The USA accounts for 65 % of Venezuela´s oil exports, so far...
Hugo Chavez - a double agent, who sold Venezuela for a Condominium at Fourth Avenue in New York, where they enjoy life and amenities...
Germany´s Automotor Emission´s scandal is a distraction - compared with Venezuela´s scandal that disturbs president Barack Obama Climate Change Control Plan and even the recent signed TPP (TransPacific Plan)- excluding Venezuela and Colombia.
The FMI reunion in Peru is another distractor since Venezuela´s Banks are monitored by the FMI and the World Bank.
Crimea´s annexation by Russia is a crime- as Venezuela´s invasion by Communist Cuba.
The USA is obliged by Law, to help Venezuela to expel communist Cuba as is acting regarding Germany´s Corruption Scandal.
Carlos E Mijares, MD, former resdident and fellow, University of Kansas, School of Medicine, Kansas City, Kansas. USA.
www.centromedicodecaracas.com.ve, www.worldallergy.org
carlosmixares@gmail.com
History of the Venezuelan oil industry
From Wikipedia, the free encyclopedia
The Real and Nominal price of oil from 1968 to 2006.
[1]
Venezuela is the world's fifth largest
oil exporting country
and has the world's largest proven oil reserves at an estimated 296.5
billion barrels (20% of global reserves) as of 2012. In 2008, crude oil
production in Venezuela was the tenth-highest in the world at 2,394,020
barrels per day (380,619 m
3/d) and the country was also the eighth-largest net oil exporter in the world. Venezuela is a founder member of the
Organization of the Petroleum Exporting Countries (OPEC).
[2]
Pre-discovery years—1907
The
Indigenous peoples in Venezuela, like many ancient societies already utilized crude
oils and asphalts from
petroleum seeps,
which ooze through the ground to the surface, in the years before the
Spanish conquistadors. The thick black liquid, known to the locals as
mene, was primarily used for medical purposes, as an illumination source, and for the caulking of canoes.
[3]
Upon arrival in the early 16th century, the
Spanish conquerors learned from the indigenous people to use the naturally occurring
bitumen
for caulking their ships as well, and for treating their weapons. The
first documented shipment of petroleum from Venezuela was in 1539 when a
single barrel of oil was sent to Spain to alleviate the gout of Emperor
Charles V.
[3]
1908–1940—The birth of the Venezuelan oil industry
Despite the knowledge of the existence of oil reserves in Venezuela
for centuries, the first oil wells of significance were not drilled
until the early 1910s. In 1908,
Juan Vicente Gómez replaced his ailing predecessor,
Cipriano Castro,
as the president of Venezuela. Over the next few years, Gómez granted
several concessions to explore, produce, and refine oil. Most of these
oil concessions were granted to his closest friends, and they in turn
passed them on to foreign oil companies that could actually develop
them.
[4] One such concession was granted to Rafael Max Valladares who hired Caribbean Petroleum (later acquired by
Royal Dutch Shell) to carry out his oil exploration project. On 15 April 1914, upon the completion of the
Zumaque-I (now called MG-I) oil well, the first Venezuelan oilfield of importance,
Mene Grande, was discovered by Caribbean Petroleum in the
Maracaibo Basin.
[3]
This major discovery encouraged a massive wave of foreign oil companies
to "invade" Venezuela in an attempt to get a piece of the action.
From 1914 to 1917, several more oil fields were discovered across the country include the emblematic
Bolivar Coastal Field; however
World War I
slowed significant development of the industry. Due to the difficulty
in purchasing and transporting the necessary tools and machinery, some
oil companies were forced to forego drilling until after the war. By the
end of 1917, the first refining operations began at the San Lorenzo
refinery to process the Mene Grande field production, and the first
significant exports of Venezuelan oil by Caribbean Petroleum left from
the San Lorenzo terminal. By the end of 1918, petroleum appeared for the
first time on the Venezuelan export statistics at 21,194 metric tons.
[3]
It was the
blowout of the
Barroso No. 2 well in
Cabimas in 1922
[5]
that marked the beginning of Venezuela's modern history as a major
producer. This discovery captured the attention of the nation and the
world. Soon dozens of foreign companies acquired vast tracts of
territory in the hope of striking it rich, and by 1928 Venezuela became
the world's leading oil exporter.
[6]
Oil ended Venezuela's relative anonymity in the eyes of world powers,
making it a linchpin of an ever-expanding international oil industry and
a new consideration in global policymaking.
[7] Venezuela's oil production became a major factor in policy making in Washington before the Second World War.
