Venezuela, once an oil giant, comes to the end of an era

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For the first time in a century, there are almost no oil platforms operating in Venezuela. The wells that have already exploited the largest gross reserves in the world are abandoned or burning toxic gases, which cast an orange glow on oil cities. Refineries that once processed oil for export are rusty giants, leaking crude oil that darkens the coast and gives the water an oily sheen. Fuel shortages paralyzed the country. At gas stations, the lines can be kilometers long.

Venezuela’s colossal oil sector, which has shaped the country and the international energy market for a century, has come to an almost complete halt, with production reduced to a trickle thanks to years of mismanagement and US sanctions. The collapse is generating a destroyed economy and a devastated environment and, according to many analysts, ending Venezuela’s era of energy power.

“The days of Venezuela as an oil state are gone,” said Risa Grais-Targow, an analyst at Eurasia Group, a political risk consultancy.

The country, which a decade ago was the largest producer in Latin America, earning about $ 90 billion a year from oil exports, is expected to raise about $ 2.3 billion by the end of this year – less than the aggregate amount that Venezuelan migrants who fled economic devastation will send back home to support their family, according to Pilar Navarro, a Venezuelan economist in Caracas.

Production is the lowest in nearly a century, after sanctions forced most oil companies to stop drilling or buying Venezuelan oil – and analysts warn that even this drip could dry up soon.

“Without drilling, without service companies and without money, it is very difficult to maintain even current production levels. If the political situation in the country does not change, it could reach zero ”, said David Voght, head of IPD Latin America, an oil consultancy.

The decline disfigured a country that only a decade ago rivaled the United States for regional influence. It is also unraveling a national culture defined by oil, a source of money that once seemed endless; funded monumental public works and widespread corruption, generous scholarships and shopping trips to Miami, Florida.

The gasoline shortage has led to an outbreak of dozens of daily protests in most Venezuelan states in recent weeks. In the capital, Caracas, Iran’s periodic fuel shipments, paid for with what remains of the country’s gold reserves, guarantee an appearance of normality for a few weeks at a time. But in the countryside, residents challenged the pandemic’s quarantine to block roads, and clashed with police desperate for the minimum fuel they need to survive.

In all of Venezuela’s oil towns, the sticky crude oil that once provided jobs and social mobility is poisoning the livelihood of residents. In Cabimas, a city on the banks of Lake Maracaibo that was once a production center for the region’s prolific oil fields, the crude oil that leaks from underwater wells and abandoned pipelines covers the crabs that former workers in the sector take from the lake with the blackened hands.

When it rains, the oil that drained into the sewer system overflows through manholes and drains, running with rainwater through the streets, staining houses and filling the city with its stench. The desolation of Cabimas marks the rapid fall of a city that only a decade ago was one of the richest in Venezuela.

During the boom years, PDVSA, the state oil company, filled residents of oil cities like Cabimas with benefits, including free food, summer camps and toy distribution at Christmas, as well as building hospitals and schools.

Now, the tens of thousands of workers at the bankrupt company dismantle the oil facilities to get scrap and sell their characteristic coveralls, stamped with the company logo, to pay their expenses.

The end of the central role of oil in the Venezuelan economy is a traumatic reversal for a nation that, in many ways, defined the meaning of a petro-state.

After large reserves were discovered near Lake Maracaibo in 1914, United States oil workers arrived in the country. They helped build many Venezuelan cities and instill in the country a love for baseball, whiskey and big cars, forever differentiating the nation from its South American neighbors.

As a driving force in the founding of the Organization of Petroleum Exporting Countries in 1960, Venezuela helped Arab nations to take control of their oil wealth, shaping the global energy market and the geopolitical order of the coming decades.

Even in those wealthy days, Venezuela’s prominent oil minister, Juan Pablo Pérez Alfonzo, warned that there were pitfalls to the sudden oil wealth: it could lead to excessive debt and the destruction of traditional industries. “It’s the devil’s excrement. We are drowning in the devil’s excrement, ”declared Perez Alfonzo.

