Venezuela Denies Rumors about Oil Industry Problems

A series of reports have emerged in Venezuela's oppositional press, saying that the oil company is in dire straights in terms of corruption, declining production levels, and misappropriated funds. A variety of government spokespersons say that this is all part of a coordinated smear campaign.

Caracas, Venezuela, May 17, 2005—Venezuela’s state-owned oil company PDVSA denied a series of recent reports about oil sales over the Internet and declining production. National private media in Venezuela had published articles recently, which stated that PDVSA was selling oil indirectly, via traders, over the internet. Also, national oppositional newspapers such as El Universal and El Nacional published articles that said oil production is down by as much as 400,000 barrels per day (bpd). Over the weekend, during his Sunday television program Alo Presidente, President Chavez called these articles attempts to destabilize his government.

The newspaper El Universal reports today, for example, that PDVSA’s own production is at 1.35 million bpd, which would be the lowest level of production since 1949. In addition to this, PDVSA has operating agreements and joint ventures that produce another 1.25 million bpd, for a total production of 2.6 million bpd. According to the paper, PDVSA’s own production was at 1.75 million bpd in 2004, meaning that it declined by 400,000 bpd since then.

Last week, Chavez admitted that production had declined recently, by as much as 200,000 bpd, due to management errors and sabotage, but that 100,000 of these had already been recovered. The remaining 100,000 would be recovered in the next few months, bringing production back up to the government’s claim that Venezuela produces a total of 3.3 million bpd.

Even if the El Universal report, which bases its numbers on a former Central Bank director and on figures of the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC) is accurate, the implication is that Venezuela did produce a total of 3 million bpd in 2004 (1.75 own plus 1.25 with foreign oil companies). However, throughout 2004 the opposition claimed that total production never exceeded 2.6 million bpd.


Opposition leaders, such as the former PDVSA president Roberto Giusti argue that PDVSA’s books have become more obscure than ever because it has not filed SEC (Securities and Exchange Commission) reports since the oil industry shutdown in 2002/2003. Venezuela’s current director of the Central Bank, Domingo Maza Zavala, has said that PDVSA has contributed only about half of the revenues it should be providing to the bank if the government’s production figures are correct.

PDVSA president and Minister of Energy and Petroleum, Rafael Ramirez, however, denied this, saying that revenues were $7.5 billion and that of these, $6.4 billion were turned over to the Central Bank. The rest PDVSA used for various funds such as its social development fund.

Internet Sales of Oil?

Another report that caught the headlines of Venezuela’s oppositonal media was that PDVSA was selling its oil over the internet, using so-called “traders,” who are intermediaries between the oil company and the final customer. The use of traders, however, is illegal according to Venezuelan law. Yesterday’s opposition paper El Nacional identified several websites where Venezuelan oil could supposedly be bought in this manner.

PDVSA, in a press release, denied this was the case. Rather, the company says that this is just one more element in a disinformation campaign against the company. The press release says, “The state oil corporation has not authorized any company to use Venezuelan crude in its internet offers nor is it responsible for the content that other companies publish in their respective websites.” PDVSA reiterates that it only sells to final buyers and in the case of crude to refiners.

National Assembly and Comptroller General to Investigate

In addition to its investigation of the operating agreements given to transnational oil companies, Venezuela’s National Assembly (AN) will also investigate accusations of corruption in PDVSA. The chairman of the AN’s energy and mines commission, Pedro Jimenez, said, though, that there is a media campaign going on against PDVSA right now, which aims to distort what is actually happening within the company.

“The industry is not in the abyss that the traitors of the fatherland tried to sink it into just a few years ago,” said Jimenez, in reference to the oil industry shutdown of December 2002 to February 2003.

Nonetheless, to answer some of the questions that have been raised in the press recently, Venezuela’s Minister Ramirez will soon testify before the Energy and Mines Commission. His testimony was supposed to take place today, but had to be postponed.

Venezuela’s Comptroller General, Closdobaldo Russian, said yesterday that his office is in the process of investigating all supposed irregularities that have been filed with his office recently that are related to the oil industry. He said that such accusations have increased in recent months, “but this does not mean that there is corruption.”

Russian also said that his office would investigate PDVSA’s use of funds for the missions “We are reviewing the legality and the pertinence of the assignment of resources to these programs,” said Russian. The missions are the very popular social programs, such as “Inside the Barrio,” which places community doctors in the country’s poorest neighborhoods, and Mission Robinson, which teaches illiterate Venezuelans to read and write. Most of these programs have been financed directly by PDVSA and not via the national government’s regular budget.

Chavez Says Venezuela Will No Longer Pay Oil Companies in Dollars

During his Sunday television program Alo Presidente, President Chavez announced that PDVSA had been paying oil companies in dollars for the expenses of its service agreements. That is, company expenses, such as for food, clothes, per diems, cars, etc., Venezuela paid the companies in dollars. Chavez said that his government would no longer do this, that the companies would from now on only receive the national currency, bolivares, for their expenses.

See also: Venezuela’s National Assembly to Investigate Oil Contracts