[8]
Cabimas still plays an important role in production from the nation's largest oil fields, which are located around and beneath
Lake Maracaibo. Other fields are increasing in importance, mainly in eastern Venezuela.
[9]
About twenty years after the installation of the first oil drill,
Venezuela had become the largest oil exporter in the world and, after
the United States, the second largest oil producer. Exports of oil
boomed from 1.9% to 91.2% between 1920 and 1935.
[10]
By the end of the 1930s, Venezuela had become the third-leading oil
producer in the world, behind the United States and the Soviet Union, as
well as the leading exporter.
[11]
Dutch Disease
By 1929, the dramatic development of the Venezuela oil industry had
begun to dominate all other economic sectors in the country, however,
agricultural production began to decrease dramatically.
[12][13]
This sudden increase of attention to oil and neglect of the agrarian
sector caused the Venezuelan economy to suffer from a phenomenon known
as the
Dutch Disease. This "disease" occurs when a
commodity
brings a substantial increase of income in one sector of the economy,
causing a strengthening of currency which in turn harms exports of
manufacturing and other sectors.
[12]
Agriculture accounted for about one-third of economic production in
the 1920s, but by the 1950s this fraction dramatically reduced to
one-tenth. This sudden increase of oil production restricted Venezuela's
overall ability to create and maintain other industries. The government
had ignored serious social problems, including education, health,
infrastructure, agriculture, and domestic industries, causing Venezuela
to fall well behind other industrialized countries.
[citation needed]
Xenophobia
With a large influx of foreign "invaders", the effects of a
xenophobia that had not been seen before became apparent. Novelist
Jose Rafael Pocaterra described the oilmen as "
the new Spaniards". He wrote in 1918:
One day some Spaniards mounted a dark apparatus on three legs, a
grotesque stork with crystal eyes. They drew something (on a piece of
paper) and opened their way through the forest. Other new Spaniards
would open roads…would drill the earth from the top of fantastic towers,
producing the fetid fluid…the liquid gold converted into petroleum.
Popular resentment of the foreign oil companies was also evident and expressed in several ways.
Rufino Blanco Fombona,
a Venezuelan writer and politician, accounts for the conflict between
Venezuelan workers and their foreign bosses in his 1927 novel,
La Bella y la Fiera:
The workers asked for a miserable salary increase and those blond,
blue-eyed men who own millions of dollars, pounds and gulden in
European and U.S. banks, refused.
1940–1976—The road to nationalization
Venezuela production of crude oil, 1950-2012
In 1941,
Isaías Medina Angarita, a former army general from the Venezuelan
Andes,
was indirectly elected president. One of his most important reforms
during his tenure was the enactment of the new Hydrocarbons Law of 1943.
This new law was the first major political step taken toward gaining
more government control over its oil industry. Under the new law, the
government took 50% of profits.
[4][14]
Once passed, this piece of legislation basically remained unchanged
until 1976, the year of nationalization, with only two partial revisions
being made in 1955 and 1967.
[citation needed]
In 1944, the Venezuelan government granted several new concessions
encouraging the discovery of even more oil fields. This was mostly
attributed to an increase in oil demand caused by an ongoing
World War II, and by 1945, Venezuela was producing close to 1 million barrels per day (160,000 m
3/d). Being an avid supplier of petroleum to the
Allies of World War II, Venezuela had increased its production by 42 percent from 1943 to 1944 alone.
[15]
Even after the war, oil demand continued to rise due to the fact that
there was an increase from twenty-six million to forty million cars in
service in the United States from 1945 to 1950.
[16]
By the mid-1950s, however, Middle Eastern countries had started
contributing significant amounts of oil to the international petroleum
market, and the United States had implemented oil import quotas. The
world experienced an over-supply of oil, and prices plummeted.
[citation needed]
Creation of OPEC
In response to the chronically low oil prices of the mid and late 1950s, oil producing countries Venezuela,
Iran,
Saudi Arabia,
Iraq, and
Kuwait met in
Baghdad in September 1960 to form the
Organization of the Petroleum Exporting Countries (
OPEC).
The main goals of the OPEC member countries was to work together in
order to secure and stabilize international oil prices to ensure their
interests as oil producing nations. This was managed largely via
maintaining export quotas that helped prevent the overproduction of oil
on an international scale.
Oil Embargo of 1973
In the early 1970s, oil producing countries of the
Persian Gulf
began negotiations with oil companies in attempt to increase their
ownership participation. In 1972 they rapidly obtained a 25 percent
participation, and less than a year later they revised those agreements
to obtain up to 60 percent participation in the ownership of the
companies.
[4]
By 1973, OPEC Persian Gulf states members decided to raise their prices
by 70 percent and to place an embargo on countries friendly to
Israel (the United States and the
Netherlands).