In the years that followed, despite abundant oil revenues, Venezuela faced a roller coaster of recurring debt and financial crises. Wealth also did not contribute to reducing corruption or inequality, and when a former paratrooper, Hugo Chávez, appeared on the national scene in the 1990s promising a revolution that would put Venezuela’s oil to work for its poor majority, he captivated the nation.

Shortly after being elected president in 1998, Chávez used the country’s respected state oil company in his radical development program. It laid off some 20,000 oil professionals, nationalized foreign-owned oil assets and allowed allies to plunder oil revenues.

The industry went into free fall last year when the United States accused Chavez’s successor and protégé, President Nicolás Maduro, of electoral fraud and enacted severe economic sanctions to force him out of power.

Soon, Venezuela’s oil partners, bankers and customers broke ties, and production plunged at a pace that overcame Iraq’s slowdown during the Gulf Wars and Iran’s after its Islamic Revolution.

The sanctions have forced the last US oil companies in the country to stop drilling. They may leave the country permanently in December if the Trump administration ends its sanctions exemptions.

To make up for the loss of revenue, Maduro turned to illicit gold mining and drug trafficking to remain in power, according to the U.S. government.

Maduro’s removal from oil has left the Venezuelan economy in decline comparable to that of the Democratic Republic of Congo, a country plagued by civil strife since its independence. But the transition has allowed Maduro to maintain the military’s loyalty and resist US sanctions, according to analyst Grais-Targow. She said the costs of this economic contraction were felt by the Venezuelan people.

More than five million Venezuelans, or one in six residents, have fled the country since 2015, creating one of the biggest refugee crises in the world, according to the United Nations. The country now has the highest poverty rate in Latin America, having overtaken Haiti this year, according to a recent study by Venezuela’s top three universities.

Near the huge Venezuelan coastal refineries, residents look for firewood and drag their fishing nets on foot to find food. The boats are stopped without gas, and the kitchens have long been without gas.

“If we haven’t reached the bottom yet, we’re inches from that,” said José Giron, who used to transport tourists in the beach town of Tucacas, close to Venezuela’s three largest refineries.

Source: Exame

For the first time in a century, there are almost no oil platforms operating in Venezuela. The wells that have already exploited the largest gross reserves in the world are abandoned or burning toxic gases, which cast an orange glow on oil cities. Refineries that once processed oil for export are rusty giants, leaking crude oil that darkens the coast and gives the water an oily sheen. Fuel shortages paralyzed the country. At gas stations, the lines can be kilometers long.

Venezuela’s colossal oil sector, which has shaped the country and the international energy market for a century, has come to an almost complete halt, with production reduced to a trickle thanks to years of mismanagement and US sanctions. The collapse is generating a destroyed economy and a devastated environment and, according to many analysts, ending Venezuela’s era of energy power.

“The days of Venezuela as an oil state are gone,” said Risa Grais-Targow, an analyst at Eurasia Group, a political risk consultancy.

The country, which a decade ago was the largest producer in Latin America, earning about $ 90 billion a year from oil exports, is expected to raise about $ 2.3 billion by the end of this year – less than the aggregate amount that Venezuelan migrants who fled economic devastation will send back home to support their family, according to Pilar Navarro, a Venezuelan economist in Caracas.

Production is the lowest in nearly a century, after sanctions forced most oil companies to stop drilling or buying Venezuelan oil – and analysts warn that even this drip could dry up soon.

“Without drilling, without service companies and without money, it is very difficult to maintain even current production levels. If the political situation in the country does not change, it could reach zero ”, said David Voght, head of IPD Latin America, an oil consultancy.

The decline disfigured a country that only a decade ago rivaled the United States for regional influence. It is also unraveling a national culture defined by oil, a source of money that once seemed endless; funded monumental public works and widespread corruption, generous scholarships and shopping trips to Miami, Florida.

The gasoline shortage has led to an outbreak of dozens of daily protests in most Venezuelan states in recent weeks. In the capital, Caracas, Iran’s periodic fuel shipments, paid for with what remains of the country’s gold reserves, guarantee an appearance of normality for a few weeks at a time. But in the countryside, residents challenged the pandemic’s quarantine to block roads, and clashed with police desperate for the minimum fuel they need to survive.

