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Venezuela's once-proud oil industry is collapsing

Venezuela's oil industry is in crisis.What was once the backbone of Latin America's most prosperous nation is ...

Posted: May 9, 2018 2:43 PM
Updated: May 9, 2018 2:43 PM

Venezuela's oil industry is in crisis.

What was once the backbone of Latin America's most prosperous nation is now a constellation of rundown projects, shuttered infrastructure and empty stillness.

The workers, who years ago enjoyed some of the best benefits among Venezuela's public and private employees, have paid the highest price for their country's spiral into hyperinflation. Their salaries are now worth just a handful of dollars.

The small northeastern town of Punta de Mata, in the state of Monagas, used to be the heart of the industry. Now it's a microcosm of the nation's crisis.

"When we started working in 2005, there were several wells working. Now you rarely see five or six wells working, at least in this area," says Jose Luis Ramirez, a rig operator at one of the wells Chinese oil company CNPC operates as part of a joint venture with Venezuela's state oil company, Petr-leos de Venezuela, or PDVSA.

Ramirez, speaking in a calm voice, detailed his daily struggle to get to the end of the month.

"We have to sell our trousers to live. The boots, the gloves, every time we receive the kit, every few months, we have to sell it to buy food," Ramirez said.

Most of his colleagues, too scared to get into trouble or lose their jobs if they speak out, preferred not to speak to CNN.

"An arepa with just butter is still better than an arepa with nothing," Ramirez said, referring to the omnipresent corn pancakes that are Venezuela's staple food.

Related: Venezuelans scramble for food, but it's often out of reach

Many of Ramirez's colleagues can no longer afford arepas. An oil worker who did not wish to be identified recalled that his salary used to be more than enough to feed his five children, and buy extras.

A family like his would need almost 30 million bolivars per month, according to consumer groups. His salary as an oilman earns him approximately 2.5 million Bolivars.

"Sometimes I cry alone, because I can't give my kids what they are asking for," the oilman added.

Only selected entities can exchange bolivars at the government's privileged rate. Most exchanges operate on the black-market dollar rate, which is illegal but commonly used all over the country.

At the beginning of November 2017, one dollar would buy 50,000 bolivars on the black market. Today, the rate is between 650,000 and 800,000 bolivars.

Even though the government has repeatedly increased it, the monthly minimum wage cannot keep up with inflation, causing the price of food to increase.

The value of a salary has collapsed.

To supplement his income, the oil worker doubles as a taxi driver in the semi-deserted streets of Punta de Mata. When he started 10 years ago he had a decent salary as an oilman, but gradually his income became more and more dependent on his second job. As a cab driver, he can set prices according to inflation, while his fixed salary working the oil wells stays the same.

Venezuela's oil company, PDVSA, used to be the main source of foreign income for the government. When crude was trading at more than US $100 per gallon, earnings for the company were counted by the billions, according to company reports.

Now, PDVSA can barely stay afloat, forced to import light crude from the United States to dilute the heavy oil it drills in Venezuela.

Crude production has been falling for the past 25 months, OPEC numbers show. In April, neighboring Colombia surpassed Venezuela as a net exporter of oil to the United States.

Venezuela now produces almost half the oil it did in the late 1990s, when late president Hugo Chavez rose to power and launched his "Bolivarian Revolution."

"PDVSA is broken for lack of investment, lack of maintenance in all its processes, for years. Now, the crisis is deepening every day," said Jos- Bodas, a union leader at a PDVSA refinery on the northern coast in Puerto La Cruz.

"The capacity is for 187,000 barrels per day, but actually refining are only 30,000 barrels per day, just in the first plant. The second plant holds 60,000 barrels per day, but they are not refined. This refinery doesn't sell refined product, it sells raw material," Bodas said, quoting the production figures in his refinery to show the dimensions of the crisis. Bodas suggested that the oil exported from the Puerto La Cruz refinery would have to be re-refined at other refineries before being ready to be used.

Production figures for PDVSA's facilities are not public, and the company did not answer several requests for comment on this story.

Related: You can't get $1 out of the bank in Venezuela. I tried.

The numbers that tell the tragedy of the Venezuelan crisis are comparable to those of a civil war or a foreign invasion.

Iraqi oil production crumbled to zero in March and April 2003 following the US-led invasion, but by January 2004, it had already rose to pre-war levels. Venezuela's production, instead, is slowly collapsing. It lost approximately 1 million barrels per day in the last two years, according to figures from OPEC and Standard & Poor's.

These numbers translate into a concrete jungle in the countryside around Punta de Mata, where most oil wells are not in operation.

The narrative follows a common pattern. A mechanical part breaks down, but there are no replacements so the oil well falls into disuse. Once a well is exhausted, no new wells are drilled. If an accident requires a well to be shut, it is not reopened.