This event became known as the 1973 oil crisis. Following a culmination
of conflicts in the Middle East and the oil producing countries of the
Persian Gulf
no longer exporting to the United States and oil prices rising steeply,
Venezuela experienced a significant increase in oil production profits.
Between 1972 and 1974, the Venezuelan government revenues had
quadrupled.
[12] With a new sense of confidence, Venezuelan president
Carlos Andrés Pérez pledged that Venezuela would develop significantly within a few years.
[12]
By substituting imports, subsidies, and protective tariffs, he planned
to use oil profits to increase employment, fight poverty, increase
income, and diversify the economy. However, OPEC members had been
violating production quotas, and oil prices fell drastically again in
the 1980s, pushing Venezuela deeper into debt.
Nationalization
Petroleum map of Venezuela, 1972
Well before 1976, Venezuela had taken several steps in the direction
of nationalization of its oil industry. In August 1971, under the
presidency of
Rafael Caldera,
a law was passed that nationalized the country's natural gas industry.
Also in 1971 the law of reversion was passed which stated that all the
assets, plant, and equipment belonging to concessionaires within or
outside the concession areas would revert to the nation without
compensation upon the expiration of the concession.
[4]
The movement towards nationalism was experienced once again under
decree 832. Decree 832 stipulated that all exploration, production,
refining, and sales programs of the oil companies had to be approved in
advance by the Ministry of Mines and Hydrocarbons.
[4]
Nationalization become official when the presidency of Carlos Andrés
Pérez, whose economic plan, "La Gran Venezuela", called for the
nationalization of the oil industry and diversification of the economy
via import substitution. The country officially nationalized its oil
industry on 1 January 1976 at the site of Zumaque oilwell 1 (Mene
Grande), and along with it came the birth of
Petróleos de Venezuela S.A.
(PDVSA) which is the Venezuelan state-owned petroleum company. All
foreign oil companies that once did business in Venezuela were replaced
by Venezuelan companies. Each of the former concessionaires was simply
substituted by a new 'national' oil company, which maintained the
structures and functions of its MNC-predecessor.
[17] All the new companies are owned by a holding company-Peteroven or PDV- and in its turned owned by the State.
[18]
Ultimately not much had changed in this regard, as all Venezuelans with
leading positions in the MNCs took over the leading positions of the
respective new companies,
[18]
and therefore still securing their interests in Venezuela's oil. PDVSA
controls activity involving oil and natural gas in Venezuela. In 1980,
in an aggressive internationalization plan, PDVSA bought refineries in
USA and Europe as the American
Citgo that catapultated it to the third-largest oil company in the world.
[12]
1977–1998
After the 1973 oil crisis, the brief period of economic prosperity
for Venezuela was relatively short lived. This especially was the case
during the "
1980s oil glut".
OPEC member countries were not strictly adhering to their assigned
quotas, and once again oil prices plummeted. During the mid-1980s,
Venezuela's oil production steadily began to rise.
[19] By the 1990s, symptoms of the
Dutch Disease
were once again becoming apparent. Between 1990 and 1999, Venezuela's
industrial production declined from 50 percent to 24 percent of the
country's
gross domestic product compared to a decrease of 36 percent to 29 percent for the rest of
Latin America,
[20] but production levels continued to rise until 1998.
[19]
However, the efficiency of PDVSA was brought into question over these
years. From 1976-92, the amount of PDVSA’s income that went towards the
company's costs was on average 29 percent leaving a remainder of 71
percent for the government. From 1993 to 2000, however, that
distribution almost completely reversed, to where 64 percent of PDVSA's
income were kept by PDVSA, leaving a remainder of only 36 percent for
the government.
[21]
1999–today
Former Venezuelan President Hugo Chávez.
After
Hugo Chávez
officially took office in February 1999, several policy changes
involving the country's oil industry were made to explicitly tie it to
the state. In addition, he attempted to strengthen Venezuela’s
infrastructure and other national industries to move the country towards
a more developed nation.
Chávez's role in the reinforcement of OPEC
At the time of Chávez's election, OPEC had lost much of its influence compared to when it was first created. A combination of
OPEC
members, including Venezuela, regularly ignoring quotas and non-OPEC
countries such as Mexico and Russia beginning to expand on their own
petroleum industries resulted in record low oil prices to which hurt the
Venezuelan economy. One of Chávez's main goals as president was to
combat this problem by re-strengthening OPEC and getting countries to
once again abide by their quotas. Chávez personally visited many of the
leaders of oil producing nations around the world, and in 2000, he
hosted the first summit of the heads-of-state of OPEC in 25 years (the
2nd ever).
