
PDVSA created a subsidiary called Maraven. Four smaller
United
States companies became Meneven. Finally, PDVSA
consolidated six
smaller foreign firms and the state oil company into
Corpoven.
A slump in world oil prices beginning in 1981 rolled
back the
substantial revenues acquired, and largely squandered,
during the
1970s. The symbolic end of PDVSA's prosperity came in
1982, when
the Central Bank of Venezuela seized US$6 billion of the
oil
company's earnings to help offset the country's growing
external
debt problems. This action effectively eliminated PDVSA's
autonomy. After oil prices dropped nearly 50 percent in
1986, the
government accelerated industrial diversification programs
in
specialized petroleum refining, natural gas,
petrochemicals, and
mining, and also stepped up oil exploration efforts.
Exploration remained a major focus of PDVSA activities
in the
1980s. At the time of nationalization in 1976, exploration
efforts had come to a near standstill. Little exploratory
activity took place during the 1960s and 1970s because the
Venezuelan government did not grant any new oil
concessions after
1958 and most foreign oil companies anticipated eventual
nationalization. Although financial constraints slowed the
pace
of exploratory drilling in the 1980s, major new finds of
light,
medium, and heavy crude by 1986 nearly doubled proven
reserves.
The country's 1989 oil reserves were expected to last
for at
least ninety-three years at prevailing rates of
extraction. The
Orinoco heavy oil belt accounted for 45 percent of proven
reserves in 1989, followed by the Maracaibo region with 32
percent, the eastern Venezuelan basin with 22 percent, and
1
percent in other areas
(see
fig. 6). Only a small fraction
of the
Orinoco's total heavy oil deposits, however, were
routinely
included in estimates of total proven reserves because of
the
cost and difficulty of extraction. Some estimates of total
recoverable heavy crude reserves ran as high as 190 to 200
billion barrels.
PDVSA's early exploration strategy emphasized heavy
crude,
but by the 1980s the company's efforts shifted toward more
valuable light and medium grades. This approach proved
successful, as major new discoveries were made in the Lago
de
Maracaibo area, the Apure-Barinas Basin in southwest
Venezuela
near the Colombian border, and in the eastern Venezuelan
basin in
the El Furrial/Musipán area in the state of Monagas.
Encouraged
by its finds in the mid-1980s, PDVSA launched further
drilling
operations in the late 1980s, with the goal of adding 14.4
billion barrels of light and medium crude to its proven
reserves
by 1993. In addition to its land-based drilling, PDVSA
established an increasing number of offshore rigs. The
Venezuelans also explored off the coast of Aruba and had
discussed with the governments of Guyana, Trinidad and
Tobago,
and Guatemala the prospects of exploratory drilling.
PDVSA not only extracted crude oil, but also refined
and
distributed a wide variety of petroleum products. In 1988
six
active refineries in Venezuela boasted an installed
refining
capacity of approximately 1.2 million barrels of oil a
day. These
refineries produced a full range of oil products and
specialty
fuels, making Venezuela an international leader in
petroleum
refining (see
table 9;
table 10, Appendix). PDVSA
increased the
percentage of locally refined crude from 35 percent to 58
percent
between 1979 and 1988. In 1988 the country for the first
time
exported more refined petroleum than crude. PDVSA
diversified its
production during the 1980s, increasing the share of
petroleum
products that fell outside OPEC quotas until the late
1980s, in
an effort to enhance price stability and boost profits.
Orinoco
Asphalt (Bitúmenes del Orinoco), a PDVSA subsidiary, began
preliminary shipments in the late 1980s of
orimulsión, a
uniquely Venezuelan synthetic fuel derived from Orinoco
heavy
crude, water, and chemical additives. PDVSA hoped to
export
increasing quantities of orimulsión, outside OPEC
quotas,
to Canada and Europe as a substitute for coal or fuel oils
used
by electric power stations.
From 1983 to 1989, PDVSA acquired overseas refining
capacity
from at least five multinational oil conglomerates, either
through production contracts or outright purchases. For
example,
in 1983 PDVSA bought a 50 percent share of the West
GermanApple
LaserWriter Plus/IINT/IINTXAPLASPLU.PRSthe Swedish
lubricant and
asphalt producer, Nynas. Beginning in 1986, PDVSA entered
the
United States oil market by purchasing United States oil
firms,
refineries, and retail outlets previously held by Citgo,
Champlin, and Unocal. PDVSA's overseas refining capacity
exceeded
700,000 barrels per day by the close of the decade. By
1990,
therefore, PDVSA had the capability to refine nearly all
of its
crude oil production, either at home or at
Venezuelan-owned
facilities overseas. Moreover, with PDVSA's purchase of
Citgo in
1989, Venezuela became the first OPEC member to wholly own
a
major United States oil refinery.
The United States has consistently been Venezuela's
leading
oil export recipient. During the 1980s, however, PDVSA
increased
its exports to Central America and the Caribbean. In 1980
Venezuela and Mexico embarked on a joint program called
the San
José Accord, under which the two oil producers exported
oil to
many countries of the
Caribbean Basin (see Glossary) region at
concessionary rates. The accord set up a system of
compensatory
finance and purchases of Venezuelan goods in exchange for
crude
that amounted to a 20 percent discount on the world market
price.
Data as of December 1990
|