In all of Venezuela’s oil towns, the sticky crude oil that once provided jobs and social mobility is poisoning the livelihood of residents. In Cabimas, a city on the banks of Lake Maracaibo that was once a production center for the region’s prolific oil fields, the crude oil that leaks from underwater wells and abandoned pipelines covers the crabs that former workers in the sector take from the lake with the blackened hands.

When it rains, the oil that drained into the sewer system overflows through manholes and drains, running with rainwater through the streets, staining houses and filling the city with its stench. The desolation of Cabimas marks the rapid fall of a city that only a decade ago was one of the richest in Venezuela.

During the boom years, PDVSA, the state oil company, filled residents of oil cities like Cabimas with benefits, including free food, summer camps and toy distribution at Christmas, as well as building hospitals and schools.

Now, the tens of thousands of workers at the bankrupt company dismantle the oil facilities to get scrap and sell their characteristic coveralls, stamped with the company logo, to pay their expenses.

The end of the central role of oil in the Venezuelan economy is a traumatic reversal for a nation that, in many ways, defined the meaning of a petro-state.

After large reserves were discovered near Lake Maracaibo in 1914, United States oil workers arrived in the country. They helped build many Venezuelan cities and instill in the country a love for baseball, whiskey and big cars, forever differentiating the nation from its South American neighbors.

As a driving force in the founding of the Organization of Petroleum Exporting Countries in 1960, Venezuela helped Arab nations to take control of their oil wealth, shaping the global energy market and the geopolitical order of the coming decades.

Even in those wealthy days, Venezuela’s prominent oil minister, Juan Pablo Pérez Alfonzo, warned that there were pitfalls to the sudden oil wealth: it could lead to excessive debt and the destruction of traditional industries. “It’s the devil’s excrement. We are drowning in the devil’s excrement, ”declared Perez Alfonzo.

In the years that followed, despite abundant oil revenues, Venezuela faced a roller coaster of recurring debt and financial crises. Wealth also did not contribute to reducing corruption or inequality, and when a former paratrooper, Hugo Chávez, appeared on the national scene in the 1990s promising a revolution that would put Venezuela’s oil to work for its poor majority, he captivated the nation.

Shortly after being elected president in 1998, Chávez used the country’s respected state oil company in his radical development program. It laid off some 20,000 oil professionals, nationalized foreign-owned oil assets and allowed allies to plunder oil revenues.

The industry went into free fall last year when the United States accused Chavez’s successor and protégé, President Nicolás Maduro, of electoral fraud and enacted severe economic sanctions to force him out of power.

Soon, Venezuela’s oil partners, bankers and customers broke ties, and production plunged at a pace that overcame Iraq’s slowdown during the Gulf Wars and Iran’s after its Islamic Revolution.

The sanctions have forced the last US oil companies in the country to stop drilling. They may leave the country permanently in December if the Trump administration ends its sanctions exemptions.

To make up for the loss of revenue, Maduro turned to illicit gold mining and drug trafficking to remain in power, according to the U.S. government.

Maduro’s removal from oil has left the Venezuelan economy in decline comparable to that of the Democratic Republic of Congo, a country plagued by civil strife since its independence. But the transition has allowed Maduro to maintain the military’s loyalty and resist US sanctions, according to analyst Grais-Targow. She said the costs of this economic contraction were felt by the Venezuelan people.

More than five million Venezuelans, or one in six residents, have fled the country since 2015, creating one of the biggest refugee crises in the world, according to the United Nations. The country now has the highest poverty rate in Latin America, having overtaken Haiti this year, according to a recent study by Venezuela’s top three universities.

Near the huge Venezuelan coastal refineries, residents look for firewood and drag their fishing nets on foot to find food. The boats are stopped without gas, and the kitchens have long been without gas.

“If we haven’t reached the bottom yet, we’re inches from that,” said José Giron, who used to transport tourists in the beach town of Tucacas, close to Venezuela’s three largest refineries.

Source: Exame

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