[12] Goals of this meeting, held in
Caracas,
included recuperating the credibility of Venezuela in OPEC, defending
oil prices, consolidating relations between Venezuela and the
Arab/Islamic world, and to strengthen OPEC in general.
[citation needed]
The meeting could be considered a success given the record high oil
prices of the following years, but much of that is also a consequence of
the
11 September 2001 attacks against the
United States, the
Iraq War, and the significant increase in demand for oil from developing economies like
China and
India,
which helped prompt a surge in oil prices to levels far higher than
those targeted by OPEC during the preceding period. In addition to these
events, the December 2002 oil strike in Venezuela, which resulted in a
loss of almost 3mmbpd of crude oil production, brought a sharp increase
in world prices of crude.
[22]
2001 Hydrocarbons Law
On 13 November 2001, under the enabling law authorized by the
National Assembly, Chávez enacted the new
Hydrocarbons Law,
which came into effect in January 2002. This law replaced the
Hydrocarbons Law of 1943 and the Nationalization Law of 1975. Among
other things, the new law provided that all oil production and
distribution activities were to be the domain of the Venezuelan state,
with the exception of joint ventures targeting extra-heavy crude oil
production. Under the new Hydrocarbons Law, private investors can own up
to 49% of the capital stock in joint ventures involved in upstream
activities. The new law also provides that private investors may own up
to 100% of the capital stock in ventures concerning downstream
activities, in addition to the 100% already allowed for private
investors with respect to gas production ventures, as previously
promulgated by the National Assembly.
Tension between Chávez and PDVSA
Chávez began setting goals of reinstating quotas, such as ten percent
of PDVSA’s annual investment budget was to be spent on social programs.
[23] He also changed tax policies and the oil revenue collection process.
[12] Chavez initiated many of these major changes to exert more control over
PDVSA and efficiently deal with the problems he and his supporters had over PDVSA’s small revenue contributions to the government.
In December 2002, PDVSA officially went on strike creating a near-complete halt on oil production in Venezuela. The aim of the
Venezuelan general strike of 2002-2003
was to pressure Chávez into resigning and calling early elections. The
strike lasted approximately two months, and the government ended up
firing 19,000 PDVSA employees and replacing them with workers loyal to
the Chávez government.
[24]
When the strike ended, substantial macroeconomic damage had been done
with unemployment up by 5 percent. This increase brought the country to a
national unemployment peak of over 20 percent in March 2003.
[25]
"Re-nationalization" and tax reform
Following the
December 2002 to February 2003 oil strike,
Chávez referred to regaining control of the industry as
"re-nationalization". He aimed at improving the efficiency of PDVSA in
the context of distributing a greater amount of its revenues to the
government and also by certain changes in taxation. Certain tax reforms
had already been implemented earlier in Chávez's first term. As of 2001,
royalty payments were nearly doubled to 30 percent of the price at
which every barrel is sold compared to before when it was 16.67 percent.
Also in 2001, the government lowered the income tax levied on oil
extraction from 67.6 percent to 50 percent.
[12]
In April 2002, the opposition took advantage of mass demonstrations
in Caracas and attempted to overthrow Chavez. A few months after the
failure of the coup and the return of Chavez, a combination of labor
unions and business groups called for an "indefinite national strike"
which, in many places, turned out to be a forced 'bosses lock out' where
the employees were prevented from working.
In 2006, the government had a 40 percent share which was announced to
be increased by 20 percent. Some believe this move could potentially
burden PDVSA with investment costs, but Chavez created several new
subsidiaries of PDVSA to try to prevent unwanted costs from happening.
These subsidiaries include agriculture, shipbuilding, construction, and
industry.
Different media and spokespersons have reported that Hugo Chávez
nationalized oil when referring to these reforms. However, oil was
nationalized in 1976.
Today and the future
Today, Venezuela is the fifth largest oil exporting country in the
world with the second-largest reserves of heavy crude oil (after
Canada). Canada and Venezuela have significant potential for capacity
expansion; Venezuela could potentially increase production capacity by
2.4 Mbbl/d (380,000 m
3/d) from 2001 level (3.2 MMbpd) to 5.6 MMbpd by 2025
[22]
- although this would require significant amounts of capital investment
by national oil company PDVSA. By 2010, Venezuelan production had in
fact declined to ~2.25 Mbbl/d (358,000 m
3/d). PDVSA have not demonstrated any capability to bring new oil fields onstream since nationalizing heavy oil projects in the
Orinoco Petroleum Belt formerly operated by international oil companies
ExxonMobil,
ConocoPhillips,
Chevron and
Total.
