What will happen with Venezuela's oil sector? Privatization needed?

[jose chalhoub + 388]

@TraderTate in replying to your question as long as the government remains in power and leaves the current military directive of pdvsa and the ministry of petroleum in control then the destruction of the industry will go on, as they have no knowledge of whats going on, the operations of the industry and all the international dynamics of the oil markets, as i have been told by some colleagues still working there, these persons have no idea of what they are doing, and we might expect the production to continue to plunge the coming months, if the investments in refining and production are not URGENTLY carried out and also preventing the continuing emigration of workers with 10 years or more of experience earning now less than 10$ monthly, definitely a sad situation. This is why i say that the industry needs at least to go under a partial or complete process of privatisation, since you cant depend only on the maneuvering of the inefficient state, you need to open up the industry to many players without ideological biases. Even russians and chinese are getting tired of all the situation regarding their investments here. So the way i could some way foresee is to privatise at least the refining and production phase of the business. But time is terribly running out... 

[jose chalhoub + 388]

I strongly am of those who believe or agrees to apply the same tool applied on PETROBRAS for example after the massive corruption scam which affected the company with the Lava Jato scandal, which underwent a massive purge ending up with the firing of many many drectives of the company along with the scandal of ODEBRECHT which for sure has affected Venezuelan authorities linked with PDVSA, i lived that situation and heard many opinions when still working there. Look at how PETROBRAS is doing now, PETROBRAS has been a model for offshore exploration and production for decades and look at whats happening with PEMEX as well plagued with corruption and a company deemed even more property of the mexican state. Now look at how well mexican oil cpmpany is performing with the reforms and the privatisation going on, under threats with the prospect of Lopez Obrador becoming president. What i mean here is that once and for all, tough anti corruption measures (but not as a clash of factions which has been happening recently in PDVSA after recent purge and accusations by the attorney general against former directors of PDVSA not aligned with Maduro allegedly) must be applied in order to start recovering the industry and also repatriate the billions of dollars stolen by former directives and the iconic former President of PDVSA Rafael Ramirez now living his golden exile as if nothing happened and now qualifying himself as the only one that can save the country... just shameful... 

[jose chalhoub + 388]

Also, its highly likely that a mechanism such as PETROCARIBE will dissapear entirely soon, which also i had the chance to live and experience during my years at PDVSA. I have to say that Venezuela does not have now and did not have completely the operational capabilities to maintain supplies of oil and products to the caribbean islands as it wanted to do and that this mechanism had important geopolitical implications in order to conform and solidify a geopolitical front where Venezuela had influence against the United States, but definitely it did not do so. Now with overall production crumbling, and the United States developing a smart and stealth geostrategy in the Caribbean leveraging on its LNG production, definitely it will add up to the elimination of PETROCARIBE. 

[TraderTate + 186]

wow. thanks! It's great to hear these granular details from someone who has direct knowledge. I'll have to digest all of this ... but find the analysis that no one there knows what they're doing right now extremely poignant. This is GREATLY APPRECIATED

[TomTom + 183]

1 hour ago, jose chalhoub said:

Also, its highly likely that a mechanism such as PETROCARIBE will dissapear entirely soon, which also i had the chance to live and experience during my years at PDVSA. I have to say that Venezuela does not have now and did not have completely the operational capabilities to maintain supplies of oil and products to the caribbean islands as it wanted to do and that this mechanism had important geopolitical implications in order to conform and solidify a geopolitical front where Venezuela had influence against the United States, but definitely it did not do so. Now with overall production crumbling, and the United States developing a smart and stealth geostrategy in the Caribbean leveraging on its LNG production, definitely it will add up to the elimination of PETROCARIBE. 

@jose chalhoub do you see Venezuela's crude output falling below 1 million bpd soon? 

[jose chalhoub + 388]

probably yes... 

[TomTom + 183]

5 minutes ago, jose chalhoub said:

probably yes... 

How soon?

[TraderTate + 186]

Ha! that's the million-dollar question and @jose chalhoub knew the answer, the hedge funds would be all over him  Based on everything you've said so far, the combination of ineptitude and a failed attempt to get the majors to sign new contracts should make it happen sooner rather than later. 

[jose chalhoub + 388]

really appreciate all your interest about the situation of Venezuela. the country used to having it all but now in shambles... hopefully it could get back on its feet again soon, since Venezuela has all the resources natural and human to be the country it used to be and in good terms with the United States and other traditional allies... 

[Tom Kirkman + 8,860]

For quite a while I've suspected that China and Russia will "privatize" PDVSA as a National Oil Company "colony" under their respective state controls.

Without the long term financial assistance (loans) so far from China and Russia, PDVSA would have like already completely collapsed.  The O&G infrastructure inside Venezuela is badly corroded, and who knows exactly how far gone from neglect and corrosion some of the downstream equipment is today.

The debts that PDVSA owe China and Russia will eventually come calling.  PSVSA these days is kinda like an indentured servant, in debt servitude to China and Russia.

