The site about 280 miles east of Caracas, the capital, has been partly paralyzed since last summer. Of its 30 drills, only six work, in large part because of a lack of maintenance and spare parts. With time on their hands, many oil workers are functioning as security guards.
And with good reason. In decline for the better part of 15 years, Venezuela’s oil industry has entered a free fall in recent months, contributing to the nation’s economic and social chaos. The crude-heavy countryside is a lawless, bandit-ridden land. Three hours south of this industrial town, a gang of thieves recently raided another drilling site run by PDVSA, the state-owned oil giant. They tied up work crews and stole their cellphones before swiping air conditioners and kitchen appliances from company trailers.
“PDVSA is in ruins,” said Luis Centeno, a rig operator and union leader at the Punta de Mata site. He lazed in the morning sun near a pack of skeletal dogs and a broken rig lying on its side. “It’s dying.”
In Venezuela, corruption, a lack of investment and a flight of expertise in the all-important oil sector have finally come to a head.
Last month, according to a report from the Organization of the Petroleum Exporting Countries, Venezuela’s plummeting oil production hit a three-decade low of 1.6 million barrels a day, a 20 percent drop from January 2017 and less than half of what it was in the 1990s. Venezuela’s headache is also the world’s problem. The sharp fall in output here, experts say, is exacerbating the global rise in oil prices, which has meant higher prices at gas pumps in the United States and elsewhere. In Venezuela, chronic production problems have forced the government to start importing gasoline.
“Venezuela has been driving up oil prices through its incompetence,” said Russ Dallen, managing partner of Caracas Capital, a Venezuela-based investment bank.
The state oil company is run by Manuel Quevedo, a military general with no industry experience, after a purge last fall of executives seen as not wholly loyal to President Nicolás Maduro. Quevedo says he is acting to halt the fall in production. But for Venezuela, a bad situation could soon become much worse.
Maduro — the anointed successor of leftist firebrand Hugo Chávez, who died in 2013 — is pushing forward with his bid for a second six-year term in April. The opposition considers the snap election the culmination of a carefully orchestrated power grab.
Last year, after elections that strengthened Maduro’s socialists but were criticized for numerous irregularities, the Trump administration slapped sanctions on officials, including Maduro, and strictly limited the government’s access to the U.S. financial system.
During his trip to Latin America this month, Secretary of State Rex Tillerson suggested that the “nuclear option” could be imminent — in other words, restrictions on U.S. imports of Venezuelan oil, as well as exports of diluents this nation needs to make its sludgy, super-heavy crude more salable.
A senior U.S. official, who spoke on the condition of anonymity because of the diplomatic sensitivities, said that a study is underway by U.S. executive departments — including State, Energy and Treasury — to assess the potential effects of such oil restrictions. If Maduro does not change course on the April vote, or pledge himself to a transparent election with foreign monitors, an embargo of some kind is highly likely, the official said.
Maduro, in a response to a question at a news conference in Caracas, was defiant.
“Venezuela has an international market for its oil, and we would substitute the United States with other countries,” he said. “It would be sad, very sad, if such a mistake is made. It would cost Donald Trump his career, that’s what I can tell you.”
Many Latin American nations fear that an embargo could worsen Venezuela’s humanitarian crisis and disrupt regional oil supplies. Still, support has grown in the region for tougher measures.
Oil revenue accounts for 90 percent of the government’s hard currency. About 40 percent of Venezuela’s production goes to China and Russia to repay loans or is gifted to chief ally Cuba. That has made Venezuela’s nemesis — the United States — its single-largest cash buyer.
A U.S. embargo “would put PDVSA further into the hands of Russia and China, which will control its cash flow,” said Francisco Monaldi, an expert on Venezuelan energy at Rice University.
PDVSA is so broke that creditors have been seizing shipments of Venezuelan oil off the coast of Curacao and other Caribbean islands. Should the U.S. government cut off Venezuela, that action could bring the country closer to a large-scale debt default that could turn the nation into an economic pariah. With less to lose, experts say, Maduro could potentially kick out the Western oil companies that still do business here, seizing their assets.
Venezuela reported to OPEC that its production had improved to 1.77 million barrels a day in January, up from 1.62 million in December. But an analysis published by OPEC, drawing on secondary sources — including the U.S. Energy Information Administration — showed a further erosion in January, to 1.6 million barrels a day.
PDVSA’s decay started years ago, with most experts seeing a tipping point in late 2002, almost four years after Chávez rose to power. Oil executives and workers at PDVSA challenged Chávez’s moves to politicize the company and joined a general strike. Chávez fired half of the company’s staff and hired new workers. Under Chávez’s direction, the company’s profit was redirected to social programs, and foreign oil interests were partly nationalized.
The oil ministry could not provide immediate comment. But Maduro, in a news conference, accused corrupt officials of sabotaging the company.
“Venezuela suffered a decrease in oil production provoked by a plan to leave the country with no resources, [orchestrated] by managers of PDVSA who are now behind bars,” Maduro said. He added, “We will, respecting OPEC quotas, recover PDVSA’s production.”
For now, PDVSA is on its knees. Guillermo Morillo, a former PDVSA manager who is working on a recovery plan for the company, said it would take as much as $100 billion in investment to bring production back to 2009 levels.
Production in eastern states, the country’s oil heartland, plunged 34 percent last year alone, according to PDVSA’s official numbers and estimates from experts.
In the city of Morichal, about 350 miles east of Caracas, dozens of nonfunctioning drills and rusting loading machines stood idle on a recent day at one of PDVSA’s main oil-extraction plants in the Orinoco oil belt. Nearby, a washed-out sign carried the barely discernible word “homeland” with a fading image of Maduro.
A PDVSA mechanic sat on the stoop of a concrete hut wearing his uniform — a red jumpsuit — after half a day of work at a nearby rig.
His weekly wage, worth about a quarter of a dollar on the black market, is not enough to pay for three meals a day. So, he sometimes skips lunch. His job has become nearly impossible, said the man, who spoke on the condition of anonymity because of fear of government reprisals. With hyperinflation here running at 13,000 percent annually and the local currency, the bolívar, nearly worthless, imported spare parts and tools have become luxuries that PDVSA cannot afford.
Without them, the man said, accidents have become “a day-to-day thing.” Recently, he said, a driver in an old company truck was hauling a rig through a nearby street when the truck stalled, overturning near a river and leaving the driver with broken arms and ribs.
“Our work conditions have become inhumane,” he said. “If we continue like this one more year, we will die.”
Faiola reported from Miami.