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Crude Mistake
Chavismo Still Hamstringing Venezuelan Oil Production

Eleven years ago, Hugo Chávez fired almost half of Venezuela’s state-owned oil company in response to a strike. The 18,000 erstwhile employees were also prohibited from working for any company that did business with the state-owned firm, as well. It was a brain drain—or, as the Economist puts it, a hemorrhage—and its effects are still being felt in Venezuela. The Economist reports:

The firm’s oil production has since stagnated, despite a big run-up in prices. The financial crisis bears some of the blame for that, as does the economic mismanagement of Chávez and, since last year, Nicolás Maduro. But the loss of skilled personnel was a huge handicap, hurting exploration and management. The Centre for Energy Orientation, a Venezuelan NGO, says the number of incapacitating injuries due to accidents at PDVSA rose from 1.8 per million man-hours in 2002 to 6.2 in 2012. At Pemex, Mexico’s state oil firm, the rate was 0.6 in 2012.

While the loss of these skilled workers hurt Venezuelan oil production, firms in other countries benefitted:

Venezuela’s loss was others’ gain. Not all of the former PDVSA employees stayed in the oil business; a minority chose to remain in Venezuela. But thousands went abroad—to the United States, Mexico and the Persian Gulf, and to farther-flung places like Malaysia and Kazakhstan. […]

No country has benefited more from the Venezuelan exodus, however, than one next door. Colombia’s oil output was declining at the time of the purge, falling from 687,000 barrels a day (b/d) in 2000 to 526,000 five years later. Today, average daily production stands at around 1m b/d. Much of this renaissance is thanks to the Venezuelans…Without the input of the Venezuelans “there is no way Colombia could have doubled its production in such a short time,” says Carlos Alberto López, an energy analyst.

It’s a remarkable story, and goes to show just how powerful the human quotient remains, even in technologically demanding fields like the oil industry. Hugh Chávez’s impact is still being felt in Venezuela well after his death, but this isn’t the legacy for which he’d like to be remembered.

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  • foobarista

    This gets to the root of what makes a complex organization work. Oil companies are every bit as high-tech as any “tech company” – if not more so since the expertise in oil & gas is learned by doing far more than it’s learned from texts. It also doesn’t help that VZ oil is gloppy and heavy (opposite of “light, sweet crude”) and hard to both extract and refine. Oil companies are capital-intensive, but what makes them work is knowing how to deploy the capital and use the equipment, not the capital itself.

    Before the mass firing, PDVSA was the most respected oil company in “the global South” due to its expertise in managing heavy VZ crude. Now, most of that expertise is gone.

    When Chavez did the firing, it was clear that he was both a megalomaniac and a buffoon who would destroy his country.

    • Andrew Allison

      Would that megalomaniacs were buffoons: it would limit the damage they do.

      • Breif2

        Oh, there is no lack of megalomaniacal buffoons on the world stage. Americans can generally afford to be amused by their antics; those at their mercy have more trouble laughing. In fact, they can find it downright unhealthy.

  • Jacksonian_Libertarian

    It seems to me that he did this to better loot the oil industry. After all when he died he was worth billions of dollars, he had to steal them from somewhere.

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