PDVSA: AND YET MORE RESHUFFLING?

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 002045 SIPDIS NSC FOR TSHANNON AND CBARTON ENERGY FOR DPUMPHREY AND ALOCKWOOD E.O. 12958: DECL: 06/20/2014 TAGS: EPET VE SUBJECT: PDVSA: AND YET MORE RESHUFFLING? -------------- SUMMARY -------------- ¶1. (C) RUMORS OF UPCOMING SENIOR LEVEL DEPARTURES/REASSIGNMENTS WITHIN VENEZUELA'S ENERGY SECTOR ARE ONCE AGAIN REACHING FEVER PITCH IN CARACAS WITH PETROLEOS DE VENEZUELA (PDVSA) PRESIDENT ALI RODRIGUEZ, CITGO PRESIDENT LUIS MARIN, AND VICE MINISTER FOR HYDROCARBONS LUIS VIERMA THE MOST POPULAR TARGETS OF THE RUMORS. THESE RUMORS OF SENIOR LEVEL CHANGES ARE IN ADDITION TO CONTINUING PERSONNEL CHANGES AT MORE JUNIOR LEVELS WITHIN PDVSA. THE MANAGEMENT OF THE COMPANY IS ATOMIZED WITH DECISION-MAKING PARALYZED IN THE FACE OF POWER WRANGLING. END SUMMARY. -------------- THE RUMORS -------------- ¶2. (C) PDVSA PRESIDENT ALI RODRIGUEZ IS SAID (AT LEAST IN PETROLEUM CIRCLES) TO BE LEAVING PDVSA, AND POSSIBLY ON HIS WAY TO HEAD PRESIDENT CHAVEZ'S ELECTION CAMPAIGN. RUMORS ON THE STREET HOLD THAT HE WILL BE REPLACED BY JOSE LUIS PRIETO, A RETIRED ARMY GENERAL AND FORMER DEFENSE MINISTER FIRST ASSIGNED TO THE PDVSA BOARD IN MARCH 2004 AND RAPIDLY PROMOTED TO THE POSITION OF VICE PRESIDENT. CITGO PRESIDENT LUIS MARIN IS ALSO SAID TO BE ON THE VERGE OF RETURNING TO THE BOARD. THE RUMORS HOLD VARIOUSLY THAT HE WILL TAKE PRIETO'S POSITION ON THE BOARD OR THAT HE WILL ASSUME THE EXTERNAL DIRECTOR POSITION NOW HELD BY VICE MINISTER LUIS VIERMA. ¶3. (C) VIERMA, WHO NOW HOLDS THE TITLES OF VICE MINISTER OF HYDROCARBONS, EXTERNAL DIRECTOR OF PDVSA, PRESIDENT OF PDVSA AFFILIATE CVP (CORPORACION VENEZOLANA DE PETROLEO),AND VICE PRESIDENT OF PDVSA GAS, IS A PARTICULARLY POPULAR TARGET FOR RUMORS. ONE HIGHLY REGARDED INDUSTRY SOURCE REPORTED ON JUNE 11 THAT VIERMA WILL NOW ADD THE PRESIDENCY OF PDVSA'S RESEARCH ARM, INTEVEP, TO HIS PORTFOLIO. HOWEVER, THE TITTLE TATTLE AT THE JUNE 15-17 LATIN AMERICAN PETROLEUM SHOW IN MARACAIBO HELD THAT VIERMA WILL BE REPLACED AS VICE MINISTER AT THE BEHEST OF MINISTER RAFAEL RAMIREZ_ WHO WANTS VIERMA OUT BECAUSE "HE IS A BACKSTABBER." THE GOSSIPS CLAIMED THAT THE VICE MINISTER POSITION HAD BEEN OFFERED TO LUIS MARIN WHO TURNED IT DOWN IN ORDER TO RETURN TO THE PDVSA BOARD. CITGO VICE PRESIDENT FRANK GYGEX WAS RUMORED TO BE A POSSIBLE SUCCESSOR TO MARIN AS CITGO PRESIDENT. ¶4. (C) AT THE MINISTRY OF ENERGY AND MINES (MEM), HYDROCARBONS DIRECTOR EDITH GOMEZ HAS BEEN REPLACED BY VENEZUELA'S OPEC GOVERNOR, IVAN ORELLANA. AN INTERNATIONAL OIL COMPANY EXECUTIVE INFORMED ECONOFF JUNE 9 THAT ORELLANA MAY WELL BE DESIGNATED AS VICE MINISTER TO REPLACE VIERMA. INDUSTRY SOURCES TELL US THAT HE WOULD BE A SOLID CANDIDATE FOR THAT POSITION. -------------- THE TURMOIL CONTINUES -------------- ¶5. (C) THESE SENIOR LEVEL CHANGES ARE, OF COURSE, IN ADDITION