This book is a systematic appraisal of the nationalized Venezuelan oil industry. It essentially serves two purposes. First, it provides up-to-date technical and economic information on the operations of PDVSA (Petróleos de Venezuela, S.A.). Various chapters deal with all the upstream and downstream activities of the company, from exploration onshore and offshore in Venezuela to the purchase of refineries in Europe and retail gasoline chains in the United States. Second, it provides a critical analysis of the political economy of oil in the largest exporting nation outside the Middle East.
Since it was formed in 1976, PDVSA has emerged as a commercially successful, vertically integrated oil company, now ranking third in the world in terms of size. Nevertheless, industry leaders are currently divided over which long-term development strategy to follow. Some argue that lucrative, high-demand light and medium crude oils will soon be in short supply, and therefore immense exploration investment is needed to replenish them. Others advocate the intensive and hugely expensive development of the Orinoco Oil Belt, one of the largest oil provinces yet discovered. The company cannot undertake both of these projects simultaneously.
A related problem concerns PDVSA-government relations. Since the 1940s, it has been state policy to use oil industry revenues to promote economic diversification and underwrite costly social and welfare programs. The government, through its tax policies, siphons off so much of PDVSA’s profits that the company has little or no money to pursue either lighter crude supplies or the Orinoco Belt. The nationalistic policies of the 1970s and 1980s, therefore, may be replaced by a more pragmatic approach that almost certainly would include the reintroduction of foreign private oil companies on an equity basis.
The author, a PEMEX official, is critical of traditional Venezuelan oil policy. He contends that Arturo Uslar Pietri’s famous “sow the oil” policy has largely been a failure, as have the state-directed import substitution industrialization policies of recent democratic regimes. Venezuela today is far from being the middle-sized industrial power that the last generation of political leaders had hoped it would be. Indeed, the urban riots of 1989 “expressed the pent-up frustration of a people who could not understand how it was possible that . . . their nation . . . had emerged as underdeveloped and dependent as it had been before the oil shocks” (p. 188).
The author recommends abandoning the “sow the oil” concept and instead making the oil industry the catalyst for an industrial development strategy that would capitalize on oil and gas and affiliated activities, such as chemicals and petrochemicals, in which Venezuela has a comparative advantage. Otherwise, he fears, the state will continue to bleed PDVSA dry, preventing the hydrocarbons sector as well as other economic sectors from prospering.
