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.