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PdV´s partners press to replace novice oil boss

10 Apr 2018 22:54 (+01:00 GMT)
PdV´s partners press to replace novice oil boss

Caracas, 10 April (Argus) — Foreign oil companies with upstream interests in Venezuela are quietly urging Venezuelan president Nicolas Maduro to remove the inexperienced National Guard major general whom he appointed as energy minister and state-owned PdV chief executive late last year.

Multiple Venezuela-based foreign oil executives, diplomats and a presidential palace official say Manuel Quevedo needs to be replaced with a professionally qualified oil executive to resuscitate the country´s crippled oil industry and tackle runaway crime at oil installations.

PdV's largest joint venture partners led by Russian state-controlled Rosneft and Chinese state-owned CNPC are also pushing for the appointment of a PdV board of directors with oil management experience and the authority to make executive decisions.

"The Russians and Chinese have warned president Maduro that general Quevedo and the entire PdV board of directors are incompetent and must be replaced with real oil executives if Venezuela's oil industry is to have any chance of recovering," a palace official told Argus.

Maduro appointed Quevedo to the joint strategic posts in November 2017, along with a new board of directors, after then-energy minister Eulogio Del Pino and PdV chief executive Nelson Martinez, two industry veterans, were fired and subsequently jailed on corruption charges. Over 80 senior PdV executives have been jailed on corruption charges since August 2017 by acting attorney general Tarek Saab. Critics say the crackdown amounts to selective enforcement in a politically charged environment.

Neither Quevedo nor PdV´s board directors have oil industry experience, but they are seen as loyal to Maduro and influential first lady Cilia Flores.

Maduro tasked Quevedo with raising Venezuela's crude production by over 1mn b/d within a year. Instead, during Quevedo's first four months in the job crude output has dropped by 327,000 b/d from 1.837mn b/d in November 2017 to 1.51mn b/d in March 2018, according to PdV officials and monthly figures communicated directly to Opec by the energy ministry. Quevedo's inability to check Venezuela's crude production decline has damaged his standing with Maduro and generated deep discontent inside PdV. But as yet there is no clear potential successor because the remaining experienced hands are in jail or have fled Venezuela.

An internal political purge launched by Quevedo in December coupled with the arrest of dozens of senior oil executives on corruption charges triggered a flood of PdV resignations, as skilled workers and managers flee political persecution and falling wages devastated by hyperinflation and a devalued national currency. Over 10,000 PdV workers have left the company since November 2017, according to the federation of oil unions (FUTPV).

PdV's management "has become dysfunctional under Quevedo," one foreign official said.

"Production continues to fall, PdV's best workers are leaving the industry, debts aren't being paid, criminal violence and theft in the oil fields is out of control, and no one makes any decisions about anything."

"We had some difficulties working with Del Pino and Martinez, who appeared last year to be under political constraints imposed by Miraflores (presidential palace). But Quevedo and the new board have been a disaster for our operations with PdV," another foreign official said.

Such criticism is echoed widely. "Output continues to fall because everything is at a standstill," an official from another foreign oil company said. "Quevedo holds many meetings but nothing is decided," a second one said.

Security is another growing concern in the small community of foreign oil executives. PdV's Russian and Chinese partners are lobbying the Maduro government through their respective diplomatic missions in Caracas to implement measures to quell widespread violence affecting their interests and citizens in Venezuela's oil fields and cities.

"The Russians and Chinese come from countries where violence always has been controlled strictly by the state," a defense ministry official said, acknowledging that the government has failed to stop violent crime in the oil fields in spite of a heightened military presence. "They don't cope well with the levels of violent crime seen in Venezuela."

Venezuela's oil fields and related installations are targeted almost nightly by gangs of organized thieves, many holding daytime jobs with PdV, who steal everything they can carry away including cables, compressors, generators, pumps and oil pipe. "In some areas they swarm in like ants after sunset," one foreign official said.

PdV's foreign joint venture partners also worry that violent crime will escalate quickly after the 20 May presidential elections as Venezuela's humanitarian crisis worsens.

"We believe that Maduro will be declared the winner, but Maduro's permanence in power after 20 May will be uncertain because his government will be viewed internationally as illegitimate," a foreign diplomat said.

As a result, the Maduro government's post-election situation could become untenable since it is very unlikely that anyone including Russia and China will be willing to finance the government and PdV, the diplomat added.

The energy ministry and PdV declined to comment.