(Reuters) - Venezuela’s state-owned oil company Petroleos de Venezuela is proposing a sweeping restructuring that would transfer a large portion of its current activities to private companies, according to a document seen by Reuters.
If carried out, the plans would roll back a slew of reforms started by former leftist President Hugo Chavez nearly two decades ago to boost the state’s role in the OPEC nation’s oil industry.
Venezuela’s production has slumped from some 3 million barrels per day (bpd) when Chavez took office in 1999 to just 700,000 bpd after years of mismanagement and, more recently, heavy U.S. sanctions aimed at ousting current socialist President Nicholas Maduro.
The proposals include reducing gasoline subsidies, allowing private companies to take big stakes in PDVSA-owned fields and refineries, and exit non-oil businesses, according to a presentation dated March 2020. The proposals are seen as a way to entice private investment in the country, which in the midst of a six-year recession.
“To boost production and make Venezuela a protagonist in the oil world again, the urgent restructuring of PDVSA is necessary,” the document reads.
The plan even floats changing the color of the company’s logo from signature socialist red to black.
Maduro on Monday ousted Manuel Quevedo, a National Guard major general, from the position of oil minister and replaced him with Economy Vice President Tareck El Aissami. El Aissami is a proponent of liberalizing Venezuela’s economy by loosening import restrictions and allowing the use of foreign currency.
El Aissami is sanctioned by Washington, which has also accused him of drug trafficking. He denies the charges.
Both PDVSA’s private partners and the Venezuelan opposition have long recommended opening the sector to more private investment. However, the proposal was likely to rankle some in the socialist party who argue Maduro’s moves toward free-market economic policies in the face of a six-year recession amount to a betrayal of Chavez’s legacy.
“This document is not proposing a reform but delivering Venezuela’s oil industry to private companies,” said Rafael Ramirez, who supervised Chavez’s nationalization of the oil industry as energy minister and PDVSA’s president for a decade.
“Any government in Venezuela will need oil production, and for that it will need PDVSA. If they progress with this, the damage will be enormous,” he added.
Neither PDVSA nor the oil ministry immediately responded to requests for comment.
The recommendations were written by PDVSA’s planning division to be presented to a committee chaired by El Aissami, which was appointed by Maduro earlier this year to consider restructuring proposals. The plans proposes allowing private firms to operate fields - even fields with massive reserves that have always been in PDVSA’s hands - and market crude themselves.
It also proposes that PDVSA cut its stakes in several fields to 50.1% from 60% while allowing private companies to operate refineries. For fields operated solely by PDVSA, it proposes converting them into joint ventures by selling stakes, or signing joint service agreements in which PDVSA pays a private company to operate the field.
“This is a disorderly opening,” said Antero Alvarado, director of consultancy Gas Energy Latin America in Caracas. “You’re doing this in the middle of sanctions, you can’t bring people in from Houston.”
The proposal also recommends lowering gasoline subsidies, which are so generous as to make motor fuel essentially free. But allowing gasoline prices to increase closer to international levels could prompt unrest in the inflation-stricken economy with a monthly minimum wage of just a few dollars.
While most oil majors and large service firms would likely not be interested due to sanctions, some Venezuelan businesses and others who are not concerned about potential U.S. sanctions may be attracted, said Raul Gallegos, director for Control Risks in the Andean region.
“The current sanctions regime coupled with this level of pragmatism will cause a number of obscure companies to mushroom,” he said.
The proposal recommends that PDVSA keeps its 60-70% stakes in Venezuela’s five most productive joint ventures. It also argues the company should exit non-oil businesses it had created during the Chavez era in areas such as agriculture, and sell shares in affiliates across Latin America.
It suggests holding onto Citgo, PDVSA’s U.S. refining subsidiary that has been controlled by the opposition since the U.S. imposed the sanctions last year.
But it also proposes the creation of a company called PDVSA Russia, which would control Nynas AB, a European refinery part-owned by PDVSA and domiciled in the Netherlands. Opposition lawmaker Luis Stefanelli said he was concerned that maneuver was an attempt to prevent the opposition from taking control of Nynas.
Reporting by Luc Cohen; additional reporting by Marianna Parraga. Editing by Bernadette Baum