Venezuela's Oilman unmasks vast oil reserves

Rafael Ramírez: Venezuela's oilman finds more reserves for the colonel Energy minister is the man who tends the ever-growing mineral wealth of Hugo Chávez's government


By Virginia Lopez, guardian.co.uk, Thursday 18 August
Rafael Ramírez should be ranked as one of the most powerful men in the world. As the Venezuelan minister for energy, he is also head of the country's state oil company – and, therefore, now controls the world's biggest proven oil reserves.

In a little-reported development, Opec recently certified that the South American nation was number one in national reserves, after a vast field of what was previously classified as tar was redefined as extra heavy crude. La Faja, as the heavy oil belt along the Orinoco river is referred to, contains nearly 220bn barrels. That takes Venezuela's reserves to 297bn – close to 20% of the world's oil – and leapfrogs it over Saudi Arabia on 265bn.

Although Ramírez has been in his job for almost a decade, he gives all the credit for the country's preeminence in oil to its controversial president, Hugo Chávez. If it hadn't been for the colonel, he says, Venezuela would have surrendered its reserves to multinationals long ago – and the price of oil would be nowhere near its current level.

"If President Chávez had not arrived to power," he says in his Caracas office, "we would be out of Opec, the price of oil would have not recovered, and Venezuelan oil would be in the hands of privates. At the international level, we strengthened Opec and called for a meeting of all its members … We established a fair price and gave unity to the market."
All of which should make Ramírez just as important a figure as the powerful Saudi oil minister, Ali al-Naimi, and make the country's state oil company, PDVSA, a force to be reckoned with. But this is Chávez's Venezuela and PDVSA is far more than an oil company. In fact, critics say that its huge diversity of operations – it's involved in health and welfare programmes, importing food, housebuilding and even making jam – means that PDVSA does not have what it takes to capitalise on the bounteous wealth beneath the Orinoco basin.

But Ramírez disagrees. "My greatest satisfaction [after 10 years as minister] is my team. We all come from the left, and I feel great pride in having recovered the industry for all of the Venezuelans," he says. "Before, PDVSA was an oil enclave. It had nothing to do with the rest of the country. I worked at one of its subsidiaries and I quit. I couldn't stand their almighty attitude and their disdain for the people. They referred to themselves as a first-world company within a third-world nation."

Ramírez, 48, was born into a communist family. His father was a well-known guerrillero and Ramírez's surname has led some to suspect that he is related to the notorious Venezuelan terrorist Carlos the Jackal (real name Ilich Ramírez), who was also an Andean communist.

He laughs off the link, joking that the name Ramírez is as common as Smith is in Britain, but the trail doesn't end there: one of his vice ministers was Lenin Ramírez, Carlos's brother.

PDVSA's radical transformation came about after Chávez cemented his control of the country following a coup attempt in 2002 and, later that year, a two-month-long strike during which Chávez's opponents cut off the oil supply in an effort to force his resignation.

"We knew something was going to happen. It was not a secret to anyone, so we prepared. If there was another coup, we knew our advantage lay with the oilfield workers, so we went from oilfield to oilfield talking to the workers. The oil sabotage didn't find us in the office, but in the field [with the people]," Ramírez says.

By February 2003, Chávez was firmly in power, and PDVSA changed forever. Close to 20,000 of the 50,000 people who worked there at the time were fired and its private, corporate approach was substituted for what came to be known as "the new PDVSA", run by political ideology more than by market rules or production standards.

Ramírez describes this ruling ideology as national, popular and revolutionary. A very tall man, Ramírez sits in front of a wall lined with paintings of Fidel Castro, Che Guevara, Chávez and Simón Bolívar, the Latin American figures that have inspired Chavismo, and redefined Venezuela's oil production.

"We are national, because our interest lies in charging what any nation that is in the least bit nationalistic would charge to favour their national interests," he says. "It is popular because we will not turn our backs on the people. And it is revolutionary because we are proposing a development model that is socialist – where we must go against the previous rentist model – where we have taken close to $300bn and invested it in the social areas of the country: literacy, education and food."

But for all the good intentions, eight years of social programmes have taken their toll on the company's core business, resulting in a decline in oil production. And with that comes criticism. Asdrúbal Oliveros, director of Ecoanalítica, a public policy consulting firm, says: "With the old PDVSA, you had an oil policy with no relation to the development policy, but now you have a company that builds houses, buys electricity plants, imports food and even makes jam. In the end, you do wonder if all this must make part of the oil industry. "It became a heavily politicised company that looks more like a ministry of social works, and both extremes are bad."

Ramírez denies that diverting attention to the misiones, as PDVSA's social programmes are called, has affected productivity. He claims it was opposition-led "oil sabotage" that led to the slump in production, and that they have since succeeded in bringing it back to close to 3m barrels a day (about4% of the global total). Measures are under way to ensure it reaches 4m barrels per day (bpd) by 2015, he says.

Depending on whom you talk to, PDVSA's exports range from 2m bpd to 3m bpd. This discrepancy in the numbers reflects one of the company's main problems: that even if its productivity has not decreased, its credibility has.

Francisco Monaldi, an oil expert at Venezuela's IESA business school, says: "Nobody believes in this government. They announce they will invest $150bn in the next six years and investors take it as a token gesture because to date none of these types of announcements have come to fruition."

For all the fear and distrust it inspires, PDVSA has succeeded in signing agreements with close to 20 multinationals to develop La Faja. Nor does Ramirez see a problem with the recent nationalisations of some multinational oil companies' assets in Venezuela. For the new PDVSA it was a matter of reestablishing the country's sovereignty, he says.

"Today, I can tell you that we have total control of our industry and total control over all the oil businesses in our country under a mixed capital scheme. All of the companies that were operating in Venezuela accepted this, except for ExxonMobil and ConocoPhillips, which left the country." Both of these companies are in a legal battle with PDVSA that could see the latter lose one of its refineries.

Ramírez prefers in any case to look at the big picture and is confident that Venezuela's total reserves will rise to 313bn barrels.

"One thing is oil on site, of which we have 1.3 trillion barrels, and another thing is to be able to extract that oil," he says. "The concept of reserve means that you have the oil and that you have the ability to extract it. With the technology we have, we can extract 20% of that oil … But the US department of geology has said that with our present technology we could actually extract close to 45%. That would be 511bn barrels – or oil for about 140 years."