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What will Venezuela do with its oil? Top five energy challenges after Chàvez.

With the passing of Hugo Chávez, the issue of what Venezuela chooses to do with its oil moves to center stage for the energy industry – and for environmentalists. Here are five energy challenges that Venezuela will have to face.

5. PDVSA's future

Carlos Garcia Rawlins/Reuters/File
Oil workers work at a petroleum area operated by Venezuelan state oil company PDVSA. With ballooning debt and falling porduction, PDVSA's future is uncertain.

Under Chávez, the national oil company became more than just a company. It funded his social programs, provided foreign aid, and boosted employment. PDVSA has twice the employees it had when Chávez came to power in 1999, even though its production has fallen.

The business approach would be to cut back the bloated payroll and reduce the company's operating costs (and ballooning debt). But with the economy suffering from years of mismanagement, cuts are politically sensitive. Even Mr. Capriles, the opposition candidate in last year's election, said he would not cut jobs at PDVSA.

 Another way to justify the company's bigger payroll is to boost production, something that Venezuela has tried to do, but with little success so far. Pressures may grow to open up its oil industry to more foreign investment if the economy – and oil production – continue to stagnate.

 Privatizing the PDVSA does not appear to be on the table. First nationalized in the 1970s, Venezuela experimented with liberalizing the oil sector. That initiative was quickly squelched when Chávez was elected president. Even the opposition doesn't talk about privatization.

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Mark Sappenfield
Editor

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