By Gustavo Inciarte
What Has Become of PDVSA?
As usual, every year when February 7th comes around, I get a bit sentimental and begin to reminisce about my days at the Instituto Tecnologico Venezolano Del Petroleo (INTEVEP), the R&D and technology development center for PDVSA, where I spent almost a quarter of my more than 40 years in the Venezuelan oil industry. I was named President of INTEVEP in early 1985 and I left in early 1995, when I was named to PDVSA�۪s Board of Directors. February 7 is when, more than three decades ago, some outstanding Venezuelans decided to create the Institute.
The anniversary has become even more emotional recently as I am now residing in Norman, Oklahoma and cannot help but consider what has happened to the oil industry in Venezuela in the last few years.
With the lay-off of practically all the professional staff at PDVSA, the organization has been reduced to a body with no brain and no memory. The best and the brightest Venezuelans have been lost, replaced now, I understand, with inexperienced, ignorant people, some in managerial positions and lacking even a high school diploma. What most non-Venezuelans do not really understand is that the events in PDVSA go beyond of pro-Chavez or anti-Chavez politics. The destruction of PDVSA eliminated the most important and egalitarian venue for the most talented Venezuelans to find a meaningful and substantive career.
In the entire Venezuelan oil industry, 18,616 people with an average of some 14 years of experience were laid off by early 2003. But for me the most worrying fact is that almost 1,000 were from INTEVEP, an institution totally dependent on the knowledge and specialized experience of its trained people.
Of some 1,600 INTEVEP employees, 55% were let go, and of these, 108 (of a total of 164) had PhDs and 200 had MS degrees. More than three decades of professional and arduous work were destroyed in one day. Although the full impact of the act cannot be measured economically, the cost alone for developing a PhD is on the order of $250,000. The effective result is the destruction of an organization which was created by selecting and developing the best talent available in a country with very little experience in R&D and specialized oil industry services. The biggest strengths of the international oil industry lie in its managerial and technological capacities, developed in a corporate culture environment of professional principles and values, permitting it to be not only efficient but also effective when faced with difficult physical and geopolitical challenges.
This understanding allowed the Venezuelan petroleum industry to be different than the country itself because, as former PDVSA president Brigido Natera used to say:
�ۢ We have a type of work discipline unfortunately not very common in our country.
�ۢ We apply and respect our norms and procedures that stimulate our work and allow for control and auditing, and make people responsible for their performance and behavior.
�ۢ We arrive on time, leave when the work allows it, and begin our meetings on time.
The impact of these firings not only resulted in a cascading effect in Venezuelan universities and their research efforts. Much more serious is the damage to the development and utilization of Venezuelan talent so essential for future generations.
When I went on pension from PDVSA, the long-term plan at the time called for the investment of some $60 billion over the subsequent ten years. This plan assumed the exploration of the remaining light/medium crudes and gas with potential discoveries of some 60 billion barrels of oil and some 200 Tcf of gas, and the increase in potential recovery of the extra heavy crudes/bitumen of the Orinoco Belt's vast potential reserves of some 200-350 billion barrels. This would have allowed Venezuela to be ready to produce more than its traditional 11 percent of OPEC production, and also to be ready for unforeseen increases in demand and to improve our market share. PDVSA was the only OPEC company that had such an aggressive development plan with the correct vision, now confirmed, for today's market.
Venezuela's oil production had increased from 2.16 million barrels per day in 1955 to 3.7 million in 1970. The recent plans called for increasing from a potential of 2.6 million in 1994 to over 4 million after 2004, later growing to over 6 million barrels per day.
So the impact of what did not happen as a result of Venezuela�۪s talent depletion is quite obvious, as well as globally devastating. What would have been the effect on today�۪s oil markets and prices had the country been producing close to a projected 5 million barrels per day rather than the current 2.5 million?
The answer to my title question: That company has been totally destroyed and it may be beyond recovery.
Gustavo Inciarte, a petroleum engineer, served as the president of INTEVEP, the R&D center for PDVSA.
He also served on PDVSA.
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