Venezuela: Military Control of the Oil Industry

Reuters wrote a lengthy report on Venezuela's oil industry and the role of the military. Petroleos de Venezuela SA (PDVSA) is Venezuela's state-owned oil company. In November 2017, President Madura placed Major General Manuel Quevedo in charge of the company. Since then, not much good has happened. Per the article, oil production has dropped 20% to 1.45 million barrels per day. Employees continue to leave, dropping 27% since 2016, currently at 106,000 (estimate). Here are some quotes about the increasing role of the military:

Military chieftains, moonlighting in the private sector, are elbowing past other contractors for lucrative service and supply business with PDVSA.

Quevedo has appointed more than 100 aides and advisors from the military and from a previous post as a government minister to senior positions, according to a person familiar with PDVSA’s human resource records.

Back in November 2017, Reuters had an article that focused on the arrests of US citizens who worked for Citgo, but it also discussed a larger crackdown on corruption within Venezuela's oil industry. Around the time of the article was when Madura handed the reigns of PDVSA to Quevedo. What is the likelihood the corruption just shifted from one group of employees to another (which in this case is the military)?



A final interesting quote from the article is:

PDVSA is struggling to fulfill supply contracts with buyers, including major creditors from China and Russia who have already advanced billions of dollars in payments in exchange for oil. Last month, the head of Rosneft, the Russian oil company, flew to Venezuela and complained to Maduro about the delays, Reuters reported.

Earlier this year,  the Center for Strategic & International Studies looked at the growing influence of China in Venezuela. Here is an interesting facts from the article: China currently owns $23 billion worth of Venezuela's foreign debt, making it the country's biggest creditor. 

The head of Rosneft flew to Venezuela. How often have the Chinese knocked on Maduro's door?

This pressure from Rosneft may have lead to the following report from S&P Global Platts, which states that the poorly run PDVSA would lead to the sacking of Quevedo:

Oil minister and PDVSA CEO Manuel Quevedo may be on the outs, as President Nicolas Maduro is preparing a cabinet shuffle that could put a new ally in charge of the country's lifeblood industry, sources close to the situation told S&P Global Platts . . . Quevedo's possible saving grace is his ties to the Venezuelan military, a key constituency that Maduro has courted to ward off a potential coup, sources said. 

That last sentence is key. My suspicion is that corruption in Venezuela's oil industry has simply shifted from previous leaders of PDVSA to the military. Quevedo may get pushed out, but I suspect that any new head of PDVSA will just be another military general. I can't see why the military would give up their new cash cow.

Note: my previous blog was about Guyana and Venezuela. Per the Reuters article, PVDA employs 27% fewer workers than before. As Guyana's oil production starts, one would think that even more would leave PVDA and head to Guyana. Guyana has a population of around 750,000. Remember that Venezuela currently employs 106,000 employees in PDVSA and they're understaffed. Let's say that Guyana needs 50,000. I doubt a country with 750,000 can have that many workers who have the proper training. Many of those current 106,000 Venezuelans have to be thinking about making their way to Guyana.