Venezuela’s Refinery Explosion: Has Chávez Made Petroleum Too Political?

The Aug. 25 disaster at Paraguaná, the worst refinery accident in Venezuela's history, killed 48 people – and, before a presidential election, revives charges that Hugo Chávez has weakened his oil industry by turning it into a political tool.

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Marife Cuauro / Reuters

A column of smoke rises as fuel storage tanks are seen on fire at Amuay oil refinery in Punto Fijo in the Peninsula of Paraguana, Venezuela, Aug. 27, 2012.

When I visited Venezuela’s Paraguaná oil refinery complex, the world’s second largest, in 2007, anxieties seemed to flare like its burn-off pipes. Employees warned of the plant’s “precarious” state; a major equipment upgrade was a year behind schedule and the refineries were operating well below capacity. Paraguaná “isn’t living up to its original design,” one supervisor told me, because the state-run oil monopoly, Petróleos de Venezuela (PDVSA) “doesn’t want to cover the costs.”

Critics called the refineries, on Venezuela’s western Paraguaná Peninsula, an example of how PDVSA was failing to make meaningful investments under Venezuela’s left-wing President Hugo Chávez, even as he ladled more and more of the company’s revenues (which were $128 billion in 2011) into social projects. Paraguaná was also a safety concern. A year before, three workers had been killed in accidents, part of a string of mishaps during the 2000s, many of them fatal.

Shortly after midnight last Saturday, Aug. 25, a massive gas leak explosion and fire killed 48 people near Paraguaná’s Amuay refinery, with others still missing. It was the worst refinery disaster in the history of Venezuela, which has the western hemisphere’s largest crude reserves, and one of the world’s worst in decades. Chávez and PDVSA again face criticism about their investment in and maintenance of Venezuela’s crucial oil industry – but this time the socialist Chávez, who has ruled for 13 years, also faces re-election in six weeks, and he’s up against his first serious opposition candidate. Venezuelans know how dangerous oil work can be, but last weekend’s ghastly death toll revives the heated debate about whether Chávez has used PDVSA less as an economic development engine and more as a political patronage trough.

Chávez and PDVSA executives, who insist they’ve pumped some $6 billion into refinery maintenance in recent years, are in a panic to dismiss suggestions that faulty security played a role in the Amuay explosion, set off when a large gas cloud ignited near storage tanks. “I recommend we don’t speculate,” said Chávez, who is battling cancer, as he arrived at Paraguaná, “and that we raise the human spirit above any political interest.” Nearby residents told Venezuelan and international media that they smelled an unusually strong and sulfurous gas odor the day before the explosion; but Chávez and PDVSA President and Energy Minister Rafael Ramírez called those reports a “disgraceful” attempt by Chávez opponents to politicize the tragedy.

Oil- and gas-related calamities are hardly unique to Chávez-era Venezuela. The U.S., Chávez’s arch-enemy, has certainly had its share of deadly refinery explosions – not to mention the BP oil rig disaster that killed 11 workers off the Louisiana coast in 2010 and produced one of history’s worst oil spills. But the troubling regularity of incidents in Venezuela over the past decade inevitably stirs accusations that Chávez, in a bid to keep production lower and prices higher, and in an otherwise admirable effort to steer more of Venezuela’s prodigious oil revenue to its poorer citizens, has enfeebled what was one of the 20th-century’s most respected petro-corporations.

Granted, before Chávez took office in 1999, Venezuelans also considered PDVSA a den of arrogant and pampered technocrats – and a cookie jar for the country’s kleptocratic elite, whose epic corruption left more than half the population in poverty. After Chávez took power, a reckless near-shutdown of PDVSA by anti-Chávez workers and managers in 2002 cost the Venezuelan economy some $7 billion.

But Chávez’s subsequent firing of 19,000 PDVSA employees, half the company’s workforce, was just as rash – and sparked a slide in the industry’s productivity and infrastructural health. In those days, PDVSA had been pumping 3.2 million barrels of crude each day; today it produces 2.7 million. (More than 40% of that is exported to the U.S.; Venezuela represents about 10% of U.S. oil imports.) Meanwhile, PDVSA has become as much a social welfare agency as an oil firm, administering as well as funding tens of billions of dollars in anti-poverty programs as part of “our right to set globalization’s terms in our people’s favor for once,” Ramírez once told me.

Which, as I mentioned, is admirable – as long as you’re also adequately attending to the business of oil production and refinement, which most analysts agree is a big problem at PDVSA. Venezuela, where inflation is the world’s highest, needs especially heavy capital layouts to extract and process the especially heavy crude in its southern Orinoco Belt.  But PDVSA invests only 1% of its revenues – that is, when investment projects aren’t on hold – while most large oil firms invest about 3%. At the same time, foreign investment has been alienated if not outright expelled. Charges of corruption are mounting, as is PDVSA’s debt. Refining capacity has dropped so sharply that Venezuela now imports gasoline; and because Chávez so lavishly subsidizes gas prices at home (a gallon costs less than 15 cents) smugglers are trafficking it right back out of the country to snare big profits.

Chávez, meanwhile, has put even more pressure on the energy sector’s finances this year by ratcheting up social spending by a third to curry favor with voters before the Oct. 7 election. It’s a reminder that PDVSA, where Ramírez demands employees declare utter allegiance to Chávez and his Bolivarian Revolution, is as much about politics as it is about petroleum.

So it sounds more than a little hypocritical now to hear Chavistas warn centrist opposition candidate Henrique Capriles and his supporters not to “politicize” the Paraguaná disaster. In an echo of what I heard five years ago, PDVSA’s own files indicate that maintenance slated for Amuay in 2011 was never completed. As if to change the subject, Chávez’s Vice President, Elías Jaua, made one of the rawest political remarks on Monday as Amuay’s flames were being extinguished: The 2002 strike, Jaua asserted, “was the gravest event” to ever hit the refinery.

