Maduro’s government is squeezing what it can from the collapsing industry — and unleashing an environmental disaster in the process.
By Fabiola Zerpa, Peter Millard, and Andrew Rosati
Boats with oil-stained hulls must now travel further out into the Caribbean to make a catch. Crude has soaked the roots of nearby mangroves, leaving shrimp grounds barren. Seeing no future, dozens of fishermen and their families have fled their homes; those who are left loiter in the village, waiting for Petroleos de Venezuela, the state oil company known as PDVSA, to compensate for lost boats, equipment and sales.
Broke and subject to international sanctions, President Nicolas Maduro’s government is squeezing what it can from Venezuela’s collapsing oil industry, unleashing an environmental disaster in one of Earth’s most ecologically diverse nations. As the country’s vast resources become a toxic burden, Venezuela offers a bleak vision of the end of oil in a founding OPEC member.
Rio Seco is just the latest to bear the consequences, after the rupture of an offshore pipeline produced an enormous toxic geyser in the middle of local fishing grounds in September. The incident only came to light after Nelio Medina, the leader of a fishing council in the village, posted a video of the catastrophe on social media, causing an outcry.
“They should have replaced them a long time ago,” he said.
Venezuela boasts the world’s largest known oil reserves, but it’s struggling to produce any gasoline at all as sanctions constrain crude exports that are the foundation of its economy and bar the import of parts essential for maintenance. The result is a downward spiral of spills, scarcity and yet more economic suffering that disproportionately hits the poorest of the poor — those who can’t afford to join the estimated 5 million Venezuelans who have fled to neighboring countries.
A journey in November to the Paraguana peninsula that is home to PDVSA’s Cardon and Amuay refineries showed how far Venezuela has fallen. Because of endemic shortages, preparations for a round trip from the capital, Caracas, of just over 1,000 kilometers (about 620 miles) include procuring enough fuel for the route and a vehicle able to transport the necessary jerrycans.
Contrasts between Venezuela’s oil-fueled glory days and today’s dereliction are everywhere. The Paraguana complex was once the largest in the world, and at the turn of the century its refineries were such dominant exporters to the U.S. that even minor production glitches often sent gasoline futures soaring. These days only two of the six produce anything at all.
The complex has a processing capacity of almost 1 million barrels a day. Yet now even cooking gas is so scarce that many residents have to rely on firewood.
“We don’t understand how with two such large refineries next to us we don’t have gasoline or gas,” said Reina Falcon, 69, as she prepared fish for her four grandchildren and five great-grandchildren.
Falcon has seen PDVSA’s declining fortunes up close from the shores of the Amuay refinery town. Living so near to the complex, she is concerned about the health and safety of her family: A giant explosion in 2012 left at least 42 dead, and fires and blasts have become almost routine since.
Spills also occur regularly, and each time Venezuela is able to dodge sanctions and export a few tanker loads — as happened when an Iranian vessel loaded crude this fall — it frees up storage space to start pumping oil through leaky pipelines. Iran’s biggest fleet of tankers yet is at sea now bound for Venezuela.
Best practices went out the window two decades ago following a failed coup and nationwide strike against the late Hugo Chavez, Venezuela’s populist president who renationalized the industry and built up massive debts even during the era of $100-a-barrel oil.
Prices have cratered under Maduro and brought to a head the cumulative impact of neglect, corruption and mismanagement. PDVSA was one of the most technically advanced national oil companies as recently as the late 1990s; now it’s a hollowed-out husk presiding over the industry’s demise. Venezuela’s crude production hit a low of 337,000 barrels a day in June, just 10% of the country’s peak output back in 2001. PDVSA didn’t respond to email and texted requests for comment.
“The level of neglect has been brutal,” said Raul Gallegos, a Bogota-based director at Control Risks, an international consulting firm. What’s more, the impact is only going to get worse since the Maduro government “isn’t going anywhere,” he said.
Maduro, who tightened his grip on power in National Assembly elections this month and looks to have seen out the Trump administration, has expressed hope for improved U.S. relations under President-elect Joe Biden. But the prospects of a let-up in sanctions look dim. Biden criticized Trump’s push for regime change, but he also called Maduro a dictator.
Venezuela exported its first barrel of oil in 1539, when records show that a shipment was sent to the Spanish court to treat Emperor Charles V’s gout. Lake Maracaibo, a Caribbean inlet the size of Connecticut, is where the industry got its real start.
In 1922, Royal Dutch Shell made a discovery at Cabimas: Residents of Maracaibo some 20 miles away could see the fountain of oil on the other side of the lake from their rooftops. The giant oilfield then known as El Barroso II, later as the Costal Bolivar Complex, went on to make Venezuela the world’s top exporter by the end of the decade, a crown it held until 1970.
Oil revenues fueled state-of-the-art airports and highways in the 1950s, made it a destination for immigrants from Europe and neighboring countries, and helped pave the way for a gilded era of excess. Hilton established hotels in the capital and near the Caribbean coast; Concorde flew a direct Caracas-Paris service.
Ninoska Diaz, a Cabimas resident who runs a small school from her home, said that she had to send students home when the school was flooded with oil that soaked desks and chairs, forcing her to throw them out. “We don’t see any response from the government,” she said by phone.
Oil spills are a chronic by-product of daily output in Venezuela, yet sanctions limit the scope for outside help even if Maduro were to seek assistance. Spills are larger and more frequent out of sight in the plains of the Orinoco River, where cattle ranches and crops are located, according to Ismael Hernandez, a remediation expert at the Central University of Venezuela. Maduro is prioritizing the region’s top fields in a last stand to maintain any output at all.