So, when China and Russia get fed up enough, I suspect they will make economic claims against PDVSA, and make Venezuela their "economic colony".

Jose, it's great to bump into here on Oilprice.  I just registered on this Oilprice forum.  And it's nice to see your new weekly summary of geopolitics + Oil & Gas over on LinkedIn.

 

[jose chalhoub + 388]

thank you @Tom Kirkman highly appreciate your comments sir and its also good to see you here.

[Curtis Stewart + 32]

The rapid deterioration of infrastructure combined with the tribal knowledge loss with the disappearing work force is driving the oil companies ability to come back to years. I am convinced one large leak on a supplying pipeline and the industry is dead. Is there knowledge and resources to respond or will they close the valves on both ends and just go home?

If China or Russia come in where will they get their heavy oil extraction expertise and support? Off hand I am unfamiliar with the Russian equalevant of Halliburton?

The industry will witness for the first time the collapse of a state oil company. Thinking there is someone out there who will rescue Venezuela is a fools errand. Unless one has worked in this business the accumulated destruction happening because of lack of maintenance cannot be overstated. Some of the equipment that will require replacing has a year or more lead time. And that is after the inspections and prep time needed for the inspections to happen. At this point in time if a magic wand was waved and everything went back to normal they would be looking at least 3 years to be even close to operating normally.

But I see Maduro applying bus driver thinking to a problem way above his level of understanding.

[Tom Kirkman + 8,860]

Hi Curtis, happy to see you found this Oil Price forum as well - I was invited here a few days ago.  Great to have a dedicated O&G forum.

Yes, it looks like there is no real hope of rescuing PDVSA.  At least not as long as the government continues to choke the life out of it.

[Curtis Stewart + 32]

Thanks Tom. I followed Jose over here with his Venezuela comments after we met on LinkedIn. See a opportunity to learn and contribute. Wondering if there is a content police enforcing unwritten rules?

[Tom Kirkman + 8,860]

Curtis, I've seen that there is a moderator for this forum.  Don't know what the policy is as far as what is allowed and what is not allowed to say here. 

I plan to shoot my mouth off pretty much the same way I did on the old Oilpro forum, and see what happens here. 

You are already familiar with my views about censorship, back when I was a feisty moderator on Oilpro - I encourage dissent, and I encourage Freedom of Speech, and I encourage others to courteously and vociferously speak their minds about Oil & Gas topics.

[Rodent + 1,424]

12 hours ago, Curtis Stewart said:

Thanks Tom. I followed Jose over here with his Venezuela comments after we met on LinkedIn. See a opportunity to learn and contribute. Wondering if there is a content police enforcing unwritten rules?

Good morning, Curtis, and welcome to our community! We do have a team of content police. We encourage debate, free thinking, and differing opinions (in fact, we encourage it), just so long as it is courteous. We are intolerant of spamming, active selling on the forum, and harassment of other community members.  

[Rodent + 1,424]

13 hours ago, Curtis Stewart said:

The rapid deterioration of infrastructure combined with the tribal knowledge loss with the disappearing work force is driving the oil companies ability to come back to years. I am convinced one large leak on a supplying pipeline and the industry is dead. Is there knowledge and resources to respond or will they close the valves on both ends and just go home?

If China or Russia come in where will they get their heavy oil extraction expertise and support? Off hand I am unfamiliar with the Russian equalevant of Halliburton?

The industry will witness for the first time the collapse of a state oil company. Thinking there is someone out there who will rescue Venezuela is a fools errand. Unless one has worked in this business the accumulated destruction happening because of lack of maintenance cannot be overstated. Some of the equipment that will require replacing has a year or more lead time. And that is after the inspections and prep time needed for the inspections to happen. At this point in time if a magic wand was waved and everything went back to normal they would be looking at least 3 years to be even close to operating normally.

But I see Maduro applying bus driver thinking to a problem way above his level of understanding.

It is alienating all the foreign oil co's that are currently operating there, and lack of maintenance is bound to catch up with PDVSA sometime soon. This equipment not only has long lead times, but it is costly--and Venezuela seems fresh out of cash at the moment. 

[Tom Kirkman + 8,860]

17 minutes ago, Rodent said:

Good morning, Curtis, and welcome to our community! We do have a team of content police. We encourage debate, free thinking, and differing opinions (in fact, we encourage it), just so long as it is courteous. We are intolerant of spamming, active selling on the forum, and harassment of other community members.  

Perfect.  Great forum policies.  I have no issues with your moderation policies, and wish more forums worked with similar policies of moderation.

