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Venezuela oil blast evidence of deteriorating infrastructure (+video)

A Saturday explosion at Venezuela's Amuay refinery, the country's largest, claimed at least 39 lives. Engineers and oil executives say the blast is fresh evidence of deteriorating infrastructure in the country with the world's largest proven oil reserves.

By Andrew RosatiContributor / August 26, 2012


Caracas

Venezuelan Vice President Elías Jaua said Saturday evening the death toll had reached at least 39 after a blast tore through the country’s biggest oil refinery, Amuay in Falcon state.

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Early reports indicated the explosion, at around 1:15 a.m., was caused by a gas leak. The blast damaged nearby homes and destroyed a neighboring National Guard outpost. President Hugo Chávez expressed his “profound grief,” on state television, declaring three days of mourning.

Opposition presidential candidate Henrique Capriles also showed support for the victims, posting on his Twitter account: “We ask Almighty God for the recovery of all those injured in the accident.”

The tragedy, following calamitous oil spills in February, reignited public debate over safety standards at government oil producer Petróleos de Venezuela (Petroleum of Venezuela, or PDSVA) six weeks before Venezuela’s Oct. 7 presidential election. Analysts and industry professionals have long voiced concerns over the overall deterioration of the company.

“There are so many accidents, so many spills that never used to happen, the quality of management has to be bad,” says Heraldo Sifontes, ex-manager of refining for Lagoven (a former PDVSA affiliate). Mr. Sifontes, who managed the Amuay refinery for seven years, pointed out that there will always be accidents in refining, “however, the issue is the frequency you have of these types of problems.”

Prior to Saturday’s tragedy, PDVSA had registered 19 accidents in the first half of 2012, including explosions, oil spills, and operational failures that resulted in the injury of 20 workers. A Feb. 4 spill in Monagas state lasted 40 hours before a broken pipeline was sealed, with an estimated 80,000 barrels of crude oil contaminating the local area and the Guarapiche River.

Yet Saturday’s carnage left Sifontes dumbfounded. “I’ve never seen an accident like this one.”

Cutting corners?

Given the frequency of accidents, “I have to conclude that they’re not taking the same safety precautions as they used to,” says Fernando Sánchez, vice president of Petroleum Engineers of Venezuela, a professional organization.

Mr. Sánchez emphasized the need for qualified management personnel to ensure worker safety and production efficiency in facilities as complex as Amuay.

According to Sánchez, based on official PDVSA data, the company’s refineries are now operating at 65 percent of capacity due to lack of maintenance and investment.

Venezuela, which has the world’s largest proven oil reserves, is now importing gasoline and other refined fuel products to meet internal demand. Bloomberg News reported in July that Venezuela imported as much as 40,000 barrels of gasoline products a day in the first four months of 2012.

Without changes in management and efforts to improve output, Sánchez says that “costly accidents which cause deaths, the loss of materials and delays in meeting company obligations will continue.”

The Chavez government has assumed full responsibility for the material and human losses resulting from the explosion and promised improvements.
“Change, is like everything else. It cannot be done overnight,” says analyst Robert Bottome, director of VenEconomy publications group.

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