Eventually gets closer

In the comments, Marcus gives us another in the endless series of Rashomon moments in Venezuelan political economy:

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.

I haven’t been able to get to Maracaibo in ages, so I can’t say for certain which is the case. However, according to sources I trust who work on the lake, “eventually” has been getting closer and closer.

The thing is, there may have been corruption in the outsourcing deals on the lake. And the workers may have been exploited by the hundred-plus small businesses that were serving PDVSA, as they were effectively oil workers but never managed to unionize and get the benefits of the oil workers’ relatively generous standard contract. And some of the firms’ owners certainly got rich feeding at the PDVSA trough. So the situation today, with all those companies seized and folded into PDVSA, and most of the workers absorbed into the permanent payroll of the state oil giant, the situation is politically better, at least from the perspective of a left-leaning resource nationalist (and while there are a lot of non-Chavistas in Venezuela, there is probably a majority that is left-leaning and resource nationalist). But operationally, the situation is unquestionably worse.

The latest I got from a very well placed industry source is that crews working on the lake used to have hours every now and then when they were out on a maritime installation such as a drilling rig, production platform, or vapor injection facility and they had to wait for a boat. These non-working hours were minimized by competition among small businesses. If one company couldn’t, for example, haul out a big winch or hoist a multi-ton motor or pick up the crew at the end of a shift, it was possible to call around until you found someone who was able to do the job. Now, with PDVSA as the only maritime operator on the lake, you have only one place to call. And if PDVSA decides you have to wait, you have no recourse. The upshot, according to this source, is that lost time for crews has risen from a bit of noise on the invoice to about 20% of any crew’s time. That’s a day a week that contractors now spend doing nothing, just waiting.

Even last October, the last time I was there, I had an operations executive at a multinational service company tell me that “preventive maintenance is now the lowest priority for PDVSA.” He wasn’t sure what the top priority was.

In the short term, the breakdowns are likely to keep being just a matter of faster well decline, more spending on contractors, fewer barrels of output, and a few leaks into the lake. Long-term, maintenance problems can build up. Catastrophic problems like the Deepwater Horizon explosion or a big refinery fire don’t happen because a single part is rusted out or a single worker screws up. They are the result of several things going wrong at once. The horror story forecasts for the lake usually involve the big vapor injection rigs, which operate at very high (i.e., dangerous) pressures. They blow up and hurt people, and then many of the lake’s wells lose pressure and suffer permanent losses of productivity. Maybe, who knows. Anything that can go wrong, will. Having fewer tools to keep up with maintenance just helps old Murphy along.

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9 thoughts on “Eventually gets closer

  1. Kepler

    What do you mean the majority is “left-leaning”?
    Hard-core Chavistas are less than 30%, just the opposition is ridiculously splintered and most people are ninis.

    The vast majority of Venezuelans are used to extreme statism -in certain areas- and to the “buenas de Dios” in others (curiously in the ones where the State should do more and is doing more even in very capitalist countries). I would not call that left-sided, just very used to a corrupt petro-state and ignorant of what priorities the state should first cover (like decent basic education, free textbooks, security, security, security)

    1. sapitosetty Post author

      Kepler – by left-leaning, I am referring to the very broad consensus in Venezuela that the government can and should provide basic health care, free public education, and help the poor. I’d maintain that the overlap between “left-leaning” and “Chavista” is loose.

  2. caracaschronicles

    I also think there’s a big unwritten story here on labor rights, and what happens to them when you have a management controlled union. Because in the olden days, Oil Sector unions were corrupt, no question about it, and slimy as hell. But they were also undeniably distinct from management, and able to press management on things like hours and industrial safety and the ineffable “economato”. When management sat down to negotiate a contract with the unions, there was no question that there was a genuine adversarial back-and-forth, with a union that took it for granted that their members’ interests were distinct than those of management.

    Now all that is gone, the dividing line between management and the union’s vanished, and workers are represented by a union that sees it as an article of faith that their interests are always congruent with management’s. In those circumstances, workers really have nowhere to turn to. Because, remember, when inadequate preventative maintenance causes an industrial accident, it’s the guys working right there on site that are going to get blown to bits. Industrial safety is a labor issue, and its total neglect only makes sense in the context of a labor movement that’s been utterly co-opted by the patrón…

  3. Marcus

    But I assume this involves more than boats. It’s just that boats are easy to count.

    What other services are not getting performed? The things that are harder to quantify?

  4. Gringo

    Here is another story about maintenance under Chavista control, courtesy of Venezuela News and Views.Puerto Cabello News and Viewstakes the floor:

    We drove in front of one of the former storage areas which now is a junkyard of huge mobile cranes, you know, those that can lift a 20 or 40 feet container around. We are talking here of a device that can hoist up to 50 tons and more and drive around to deposit them elsewhere in the storage area…. There were dozens of them it seemed, equipment worth each at least a 100,000 dollars each. My agent pointed out to them telling me that they used to belong to the different private service companies until early last year the port was taken over by the regime. Now, after one year of lousy services if any, they are breaking down one by one and just towed there where they wait for who knows what. Many looked still brand new and I asked. He replied that they did not even bother to do oil service, they did not bother to ask for instructions, they just did not care, drove them around until they broke down and that was that. There are only a few working still and he worries about when they will finally break down too. He also told me that the main cranes to unload the ships were breaking down and only a very few still worked.

    Maintenance is for escualidos and pitiyanquis.

  5. Steve

    You wrote: “And the workers may have been exploited by the hundred-plus small businesses that were serving PDVSA, as they were effectively oil workers but never managed to unionize and get the benefits of the oil workers’ relatively generous standard contract.”

    Only partly true. Workers at private companies who were doing jobs that were defined in the current Contrato Colectivo had the same wages and benefits as PDVSA employees. It’s been a long time since I saw a tabulador de sueldos, but it included mechanics, welders, drivers, ayudantes de patio, drilling and workover rig personnel, etc. It didn’t apply to adminstistrative personnel.

    The private companies could hire someone as “provisional” for a shorter period (I believe up to six months). Short-term workers were not eligible for all the benefits, and I’m sure that this situation was abused by the contractors. On the other hand, there’s less activity now and fewer paying jobs.

  6. Steve

    Here’s a simple explanation of why the service companies stayed in business, even though PDVSA had their own crews and equipment. The contractors could help PDVSA save money.

    This example applies to crew boats, but similar accounts could be given for construction, drilling, workover, maintenance, whatever.

    Say that a crew boat would be scheduled to leave the dock at 5:00 a.m. to take a crew to a drilling rig and start work at 7:00 a.m. The crew might be late or the boat requires maintenance, so it’s late, and the crew doesn’t get to the rig on time. That means that the guys on the rig don’t get relieved on time. A little of that they don’t mind (because they get paid overtime), but when it stretches out too late they complain. It also inflates the drilling budget and makes scheduling operations more complex.

    That was the difference between a PDVSA boat and a contractor boat. The contractor could be fired for poor performance.

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