(The authors are Reuters Breakingviews columnists. The opinions
expressed are their own.)
NEW YORK, June 7 (Reuters Breakingviews) - Hugo Chavez, the
Venezuelan president, is struggling with cancer even as his
re-election campaign begins. Whether decided by the state of his
health or at the Oct. 7 election, any successor could make big
changes. That could include running the nation's oil business
better. That matters to rivals in the Organization of the
Petroleum Exporting Countries, which have gained from
Venezuela's shrinking output.
Chavez survived a massive 2002 oil strike meant to unseat
him, but the flow of oil never recovered. Since then, Petroleos
de Venezuela, the government oil company, has tripled
its payroll to 121,000 employees while output has fallen by at
least a fifth from its 3.2 million-barrel-a-day peak. PDVSA now
employs more than twice as many people as Saudi Aramco, the
world's largest state oil company, but its output is a mere
quarter of its Saudi cousin's.
The president's management style doesn't help. PDVSA's
bosses attend his made-for-TV cabinet meetings and endure
eight-hour speeches. Then there's poor capital allocation. The
national oil group spent $30 billion on social initiatives last
year, twice what it devoted to barely adequate capital
investments.
Venezuela's 944,000 barrels a day of crude oil and product
sales to the United States, a natural customer, are half what
they were when Chavez took power 13 years ago. Canada, Mexico
and Saudi Arabia now sell more to Uncle Sam. As a member of
OPEC, Venezuela's ouput is one component of the total production
the cartel tries to limit in order to keep oil prices buoyant.
The country's declining production has allowed others in the
group to sell more, thereby bringing more cash into their
national coffers.
Even if Chavez is replaced by an acolyte, someone more
pragmatic could turn PDVSA's fortunes around. Even more so, a
business-friendly opposition leader in power could attract
foreign capital to develop the country's reserves, now the
world's largest. Venezuela's pump-happy 1990s angered OPEC
colleagues and helped depress global prices. That pattern could
be repeated.
Though he is clearly very ill, Chavez's prognosis is
anybody's uninformed guess. Venezuela's oil-producing
competitors might feel sympathy for the Chavistas hoping he
pulls through and wins another term. After all, they won't want
a new broom who gets the crude flowing again.
CONTEXT NEWS
- Venezuelan President Hugo Chavez's battle with cancer has
kept him off the street during the run-up to Venezuela's Oct. 7
presidential vote, exacerbating supporters' fears that the
leader's health is deteriorating. However, his campaign said on
June 6 that he would register his candidacy in person on June
11.
- Venezuela is the sixth-largest oil producer among the 12
members of OPEC. The nation's proven oil reserves are the
largest in the world at around 296.5 billion barrels, according
to OPEC, surpassing those of Saudi Arabia. The country produced
3.2 million barrels a day of oil in 2000, according to the BP
statistical review, but output declined to 2.47 million barrels
a day in 2010.
- Oil ministers from the Organization of the Petroleum
Exporting Countries are set to meet in Vienna on June 14.
- Reuters:
Chavez to launch Venezuela candidacy in person
"Virtual" Chavez campaigns for re-election in Venezuela
RELATED COLUMNS
Debt end
- For previous columns, Reuters customers can click on
and
(Editing by Richard Beales and Martin Langfield)