[NYTr] LaborDisputes, Oil Drill Shortage Trouble Venez Oil Industry

[nytr at olm.blythe-systems.com]

Venezuelanalysis - Jul 23, 2007
http://www.venezuelanalysis.com/news.php?newsno=2361

Labor Disputes and Oil Drill Shortage 
Cause Problems for Venezuela’s Oil Industry

By: Kiraz Janicke

Caracas , July 23, 2007 (venezuelanalysis.com) - Industrial unrest,
technical challenges and corruption claims have recently plagued
Venezuela’s state-owned oil company Petróleos de Venezuela, (PDVSA). On
July 18, Luis Vierma, the exploration and production vice president
PDVSA, the state oil company, told Venezuela’s National Assembly's
comptroller committee, that PDVSA is in a state of “significant
operational emergency.”

PDVSA accounts for about half of government revenues and three quarters
of export revenues and has been the backbone for funding the Chavez
government's social programs.

In May PDVSA took over operations of major oil projects that had been
run by ConocoPhillips, ExxonMobil, Chevron, and Total. The projects are
in Venezuela's oil-rich Orinoco River basin. Also nationalized were 46
oil rigs, most of which are also centered around the oil rich Orinoco
River basin.

PDVSA's annual plan for 2007 set a target for 191 active oil rigs to
produce a projected 3.3 million barrels per day of crude oil. However,
Vierma told the National Assembly that only 112 oil rigs (33 of which
belong directly to PDVSA), are currently operational and it is
estimated that only 120 will be up and running by the end of the year,
a deficit of 36%.

"Venezuela is moving toward technological independence, but it will
take a long time," Vierma continued.

A new law requiring contract winners to put 10% of the contract value
towards social programs, and increased international demand for oil
rigs are factors thought to have contributed to a reduced number of
contract applications through PDVSA's bidding process.

The Minster for Energy and president of PDVSA, Rafael Ramirez, told the
newspaper El Universal last week, "There's an international shortage of
rigs. The cost associated with oil in OPEC countries has risen 40
percent and an offshore rig is being hired at no less than 400,000
dollars per day; double that of last year."

In an effort to combat the shortfall, PDVSA announced on July 20 it
would invest US$3.5bn in new drilling rigs. The statement also said
that PDVSA has reached an agreement with China for the acquisition of
new rigs - an initial thirteen rigs to be imported directly from China
and future Chinese rigs to be assembled in Venezuela.

While the Paris-based International Energy Agency, which analyzes the
international oil market, estimates that that oil production in
Venezuela has fallen to 2.37 million barrels a day, Ramirez maintains
that production remains steady at 3 million barrels of crude per day.
At least part of the discrepancy can be traced to differences in the
type of oil being included in the totals.

Two-pronged industrial dispute at PDVSA

In addition to the problem with the oil rigs, PDVSA is also facing two
labor conflicts. The first dispute relates to the collective contract
for 2007-2009, which has been under negotiation since April.
Venezuela's oil workers are represented by four major union
federations, all officially aligned with the UNT (National Union of
Workers). The loyalties of hundreds of individual unions are divided
amongst the four federations.

A technical commission of representatives from the four federations has
been appointed to negotiate the collective contract with PDVSA.
However, union leaders have raised concerns over the slow progress and
“uncertainty” surrounding the negotiations.

The Minister of Labor José Ramón Rivero said on July 21 that the
situation within PDVSA is “absolutely normal,” and that the
negotiations between the technical commission and PDVSA representatives
was going well, with 34 clauses of the new collective contract, under
negotiation since April, agreed upon, and 41 still pending.

José Bodas, general secretary of Fedepetrol-Anzoátegui, has called into
question the legitimacy of technical commission appointed to negotiate
with PDVSA, saying that the committee is unelected and comprised of
“union bureaucrats”. Bodas called for the election of a new negotiating
committee that is “truly representative of the base,” as well as
calling for democratic elections for a new leadership of a single,
united, union federation of oil workers.

This week, beginning Monday, July 23, oil workers have called for
pickets at the gates “of all oil installations” throughout the country,
both administrative and operational, including ports, refineries and
oil rigs, demanding the removal of the Manager of Human Resources,
Dario Merchan, a relative of Ramirez, who they claim has delayed
negotiations for the collective contract 2007-2009, and protesting what
they say are the daily violations of the existing collective contract
and failure to pay workers entitlements. A further demonstration
supported by more than 160 unions affiliated with Fedepetrol has also
been called for the August 2nd, in front of the Presidential palace,
Miraflores.

The other industrial dispute centers around the nationalization of 46
oil rigs in the Orinoco Oil Belt last May, with allegations that not
all of the oil workers formerly employed in the old joint ventures have
been reemployed by PDVSA.

Ramirez has repeatedly denied that there have been dismissals and that
all of the 1,342 oil workers are being incorporated into PDVSA and
argued that some unions had tried to incite conflict, so that the
control of the rigs did not pass over to other unions, according to the
newspaper Últimas Noticias of July 10.

In contrast, Bodas, who has described the situation in PDVSA as a “time
bomb,” argued that 268 workers remained in “limbo.” “If we achieve 100%
absorption of the operators it will be a triumph of the mobilization of
the workers,” he added.

Argenis Olivares, a representative of the Sindicato Nacional Unitario
de Trabajadores Petroleros (Sinutrapetrol) said last week that this
situation is simply a problem of opportunism, although “it cannot be
denied that in some middle levels of PDVSA there is ingovernability.”
According to him, some unions were taking advantage of the fact that
the minister was out of the country and that the situation would soon
be resolved.

In addition to the technical difficulties and industrial unrest facing
PDVSA, allegations of corruption have also surfaced, relating to the
bidding process of for oil rigs and other oil-services providers
contracted by PDVSA.

On July 19 Luis Tascón, a pro-government member of the Venezuelan
National Assembly said he was convinced there was evidence of
“irregularities” and corruption and demanded Minister Rafael Ramirez
give an explanation to the National Assembly.

Tascón was quoted in the New York Times as saying, “Our sovereignty is
at risk if we allow Petróleos de Venezuela to remain in this situation.”

As yet, Venezuelan President Hugo Chavez has not publicly intervened in
the debate.

While Venezuela continues to export about 1.4 million barrels of oil
per day to the United States, it is looking to expand markets through
joint ventures with state oil companies from China, Iran, Vietnam, and
Belarus. With oil prices hitting an 11-month high of $78.40 a barrel in
London last week, Chavez remains confident, “Oil is going straight to
$100 [per barrel]. No one can stop it,” Chávez said yesterday.