Oil Report

ANALYSIS-Venezuela oil woes hurt Chavez ahead of vote

CIUDAD OJEDA, Venezuela, Feb 9 (Reuters) - Thousands of Venezuelan oil workers have been laid off or are going without pay as oil prices tumble, hurting President Hugo Chavez’s chances of winning a reelection referendum on Sunday.

Oil projects have shed employees and wages are backed up by as much as six months as collapsing prices have left the OPEC nation struggling to meet obligations, frustrating even some oil workers loyal to Chavez.

The discontent could hurt Chavez in a tight vote on lifting a two-term limit on presidents that would allow him to stay in power for as long as he keeps winning elections. Polls show the self-styled revolutionary probably has a slim lead.

“It’s outrageous that workers haven’t been paid,” said Jose Marcano, who works in this sweltering oil city on the shores of oil-rich Lake Maracaibo. “I believe in the revolution, but I think oil workers are going to vote ‘No’ in protest.”

These workers are the first to feel the impact of the oil price plunge that will likely slow Venezuela’s economy and may dampen support for Chavez -- a reality that appeared to push him to hold the vote as early in the year as possible.

The referendum will likely hinge on Chavez’s ability to get supporters to the polls. A broad package of constitutional reforms that included the current amendment was narrowly defeated in 2007 mostly because of heavy abstention by Chavez supporters.

Chavez, who has been in power for a decade, would have to leave office in 2013 if he loses the vote on Sunday.

State oil company PDVSA’s roughly 60,000 employees are still being paid. But it has built up billions of dollars in debts with service companies, which have been unable to pay around 5,000 workers across the country for lack of cash.

In addition, PDVSA has ended some of its contracts with service companies -- leaving some 4,500 workers out of a job.

Hardest hit has been the state of Zulia, an opposition stronghold that depends on the oil sector for half of its economic activity and where some 230 oil service companies have gone unpaid for months.

Some workers in Zulia say they are considering halting activities such as worker transport, but a broad industry strike is unlikely after a grueling 2002-2003 shutdown allowed Chavez to take control of PDVSA.

The state oil company is now campaigning heavily for Chavez, with staff often leaving offices for rallies and companies owed massive amounts by PDVSA being told they will not be paid until after the vote.


For years, Chavez has used oil revenues to finance social programs expanding health and education services, boosting his popularity but leaving PDVSA burdened with billions of dollars in costs unrelated to oil production.

He also provides low-cost oil to allies such as Cuba, which sends doctors to Venezuela in return, and to a group of Caribbean nations that have struggled with high fuel bills. Critics accuse Chavez of giving away oil through such programs.

When oil prices were soaring, PDVSA could pay both industry costs and social programs, but with oil now near $40 per barrel it has racked up at least $8 billion in debts to service companies -- with contract workers feeling the pinch.

Venezuela has worked to cushion the price decline by shuttering some 10 percent of its production, according to official figures, in a coordinated cut with OPEC, but the move also left thousands of contractors unemployed.

“They’re making the oil workers go hungry -- or rather the oil workers’ children,” said Pedro Viloria, who used to work on a drilling rig near the town of La Ceiba but lost his job with some 130 others after rigs were shut to comply with OPEC quotas.

Viloria said the actions have a ripple effect in places like La Ceiba because clinics, pharmacies and grocery stories depend heavily on expenditures by oil workers.

“There is a double discourse here -- President Chavez talks about a government for the workers, but PDVSA’s attitude is totally different,” said Carlos Labrador, a union leader who is seeking to postpone protests until after Sunday’s vote.

“If workers and their families are suffering, obviously they’re going to vote against the referendum on February 15.” (Editing by Saul Hudson and Kieran Murray)