That anti-Chávez work stoppage a decade ago was admittedly irresponsible. But to compare it to Saturday’s carnage is cynical at best – and a sign that Chavistas realize that last weekend’s grave event is likely to affect events six weekends from now.

13 comments
Eljurel Gomez
Eljurel Gomez

La oposicion o los Majunches que quieren el poder en Venezuela no volveran y si lo de Amuay se comprueba que fue un sabotaje de estos apatrias le van a ir muy mal porque se las vera con la justicia. VIVA CHAVEZ.

Eljurel Gomez
Eljurel Gomez

La oposicion o los Majunches que quieren el poder en Venezuela no volveran y si lo de Amuay se comprueba que fue un sabotaje de estos apatrias le van a ir muy mal porque se las vera con la justicia. VIVA CHAVEZ.

Asdrubal Gomez
Asdrubal Gomez

The most unfortunate that there is hatred in PDVSA to learn, to experience.       ¨ The sweating is not working, does the thinking ¨

Bosda
Bosda

Again, in a language we can understand, please?

Vincent Lovece
Vincent Lovece

Over-dependence on oil production kills economies. When the oil run out, Venezuela will have a badly-damaged environment, a population largely skilled in extracting oil that no longer exists in their territory, and few if any other industries to keep the country going.

Sure, PDVSA is absolutely huge, but it's a single basket for almost all of the eggs in Venezuela's economy.

Juan Pablo García
Juan Pablo García

this is bullshit... it was fixed in 3 days. the oposites forces make this a chance for make an unstable panorama before elections because they know they can't win by popular elections... it was no the worse oil accident in venezuelan's petroleum history. sorry for my bad english.

 

Ric Ardleberry
Ric Ardleberry

BP has an ongoing record of catastrophe as the criminal lowlife of the Western oil majors.  PVDSA under Chavez just pole vaulted past BP again in poor track record.

RJ Silva
RJ Silva

"Before Chávez took office in 1999, PDVSA was also a den of arrogant and pampered technocrats – and a cookie jar for the country’s kleptocratic elite, whose epic corruption left more than half the population in poverty" - Tim, you've obviously spent a lot of time swallowing the lies that Ramirez and other chavistas have been feeding you. You have no clue what you're talking about here, do you? You think Venezuelans are better off now that Chavez has "admirably" used oil revenue to help the poor? I would love to have you come stay at my house here in Barquisimeto, Venezuela so I could drive you around and show you the extreme poverty conditions in which so many Venezuelans still live and then compare that with the lavish lifestyle Chavez and his posse enjoy.

It's so easy to talk about the wonders Chavez is working for the Venezuelan underprivileged from the comfort of a living room in New York or Los Angeles. Why don't you come down and have an average Venezuelan and not some rich oil minister show you around?

El_Babalawo
El_Babalawo

I think @RJSilva:disqus is being unfair. I do not feel Tim Padgett has swallowed any lies and I do think that generally his reporting on Venezuela is fair. Nowhere in this story does he say that Venezuelans are better off now and I definitely do not feel he is talking wonders of Chávez. 

RJ Silva is clearly in one extreme of the Venezuelan political spectrum. I'm sure that people on the other extreme would accuse Padgett of attacking Chávez with this news story. Both extremes are wrong. 

I don't like Chávez, I've never voted for him and I will do my part to see him lose the October election, but that does not mean I can't admit to the few good things he has done. He put the issue of Poverty on the table for the first time in Venezuelan politics, he empowered many people who had been ignored by politicians for decades and he has put oil money into social programmes --admittedly short-term and reactive-- that do benefit a lot of people.

However, under his government corruption has multiplied at an almost unbelievable rate, he has eroded the rule of law and democratic values and institutions, he has exaggerated and lied about his social achievements, he has abused power and he has institutionalized impunity and criminality, turning Venezuela into one of the most violent countries in the world.

Denying that there was corruption in PDVSA and the government before Chavez, and that the oil company's employees were pampered (anyone remember Luis Giuti's obscene salary as president of the company?) would be as false and biased as ignoring the rampant corruption in Venezuela today, and the way the "socialist" politicians have quick become the new pampered elite --including Rafael Ramírez, the current president of PDVSA, who also has an obscene salary. 

In Venezuelan politics there is a small but very loud anti-Chávez group that honestly believes Venezuela was on the right path before 1998. Fortunately there is also a much bigger group of people that admit that a change was needed then as it is now, that recognize the need to reduce poverty in Venezuela, that can see through Chavez's empty promises and that will hopefully elect a new president that will rebuild the country working with the people in the middle, not in the extremes.

fjbg
fjbg

I worked in a company that supplied equipment and technology to Pdvsa for close to 20 years, until 2002. During al those years, there was some issues with bidding processes, but NEVER an issue of having to pay or seeing corrupt activities in PDVSA. Yes, there may have been mistakes and many problems in different moments, but 99% of the people that were resposible on running the company acted with the same ethical and honest behavior you could find in Exxon or other multinational organizations. Any comment different that this one is from someone that never dealt with what used to be a sterling company. Governemtns were a different story. 

Bosda
Bosda

That a state-run business in the Third World is routinely raided for lucre by the powers-that-be is so common that it is no longer news.

Is Chavez doing it? Likely yes.

Were his predecessors doing it? Likely yes.

loroferoz
loroferoz

Only Chavez's predecessors did just take profits and misused them, true enough. Corrupt as they might have been, they had the common sense not to raid PDVSA to such a degree that production, and even safety of life, equipment and surrounding environment was compromised.