* Cancer could force Socialist leader to step down
* Few changes expected at state company in short-term
* OPEC nation has world's largest crude reserves
By Daniel Wallis and Andrew Cawthorne
CARACAS, Dec 19 Ten years ago when Venezuelan
President Hugo Chavez's leadership was in serious doubt, the
state oil company embarked on a devastating strike to force him
from office, resulting in a years-long decline in production.
Now, with the world's 11th largest oil exporter on the brink
of a political transformation if cancer forces Chavez from
power, the odds are the opposite: an extension of "Chavismo"
should keep existing projects on track, while a change in
parties may usher in more foreign capital.
While state-run PDVSA's loyalties long ago shifted in
staunch support of Chavez, few analysts expect anything like a
repeat of the late 2002 crisis that shut down the oil sector and
crippled the economy - even if the primary opposition leader
wins power and follows through on a promise to shake up PDVSA
and fire long-time President and Energy Minister Rafael Ramirez.
The likelihood is that things continue much as they are
including joint ventures with Chevron and Spain's Repsol
in the Orinoco extra heavy crude belt adding a small
amount to the country's current production of around 3 million
barrels per day (bpd).
"You have lots of political uncertainty, but I don't believe
that's affecting the ongoing projects," said Venezuelan energy
expert Luisa Palacios at New York-based Medley Global Advisors.
"These Orinoco belt projects can work under different
political circumstances. This gradual, ongoing investment in the
oil projects will continue."
Chavez has named Vice President Nicolas Maduro as his heir
apparent and urged supporters to vote for him if it came to
that. The former bus driver and union leader is a close ally of
Chavez who is seen broadly sticking to his policies.
Before October's vote, PDVSA union boss Wills Rangel told
Reuters that workers guaranteed continuity of production under
any political scenario, and rejected efforts to bring back "the
bad old days" of previous governments.
DEALS QUESTIONED, INVESTMENTS OPENED?
Venezuela is South America's biggest oil exporter, a
top-four supplier to the United States and an increasingly
important fuel source for China. Last year, OPEC said it
overtook Saudi Arabia as the country with the world's biggest
The government hopes to add 2 million bpd of output for
investments of more than $80 billion in joint ventures in the
PDVSA sends tens of billions of dollars a year to
government coffers to fund Chavez's "21st Century Socialism"
project, and carries out the preferential supply deals signed
with political allies.
The company is powerful: in 2002, it all but shut down
output for two months. Now it has more than 100,000 workers and
its net profit jumped 42 percent to $4.5 billion last year on
record revenue of almost $125 billion.
If Chavez is forced to step down, a new election would be
held within 30 days.
"If it is a transition to Chavismo without Chavez, then you
have the status quo," Palacios said. "Or, you have an opposition
government, which represents upside...they will be more open to
Likely opposition candidate Henrique Capriles would make
some important changes: ending some of the politically motivated
oil deals of the Chavez years; streamlining PDVSA - which is
widely seen as a bloated and inefficient company - and reviewing
all of its joint ventures.
But these would probably take years, and after criticizing
Chavez so roundly on the campaign trail all year, Capriles would
not want to endanger production, even in the short term.
Among the deals to be scrutinized would be around 115,000
bpd of preferential oil sales to Cuba, as well as shipments to
ideological allies further afield such as Syria, Belarus and
Capriles has also said he would look into whether it was
possible to pay China with cash, not fuel, for the loans. PDVSA
sends China 430,000 bpd of crude and products in repayment for
loans totaling $34 billion to Caracas, and he said that would
help solve the company's cashflow problems.
China would remain an essential partner under an opposition
government, he said. "No one in the world can do without China."
Before losing October's presidential election to Chavez,
Capriles said he would only fire one PDVSA worker, Ramirez.
He also said he would take politics out of the running of
the company - Ramirez once described it as "red from top to
bottom" - which has repeatedly failed to hit its own production
targets and suffered a string of sometimes deadly accidents.
But he could face resistance from more militant members of
the workforce. Union leaders, who are deeply loyal to "el
comandante", could be expected to reject any layoffs or other
changes to operations as a betrayal of his memory.
Neither Capriles nor Vice President Maduro is likely to do
much quickly about domestic fuel subsidies that have made
Venezuela's gasoline the cheapest in the world: it costs less
than $2 to fill up an average SUV.
Capriles says he wants to start a debate on the issue with
an eye to eventually increasing fuel costs, but the topic has
been a sensitive one since deadly riots over price hikes in
Whatever happens to Chavez, oil will continue to contribute
more than 95 percent of Venezuela's hard currency earnings.
"In the short term, there is little likelihood that sweeping
changes will be made to existing policies," J.P. Morgan said in
a research note.