Petróleos de Venezuela, Accounting For 60% Of Country’s Budget, Faces Hardship As Fires, Layoffs And Debt Escalate

These are not good times for Petróleos de Venezuela (Pdvsa). Fires, layoffs and debt are seriously threatening the future of the once-profitable state-owned oil company, which still accounts for 60 percent of the government’s budget.

In the last 12 months, Pdvsa has reported 24 incidents including fires, wildcat strikes and blackouts. In June, an explosion at the José Antonio Azoátegui site in Barcelona, in the east of the country, started an enormous fire that luckily left nobody injured. In August, several sites were hit by lightning, including Amuay, the biggest oil extraction site in the country, which in 2012 was the scene of a gas leak that killed 42 people.

“The workers are resigned; many do not want to be there,” one of them, Juan Montero, told Caracas newspaper El Nacional. And it is not like there are so many of them either. Many have left for Colombia in search of better conditions and salary, while many others have been laid off. Since 2003, more than 20,000 oil workers have been asked to leave.

This does not bode well for the company: In 2012, Pdvsa registered $7.7 billion in losses. Debt rose to $40 billion, a 14.7 percent rise from 2011. According to the opposition, this is due to a lack of foreign investment prompted by instability. The government, on the other hand, blames the red in the accounting books on “acts of God,” meaning the natural disasters and accidents that have hurt profitability.

The oil industry is the main financial support of the Venezuelan government, particularly during the last decade. Even though its production declined from 3.5 million barrels a day in 1998 to 2.4 million in 2011, revenues increased thanks to the rise in oil prices, according to the Organization of Petroleum Exporting Countries.

In the first six months of 2013, Pdvsa has produced 2.7 million barrels a day. This number is much lower than the one expected by the late President Hugo Chávez, the most passionate promoter of Venezuelan oil. “By 2014, we will be reaching 4 million barrels a day. By 2019, we will reach 6 million. We are one of the few countries in the world that have that growing potential,” said the Comandante in 2011, when the company was already in trouble.