A New Approach to the Oil Business in Venezuela

Abstract

Petroleos de Venezuela S.A. (PDVSA) has been meeting during the past two years with a considerable number of companies (groups) with a view to possible associations for the reactivation of known fields, joint activities in barely explored areas and the exploitation, refining, upgrading and marketing of crudes from the Orinoco Belt holder of immense reserves of extra-heavy crudes and bitumens. In Venezuela, a new approach to the oil business is under way. On January 1976, the law nationalizing the Venezuelan oil industry became effective establishing that the government retains the sole rights to the country's petroleum industry. However, Article 5 of the law made provision for associations in cases considered to be of [open quotes]National Interest.[close quotes] PDVSA became the wholly government-owned holding entity, encompassing 26 subsidiaries and affiliates. Other energy segments, particularly coal and petrochemicals, were not included in the law and since 1984 several associations with non-governmental entities have been established in Venezuela and very valuable experience has been garnered. Similarly, partnerships and acquisitions have been made in Europe and USA, mostly in refining, through PDVSA. The international petroleum industry foresees a modest, but steady increase in production during the coming decade, particularly in the second half ofmore » the nineties. This effect, added to the globalization concept, is making the traditional vertically integrated oil companies look for diverse [open quotes]lateral[close quotes] associations between groups, private and/or state owned with common interests, that will give greater security to sources of supply and market share.« less