Venezuela’s Oil Company Presents Audited Finances of Industry Shutdown Year

Today, after a one-year delay, Venezuela's state-owned oil company presented its audited financial statement for 2003, the year in which the opposition practically shutdown the industry for two-months. The statement showed that the company lost at least $13.25 billion as a result of the shutdown.

Caracas, Venezuela, July 26, 2005—Rafael Ramirez, the President of Venezuela’s state-owned oil company PDVSA, presented the company’s audited financial statements for 2003, the year of the oil industry shutdown, today—a full year after they would normally have been presented. The statement shows that PDVSA (Petroleos de Venezuela, S.A.) suffered $13.25 billion in losses due to the opposition-engineered industry shutdown, which lasted from early December 2002 to early February 2003.

Ramirez, who is also Venezuela’s Minister of Energy and Petroleum, said that the financial statement was audited by the U.S.-based auditing firm KPMG. Also, he explained that the reason for the statement’s delay had to do with the sabotage former oil industry managers committed, when they deleted or destroyed contracts, invoices, and orders, which forced those who remained in the company to contact clients individually and ask them to supply these documents. In addition to this, the data processing software was sabotaged and the company had to deal with new auditing norms that were coincidentally implemented for 2003.

According to Ramirez, KPMG provided PDVSA with an audit that included no reservations and thus certifies that PDVSA’s finances are “completely clean,” said Ramirez.

Ramirez presented the calculation of how much financial loss the oil industry shutdown caused by explaining that in 2001, the year prior to the coup and the shutdown, Venezuela exported 1.03 billion barrels. The shutdown, however, caused exports to drop to 870 million in 2002 and to 760 million barrels in 2003. Based on the price of oil and the lost exports, Venezuela lost $12.75 billion in revenues in the course of these two crisis years. In addition to this, PDVSA had to import gasoline at very high prices, which cost the company another $504 million.

PDVSA’s balance sheet for 2003 states that PDVSA had assets of $55.9 billion and liabilities of $17.9 billion, for a net worth of $38.0 billion. This is a slightly higher net worth than it had in 2002, which was $37.3 billion.

With regard to the company’s profit and loss, its total revenues for 2003 were $46.6 billion and its total expenses were $42.0 billion, resulting in profits of $4.6 billion, which is almost exactly the same as for 2002. Out of this profit PDVSA had to pay the Venezuelan state $1.3 billion in taxes, in addition to the $6.4 billion it paid in royalties (which are included in the costs). This is almost $1 billion more it provided the Venezuelan state than in 2002 ($5.7 billion in royalties and $1.1 billion in taxes).

Another positive aspect of the company’s finances was that it was able to reduce its debt in 2003 by $1.2 billion, which represents a 15% reduction relative to 2002.

The year 2003 was also the year in which the Chavez government initiated the social programs known as “missions,” which PDVSA helped finance. The financial statement shows that PDVSA directly contributed $547 million to the missions that year, which primarily consisted of the educational programs Misión Robinson (literacy training), Misión Ribas (high school completion), and Misión Sucre (university scholarships).

The oil industry shutdown, which led to the dismissal of 18,000 oil industry employees, mostly administrative and management, was designed to force Chavez to resign. The action consisted of a mostly management and administrative employees’ strike, a lock-out of most of the rest of the employees, and the sabotage of key elements of the industry’s technology.

After a two-month near complete shutdown of the industry, PDVSA managed to get back on its feet again and within six months managed to bring production back up to its pre-strike levels, according to the company. The feat was mostly managed with the help of workers who took on larger responsibilities, retired employees who were re-hired, and help from countries such as Iran. Many analysts, however, have long denied that PDVSA ever fully recovered to its pre-shutdown production levels of 3.1 million barrels per day, saying that it is producing at most 2.6 million barrels per day.

According to a PDVSA press release, the damage caused included, “delays in the execution of plans to remedy environmental damage, loss of sensitive information for operations, interruption of information systems, delays in the compliance with creditor obligations, deterioration of PDVSA’s reputation as secure and reliable supplier, non-compliance with financial, legal, and contractual obligations, loss of market share, delays in the execution of plans and projects, and the loss of human resources.”