The company has so far drilled only PDVSA workers, including most of The country’s largest potential
seven exploratory wells in deep wa- the company’s senior managers. In new source of oil is in the Orinoco
tersinthe Gulfof Mexicoandhasnot addition, his government has im- tar-sands belt, which holds esti-discovered any commercial quanti- posed more stringent terms on for- mated reserves of some 235 billion
ties of oil. Mexico hopes to maintain eign oil companies operating in barrels of extra heavy crude. Devel-or slightly raise current production Venezuela, including raising royal- oping the Orinoco, as well as the un-of around 2. 8 million b/d over the ties and taking operational control der-exploited middle section of the
next ten years, but many indepen- of 32 service agreements and four country, could raise production in
dent analysts forecast the country Orinoco heavy oil projects and con- just a few years. But without help
will become a net oil importer in verting them to joint venture agree- from major international oil compa-seven or eight years unless it intro- ments with PDVSA as the majority nies with the experience and tech-duces major energy reforms. On the stakeholder. nology to develop the area, Orinoco
other hand, Mexico could increase Production still suffers today from production is unlikely to increase
output more rapidly by partnering the policies enacted by the Venezue- beyond current output of 600,000
with the world’s leading deepwa- lan government over the past eight b/d. Although Venezuela has been
ter oil companies, such as Brazil’s years. PDVSAhasnotrecoveredfrom courting state oil companies else-Petrobras, StatoilHydro of Norway the loss of skilled workers fired dur- where, for instance in China, India
and Chevron. ing the strike. To complicate matters, and Russia, it has now short-listed
In October, Mexico’s congress ap- PDVSA has paid a growing portion of several major Western firms, in-
Many independent analysts forecast Mexico will become a net oil importer
in seven or eight years unless it introduces major energy reforms.
proved a weak energy reform pack- its income to Fonden, an opaque de- cluding Chevron and Royal Dutch
age that introduced small steps velopment fund controlled directly Shell—perhaps realizing that while
toward improving Pemex’s financial by Chávez, while the company is such state firms might make conge-situation, administrative efficiency failing to reinvest in new produc- nial ideological partners, they lack
and its ability to award service con- tion and maintain primary facili- the capability to develop Orinoco’s
tracts. However, the reform excludes ties. During the first three quarters extra-heavy crude.
any potential for private sector par- of 2008, PDVSA contributed almost
ticipation in oil production and at $11 billion to Fonden, an increase of
Fickle Ecuador
best will have a minor long-term im- 138 percent compared to the same pe- Venezuela’s close ally, Ecuador, could
pact on production. riod of 2007. also increase production by introduc-
Venezuela currently exports about ing a more stable and attractive invest-
Venezuela Trails Off
1 million b/d to the U. S., almost one- ment environment, and by opening
Like Mexico, Venezuela’s production third of its current declared pro- new areas to exploration. The coun-
is in decline due to a dearth of pri- duction—although independent try supplies about 200,000 b/d to the
vate or state investment in oil oper- organizations, such as the Organiza- U. S., but production has slipped since
ations. President Hugo Chávez has tion of Petroleum Exporting Coun- President Rafael Correa initiated con-
been the region’s most vocal sup- tries and the International Energy tract renegotiations with major for-
porter of resource nationalism. He Agency say the real figure is about eign companies that produce about
launched Venezuela’s oil nationaliza- 2. 4 million b/d. This represents a de- half of the country’s output.
tion in 2000 by introducing the hy- cline from a peak of 3. 3 million b/d Nevertheless, most of those
drocarbons law, which set the stage in 1997. Yet Venezuela is thought to companies have reduced their in-
for a return to state control of the hold some of the largest oil reserves vestments, largely because of the
country’s oil operations. in the world, about87 billionbarrels uncertainty created by Correa’s
In late 2002, executives from the of proven reserves, according to the fickle tax policies. Moreover, Cor-
state oil company, Petroleos de Ven- 2008 BP Annual Statistical Review, rea’s efforts to strengthen Petroec-
ezuela (PDVSA), orchestrated a major putting it on a par with major pro- uador, the state oil company, have
oil strike that virtually shut pro- ducers like Russia, Kuwait and the failed to boost production: the
duction down. Chávez fired 18,000 United Arab Emirates. company suffers from notoriously