[jose chalhoub + 388]

59 minutes ago, Rodent said:

It is alienating all the foreign oil co's that are currently operating there, and lack of maintenance is bound to catch up with PDVSA sometime soon. This equipment not only has long lead times, but it is costly--and Venezuela seems fresh out of cash at the moment. 

i perfectly understand your good points of view and as some young professional who started my career in whats been dubbed venezuelan national pride, i agree with these views, it will be so hard to recover venezuelan oil industry, but one step will definitely be to change the system of government and then will give way to substantial investments which will necessarily be under strict control and monitoring in order for this potential investments to be spend in the right way, also enhancing the return of thousands of highly skilled oil workers (those who were rejected and kicked out of the industry during the strike of 2001 against Chavez and those younger professionals who saw an opportunity to develop a career since the start of the revolution but which now have been emigrating as the conditions in the country have worsened considerably. This is in my view a unique case in the oil sector, a state oil company practically destroyed in a country not experiencing a civil war. 

[Manfred Kruger + 40]

Venezuelan politics will continue to trump economics until they run out of $$$. Production will continue to suffer until there is a profound change that reestablishes trust and investment.

[Jaime + 3]

I am amazed that Maduro is still in power. The historical role of the military in Venezuela in

overturning failed governments has been delayed due to Maduro replacing the leaders.

When the police and military can no longer be paid, there will be a change in government,

in my opinion.

 

[Curtis Stewart + 32]

I worked with several Venezuela escapees in Corpus Christi who came in through Citgo. This was in the early 2000's. Very smart and hard working. They will never return to Venezuela. Not that the oil could return, but it will not be via China or Russia as the culture will drive both mad. It will take someone the western oil companies will trust and a change in attitude.

When half the population gets free stuff and has the guns, the other half gets exploited.

[valarie + 8]

I absolutely agree here with Mr. Tom Kirkman. Surely, it will become a privatized oil ownership. Or at least this what I think the world should see as another money maker for itself. So I think we as the United States should have the control, not China or Russia. What is President of the United States of America Donald Trump's cell phone number, surely he can agree with me on this? 

There could only be one problem with my plan is who in Venezuela gets their hands on the privatized oil money???? 

[Tom Kirkman + 8,860]

@Jose Chalhoub, what is your take on this U.S. Mainstream Media article from Bloomberg? 

Personally, I tend to think that China and Russia will eventually come calling for payment for the massive debts owed to them by PDVSA. 

And I tend to think that it is a false red herring by Ramirez that "international oil companies" will take control of PDVSA.  It will likely be state players China and Russia that gain de facto control over Venezuela's oil, because PDVSA owes China and Russia tens of billions of dollars, due to incompetence by Chavez and then by Maduro.

But that's just my opinion.  You are in Venezuela and I'm not.  You also worked for PDVSA for years.  So I'm curious what your views are on the statements by Ramirez:
================================

Man Who Ran Venezuelan Oil Giant for a Decade Predicts Fast Demise

"Rafael Ramirez, the once all-powerful Venezuelan oil czar, says the state producer he ran for almost 10 years is on the brink of collapse.  He blames it on a power grab by the government that’s after him."

... "As a result of the “collapse in production and refining,” Venezuela will increasingly surrender control of PDVSA to international companies operating in the South American nation, Ramirez said.

“Under the argument that we destroyed the company, PDVSA will be de facto privatized,” he said. “It’s being taken out of the control of the Venezuelan state.”

[jose chalhoub + 388]

7 hours ago, Tom Kirkman said:

@Jose Chalhoub, what is your take on this U.S. Mainstream Media article from Bloomberg? 

Personally, I tend to think that China and Russia will eventually come calling for payment for the massive debts owed to them by PDVSA. 

And I tend to think that it is a false red herring by Ramirez that "international oil companies" will take control of PDVSA.  It will likely be state players China and Russia that gain de facto control over Venezuela's oil, because PDVSA owes China and Russia tens of billions of dollars, due to incompetence by Chavez and then by Maduro.

But that's just my opinion.  You are in Venezuela and I'm not.  You also worked for PDVSA for years.  So I'm curious what your views are on the statements by Ramirez:
================================

Man Who Ran Venezuelan Oil Giant for a Decade Predicts Fast Demise

"Rafael Ramirez, the once all-powerful Venezuelan oil czar, says the state producer he ran for almost 10 years is on the brink of collapse.  He blames it on a power grab by the government that’s after him."

... "As a result of the “collapse in production and refining,” Venezuela will increasingly surrender control of PDVSA to international companies operating in the South American nation, Ramirez said.

“Under the argument that we destroyed the company, PDVSA will be de facto privatized,” he said. “It’s being taken out of the control of the Venezuelan state.”

thanks sir. I think i stated elsewhere in other thread, Ramirez is the one to blame in al this mess and chaos and he also was responsible for the giving away of the industry to russian and chinese since he was the one in control during the most intense years of the alliances of Chavez with Russia China and Iran being himself the strongman of the revolution at the head of PDVSA more than 10 years, and yes i lived all the Ramirez era and i can say that rather than invest in maintenance and improvement of facilities on shore and off shore of the company, all the destruction ensued and he just ran away. This is just unbelievable. His rantings and attitudes is no more than a power struggle between factions to keep control of PDVSA, thats it.