Left turn: 'Revolution' hits Venezuela's oil culture

At the gleaming offices of Petroleos de Venezuela (PDVSA), the country's state-owned oil giant, a corporate revolution is under way. Nine-to-fivers have come to think of themselves as patriots. Senior managers now eat at the same cafeteria tables as secretaries. And former soldiers have left the battlefield for the boardroom.

After PDVSA workers walked off the job last December in a bid to force Venezuelan President Hugo Chávez from office, the fiery populist hitched his social revolution to the $110 billion business: He purged the company's ranks and installed his own people. What was widely regarded as a world-class energy company before the strike has a new philosophy: to help the poor. And a new corporate culture is gradually taking shape, injected with the president's particular brand of leftist ideology.

Whether or not this do-good idealism can prevail amid the high-pressure realities of running the world's fifth-largest oil supplier remains to be seen. For a country that relies on PDVSA for 50 percent of its federal budget, the success or failure of this massive corporate social experiment could have rip- ple effects throughout the country - even the world - for years to come.

"The old culture is dead, and a new one is developing," says Omar Enrique Perez, a compensation analyst with 15 years at the firm, who is working to slash salaries across the board - including his own. "Because we feel we have to do something about the problems that are confronting our country, and we believe our work will help Venezuela develop."

While PDVSA's rhetorical about-face has yet to lift up the poor - even in the stone-broke villages that surround the oil refineries - change has swept through the company's Caracas headquarters.

In addition to the classless cafeteria, volunteerism is up, and salaries are said to be on their way down. The dress code has been loosened, and in some departments the high-five has replaced the curt nod in the hallways.

"There has been a change of mentality in all levels of the company," says a member of PDVSA's board of directors, who speaks on the condition of anonymity. "We believe that PDVSA should be subordinated to the needs of the state. For us, job No. 1 is fighting poverty."

The main force reshaping the company's philosophy is Chávez himself. The former paratrooper has handpicked company managers to promote his vision for a more egalitarian society and has vowed to plow more oil profits into social programs.

PDVSA has been staggered by the dismissal of 17,000 workers, nearly half the workforce, forcing the company to bring in help from private industry and, controversially, the ranks of the active-duty military. One commander, who helped put down the short-lived coup against Chávez a year ago by driving a tank up to the gates of the presidential palace, is now assisting with restructuring efforts now under way. Another soldier uses a military metaphor to explain the role of the Army in the oil company.

"We're here to establish a beachhead, move in, and clean the place up," he says. "When we are finished ... we will move on."

A humanitarian oil company is almost a contradiction in terms, though, and many critics are dismissive of the lofty sentiments heard inside the company.

"Plain and pure rhetoric," says Edgar Leal, senior associate with Cambridge Energy Research Associates, in Cambridge, Mass. "What are they going to do, have PDVSA start distributing food? They have a business to run."

The man in charge of this business is Ali Rodriguez, a former guerrilla fighter who ran the OPEC oil cartel until he was installed by Chávez as company president. Mr. Rodriguez has not won over his critics, including the far left, who question his decision to eschew an oil embargo against the United States by countries opposed to the war in Iraq.

But Rodriguez has signed on with the government game plan - to divert some revenue to federal coffers that would otherwise be reinvested in PDVSA. The government says infusions of cash into schools and hospitals has already pushed down illiteracy and infant mortality rates.

Previously, PDVSA's management used its considerable degree of autonomy to aggressively explore for oil, develop new technologies, and acquire overseas assets. The new PDVSA management says much of that money was wasted, and points to operating costs that are three times higher than other oil majors as proof. Officials at the energy ministry say that restructuring will save $1 billion a year.

But critics say the new system can't be sustained. "Chávez and Rodriguez will probably use whatever they can get out of PDVSA for projects this government wants to do," says Michael Coppedge, a political science professor and Venezuela specialist at the University of Notre Dame in South Bend, Ind. By some measures, PDVSA's production capacity has already suffered as a result. The company was operating 120 oil rigs only four years ago. Today that number has fallen to less than 40. "They may be able to extract more revenue from PDVSA than before for a short time, and then production capacity will fall, and the oil industry will deteriorate and won't be able to produce as much and earn as much," Mr. Coppedge adds.

Oil industry experts also say that the loss of many skilled laborers and specialists will negatively impact PDVSA's long-term capacity to grow and produce.

More important, they say that oil alone cannot meet all of Venezuela's needs, even in the rosiest of scenarios.

"There's a myth in this country that petroleum can save us, but at least in the short term, that's just not possible," says Elie Habalian, a retired professor and an expert in petroleum economics. "To Venezuelans, oil is like blood; without it, this country would be nothing. But sooner or later, we're going to have to find other solutions to our problems."

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