But there's something much worse than wells shutting down. Several workers related tales of criminal bands targeting the wells in the middle of the night, stealing everything from the oilmen's mobile phones to excavators and trailers.

One well operated by Chinese company CNPC was attacked in the second week of January. Three of its workers confirmed, speaking on the condition of anonymity, that several masked criminals entered the well precinct and subdued eight workers and a National Guard soldier on patrol and stole about three vans full of computers, TV screens and office machines. One these men witnessed the attack, while the other two said they heard about the incident through colleagues. CNPC did not respond to requests for comment.

For many workers, this type of criminality is too common.

"The criminals are armed, I even think they are better armed than the government," the oilman-turned-taxi driver said. "Everything they find they take it. And nobody fights against them because it's not that they come just in two or three, sometimes 15 people come in, or more," he added.

Caught between a worthless salary and the fear of being harmed, many of the oilmen have been asking themselves why they're still holding on.

"The only thing I am proud for being an oilman," the oil worker said, "is the health insurance. Nothing else."

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 441935

Reported Deaths: 5885
CountyCasesDeaths
Hennepin918591461
Ramsey39405729
Dakota32551324
Anoka30638354
Washington19827221
Stearns17686184
St. Louis13453237
Scott1178693
Wright11485101
Olmsted1024870
Sherburne812364
Carver686636
Clay643278
Rice595266
Kandiyohi551069
Blue Earth533833
Crow Wing476573
Otter Tail449860
Chisago446331
Benton414885
Winona383946
Douglas370366
Nobles364646
Mower358026
Goodhue340757
Polk326754
McLeod321644
Morrison308743
Beltrami305746
Lyon298735
Itasca281143
Becker279438
Isanti279440
Carlton276942
Steele26879
Pine263813
Freeborn237219
Todd230029
Nicollet222136
Brown212334
Mille Lacs211645
Le Sueur206515
Cass203823
Meeker197433
Waseca187515
Martin168226
Wabasha16712
Roseau164916
Hubbard146937
Redwood138527
Renville136139
Houston133213
Dodge13134
Chippewa130632
Cottonwood125118
Fillmore12084
Wadena118214
Rock108511
Sibley10757
Aitkin106633
Watonwan10548
Faribault103214
Kanabec96818
Pennington95915
Pipestone92522
Yellow Medicine92514
Murray8585
Jackson84510
Swift82617
Pope7355
Marshall70115
Stevens6968
Clearwater68114
Lac qui Parle65216
Lake62215
Wilkin6179
Koochiching57910
Lincoln4771
Big Stone4513
Unassigned43568
Grant4247
Norman4218
Mahnomen4077
Kittson36619
Red Lake3154
Traverse2433
Lake of the Woods1741
Cook1130

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 300884

Reported Deaths: 4197
CountyCasesDeaths
Polk44949440
Linn17563269
Scott15228161
Black Hawk13552228
Woodbury12896175
Johnson1191749
Dubuque11229148
Pottawattamie8863112
Dallas874169
Story857433
Webster464768
Cerro Gordo458766
Sioux452451
Clinton445461
Warren430637
Marshall424561
Buena Vista389029
Muscatine382275
Des Moines377340
Plymouth347967
Wapello336796
Jasper315955
Lee310828
Marion298852
Jones268949
Henry262130
Carroll252233
Bremer240048
Crawford227622
Boone214116
Washington213531
Benton207543
Mahaska189936
Jackson189631
Tama184757
Dickinson183225
Delaware171136
Kossuth169241
Clay165319
Wright161724
Fayette157022
Buchanan156920
Hamilton156828
Hardin153129
Harrison152961
Winneshiek150819
Clayton149848
Cedar149119
Butler145423
Page143115
Floyd137236
Cherokee137125
Mills135216
Lyon133132
Poweshiek131024
Hancock127924
Allamakee125927
Iowa122122
Calhoun12159
Jefferson118623
Grundy118522
Winnebago117229
Madison11639
Mitchell114634
Louisa113729
Cass111741
Chickasaw110111
Sac110115
Emmet109931
Appanoose108838
Union107922
Humboldt103919
Guthrie102124
Shelby101026
Franklin99818
Unassigned9370
Palo Alto8969
Keokuk84225
Montgomery82722
Howard81119
Monroe79918
Pocahontas77211
Clarke7717
Ida73530
Greene6837
Davis68221
Adair68120
Lucas6458
Osceola6349
Monona62316
Taylor5889
Worth5873
Fremont5005
Van Buren49112
Decatur4744
Ringgold4229
Wayne41321
Audubon4118
Adams2923
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