Maracaibo maritime industry collapses, El Mundo says

Check out this incredible report from today’s El Mundo. A reader who alerted me to the story points out that the main topic has little to do with the headline, and sends this synopsis:

Report on economic situation from east coast of Lake Maracaibo. Several service company owners report that they were owed millions of Bs by PDVSA before the nationalization. Since being expropriated they haven’t been paid anything at all. Minister Ramirez now says they won’t be paid because they’re “golpistas”.

Many of the assets that were taken over (boats, tugboats, cranes, barges, etc.) are falling into disuse or have simply disappeared. One ex-owner owned crew boats, he went to check recently. Several boats have been destroyed by fires; or engines ruined due to misuse and lack of maintenance.

Also mentioned is loss of income to the municipalities. Formerly they received the municipal sales tax, which was 2% of the gross sales made by each of those companies to PDVSA. That was one of the acknowledged purposes of the expropriations; to cut off funding to local opposition government
bodies.

Setty here: my favorite paragraph, translated:

PDVSA took a total of 97 tugs, of which only 20 are currently working. The dive boats absorbed by the state add up to 80, of which only 16 are active. While of 30 barges expropriated, half are stopped.

Worth a read.

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9 thoughts on “Maracaibo maritime industry collapses, El Mundo says

  1. Marcus

    So we are left with a spectrum of two extremes.

    1. Either all these service companies were being paid to do relatively little, wasting resources and PDVSA’s money (possible with crony capitalism).

    2. These companies were performing necessary and valuable services worth hundreds of millions of dollars.

    If the situation is closer to #1, PDVSA has just cut costs tremendously and is now a more efficient and leaner firm.

    If the situation is closer to #2, something really bad will eventually happen.

  2. Bernard Guerrero

    “If the situation is closer to #2, something really bad will eventually happen.”

    Eventually? :^)

  3. moctavio

    From a report:

    Equipment taken in 2009 In use in 2010

    Boats

    930 113

    TUGS

    97 20

    Diver Boats

    80 16

    Gabarras

    30 15

  4. Gringo

    So we are left with a spectrum of two extremes.
    1. Either all these service companies were being paid to do relatively little, wasting resources and PDVSA’s money (possible with crony capitalism).
    2. These companies were performing necessary and valuable services worth hundreds of millions of dollars.

    The long term-picture of PDVSA under Chavista control is of funds for maintenance, operations and investment being siphoned off for “social programs” and/or funds for Chavista supporters.

    When the price of oil fell, stiffing the oil service companies occurred because the “social programs” were considered more important. Stiffing the oil service companies continued the pattern of PDVSA’s being starved of funds for maintenance, operations and investment. It just got applied to the service companies.

    When PDVSA took over the oil service companies, why should we be surprised that the lack of maintenance and investment in PDVSA was applied to the service companies? Result: fewer operating boats and barges.

    First step: don’t pay them. Second step: take them over without compensation. Third step: after takeover, don’t maintain the equipment.

    The precipitous decline in the number of operating boats has a parallel in the decline in agricultural production in lands the government took over.

    As this is Venezuela, where many companies exist at the sufferance of a government contract, crony capitalism does exist. But it is not the main factor in the decline of operating boats and barges on the lake.

  5. Marcus

    So Gringo,

    What is the consequence of all these maintenance operations no longer being performed?

    Does something blow? Does enough oil leak into the lake until it catches fire and knocks some rigs out of commission?

    Or does the production just decline another 20,000 barrels per day more than it would have?

    I’m just asking if someone knows what all these boats were doing and what exactly happens when they stop doing it?

    What is cause and effect here? Does someone have a good answer?

  6. Gringo

    What is the consequence of all these maintenance operations no longer being performed?
    Here is one consequence at Planta Centro. Granted, this is not an example from the lake, but it shows a consequence of lack of maintenance. Even cash cows need to be fed.

    A Ph.D. petroleum engineer who makes periodic inspection tours of Venezuela informed me three years ago of the abysmal lack of maintenance of PDVSA facilities after Chavez took over.

    Does something blow?
    If equipment is not maintained, it will not operate according to specs when it is needed. If a Blowout Preventer on a drilling rig fails due to lack of maintenance when the Blowout Preventer is called upon, the rig could be blown out of the water. However, lack of maintenance of boats and of underwater pipelines generally have less drastic consequences: shutting down and leaks, respectively.

    Does enough oil leak into the lake until it catches fire and knocks some rigs out of commission?
    Oil leaking into the lake from a pipeline is unlikely to catch fire. If a fire occurs, it would come from a blowout during a drilling operation which involved a fair amount of natural gas.

    Or does the production just decline another 20,000 barrels per day more than it would have?
    This is the more likely consequence, along with contamination of the lake.

    I’m just asking if someone knows what all these boats were doing and what exactly happens when they stop doing it?
    What are the boats used for? Basically to transport people and goods to and from drilling rigs on the lake. When there is a crew change on a rig [when I was on the lake, crews were changed out every 6 days.] , workers need to be transported to and from the rig. The rig needs to be supplied with food and fuel on a regular basis. Unless it is an emergency, where a helicopter would be used, a replacement part would come to the rig by boat. One consequence of boats not running as often: longer shifts, which will lead to less efficient operations. The sleeping conditions on many of the rigs/drilling barges are hellish. With fewer boats, a longer wait for goods: more down time on the rigs. With fewer boats, less drilling on the lake.

    I am not knowledgeable about specific issues on boat maintenance. Just think of owning an auto, and not changing oil, not adding radiator fluid, not changing air filters, not getting brakes fixed, not getting a clutch repaired, not repairing a leak in the radiator. Etc. If you don’t maintain, the auto will eventually stop. The older the auto, the more likely there will be maintenance issues, and I imagine there were a fair amount of older boats on the lake.

    Why the lack of maintenance under Chavista control? The simplest answer is that the former owners of the boats were most likely replaced by Chavista hacks who had as much knowledge of running boats around the lake as they did of astrophysics.

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