In 2005, PDVSA opened its first office in China, and announced plans
to nearly triple its fleet of oil tankers in that region. Chávez had
long stated that he would like to sell more Venezuelan oil to China so
his country can become more independent of the United States. The United
States currently accounts for 65 percent of Venezuela's exports.
[26]
In 2007, Chávez struck a deal with Brazilian oil company
Petrobras
to build an oil refinery in northeastern Brazil where crude oil will be
sent from both Brazil and Argentina. A similar deal was struck with
Ecuador where Venezuela agreed to refine 100,000 barrels (16,000 m
3) of crude oil from Ecuador at discount prices.
Cuba
agreed to let thousands of Venezuelans be received for medical
treatment and health programs, and in turn, Venezuela agreed to sell
several thousands of barrels to Cuba at a 40% discount under
Petrocaribe program.
[citation needed]
As of March 2010, PDVSA’s current strategic plan forecasts 5 million barrels per day (790,000 m
3/d) for 2015 and 6.5 million barrels per day (1,030,000 m
3/d) for 2020
[27] PDVSA's goal to produce 6.5 million barrels per day (1,030,000 m
3/d) by 2020 will likely be harder under Chavez’s policies, which hinder the potential increase of private investment.
[27]
The Chávez government used PDVSA resources to fund social programmes, treating it like a "piggybank",
[28] and PDVSA staff were required to support
Hugo Chávez.
Experts reported that systematic underinvestment in the Venezuelan oil
industry caused the August 2012 explosion at Amuay; Chávez called these
reports "irresponsible".
[29][30]
The "string of accidents, outages and unplanned stoppages" then
continued with a fire started by lightning at the El Palito refinery a
month later.
[31]
See also
Notes
Annual Energy Review 2006, Energy Information Administration
References
US Energy Information Administration, “Country Energy Profiles: Venezuela”, US Energy Information Administration, [1]).
Anibal Martinez (1969). Chronology of Venezuelan Oil. Purnell and Sons LTD.
Gustavo Coronel (1983). The Nationalization of the Venezuelan Oil Industry. Heath and Company.
The Royal Dutch Shell Group of Companies in Venezuela, 1913-1922
Miguel Tinker Salas, The Enduring Legacy: Oil, Culture, and Society in Venezuela(United States: Duke University Press, 2009), 6.
Salas,6.
Ibid.
Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power [Simon and Schuster, 1990], pp. 233–236; 432
Franklin Tugwell (1975). The Politics of Oil in Venezuela. Stanford University Press.
Painter 2012, p. 26.
Gregory Wilpert, “The Economy, Culture, and Politics of Oil in Venezuela”, Venezuelanalysis.com, http://venezuelanalysis.com/analysis/74.
Suburban Emergency Management Project, “History of Venezuela’s Oil and Rentier Economy”, Suburban Emergency Management Project, http://www.semp.us/publications/biot_reader.php?BiotID=476.
Yergin, p. 435
Jose Toro-Hardy (1994). Oil: Venezuela and the Persian Gulf. Editorial Panapo.
Daniel Yergin (1991). The Prize: The Epic Quest for Oil, Money, and Power. Simon and Schuster.
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, http://www.jstor.org/stable/422789?seq=11.
Bye, "Nationalization of Oil in Venezuela:Re-defined Dependence and Legitimization of Imperialism", 67.
Venezuela peak
World Development Report 2000/2001. p. 297.
Bernard Mommer (2001). Venezuelan Oil Politics at the Crossroads. Oxford Institute for Energy Studies, Monthly Commentary.
Jan Kalicki, David Goldwyn (2005). Energy and Security. Woodrow Wilson Center Press.
Cesar J. Alvarez, “Venezuela’s Oil-Based Economy”, Council on Foreign Relations.
UN News Centre. "UN labour agency discusses repression in Myanmar, China, Colombia, Venezuela". Retrieved 12 September 2015.
Venezuelanalysis.com. "Venezuela's economy shows strong signs of recovery after lock-out/strike". Retrieved 14 April 2008.
Marijke van den Berg. ""Oil Chinese" in Venezuela are treading carefully". Retrieved 14 April 2008.
Sheridan Titman, “The Future Oil Production in Venezuela”, blogs.mccombs.utexas.edu, 23 March 2010.
""Pdvsa is the government's piggy-bank," a U.S. official says". El Universal. 29 June 2004. Retrieved 28 June 2014.
"Huge blast stops Venezuela's main oil refinery Amuay". BBC, 25 August 2012.
"Chavez denies neglect in Venezuela oil fire", AlJazeera.com, 27 August 2012.