TO THE CONTINUING PERSONNEL CHANGES AT LOWER LEVELS IN PDVSA. HERVE GEHIN, VENEZUELA COUNTRY MANAGER FOR THE GIANT SERVICE COMPANY SCHLUMBERGER, COMMENTED TO THE AMBASSADOR ON JUNE 12 THAT THE MANAGEMENT OF THE COMPANY IS ATOMIZED WITH DECISION-MAKING PARALYZED IN THE FACE OF POWER WRANGLING. GEHIN ADDED THAT FOUR DISTINCT GROUPS CAN STILL BE SEEN WITHIN PDVSA. ACCORDING TO GEHIN THE GROUPS BREAK DOWN AS FOLLOWS: THE ADHERENTS TO THE FATHERLAND FOR ALL (PATRIA PARA TODOS - PPT) PARTY LED BY ALI RODRIGUEZ; ADHERENTS OF CHAVEZ'S MVR PARTY STILL DEEPLY FRUSTRATED BY THE POWER OF THE PPT WITHIN VENEZUELA'S ENERGY SECTOR; THE MILITARY, SAID BY GEHIN TO BE ANXIOUS TO GET THEIR HANDS AS DEEPLY AS THEY CAN INTO PDVSA'S TILL; AND, FINALLY, THE "OPPORTUNISTS" WHO STAYED IN THE COMPANY AND CLIMBED UP THE LADDER FOLLOWING THE DEPARTURE OF MORE SENIOR (OR MORE TALENTED) EMPLOYEES. ¶6. (C) GEHIN COMPARED PDVSA TO THE IRANIAN NATIONAL OIL COMPANY, SAYING THAT THERE IS STILL TECHNICAL EXPERTISE THERE AMONG THE AGING TECHNOCRATS WHO HAVE BEEN WITH THE COMPANY SINCE BEFORE THE REVOLUTION, BUT POLITICS RULES THE DAY. GEHIN SAID THAT PDVSA NEEDS SCHLUMBERGER (AND OTHER SERVICE CARACAS 00002045 001.2 OF 002 C) RUMORS OF UPCOMING SENIOR LEVEL DEPARTURES/REASSIGNMENTS WITHIN VENEZUELA'S ENERGY SECTOR ARE ONCE AGAIN REACHING FEVER PITCH IN CARACAS WITH PETROLEOS DE VENEZUELA (PDVSA) PRESIDENT ALI RODRIGUEZ, CITGO PRESIDENT LUIS MARIN, AND VICE MINISTER FOR HYDROCARBONS LUIS VIERMA THE MOST POPULAR TARGETS OF THE RUMORS. THESE RUMORS OF SENIOR LEVEL CHANGES ARE IN ADDITION TO CONTINUING PERSONNEL CHANGES AT MORE JUNIOR LEVELS WITHIN PDVSA. THE MANAGEMENT OF THE COMPANY IS ATOMIZED WITH DECISION-MAKING PARALYZED IN THE FACE OF POWER WRANGLING. END SUMMARY. -------------- THE RUMORS -------------- ¶2. (C) PDVSA PRESIDENT ALI RODRIGUEZ IS SAID (AT LEAST IN PETROLEUM CIRCLES) TO BE LEAVING PDVSA, AND POSSIBLY ON HIS WAY TO HEAD PRESIDENT CHAVEZ'S ELECTION CAMPAIGN. RUMORS ON THE STREET HOLD THAT HE WILL BE REPLACED BY JOSE LUIS PRIETO, A RETIRED ARMY GENERAL AND FORMER DEFENSE MINISTER FIRST ASSIGNED TO THE PDVSA BOARD IN MARCH 2004 AND RAPIDLY PROMOTED TO THE POSITION OF VICE PRESIDENT. CITGO PRESIDENT LUIS MARIN IS ALSO SAID TO BE ON THE VERGE OF RETURNING TO THE BOARD. THE RUMORS HOLD VARIOUSLY THAT HE WILL TAKE PRIETO'S POSITION ON THE BOARD OR THAT HE WILL ASSUME THE EXTERNAL DIRECTOR POSITION NOW HELD BY VICE MINISTER LUIS VIERMA. ¶3. (C) VIERMA, WHO NOW HOLDS THE TITLES OF VICE MINISTER OF HYDROCARBONS, EXTERNAL DIRECTOR OF PDVSA, PRESIDENT OF PDVSA AFFILIATE CVP (CORPORACION VENEZOLANA DE PETROLEO),AND VICE PRESIDENT OF PDVSA GAS, IS A PARTICULARLY POPULAR TARGET FOR RUMORS. ONE HIGHLY REGARDED INDUSTRY SOURCE REPORTED ON JUNE 11 THAT VIERMA WILL NOW ADD THE PRESIDENCY OF PDVSA'S RESEARCH ARM, INTEVEP, TO HIS PORTFOLIO. HOWEVER, THE TITTLE TATTLE AT THE JUNE 15-17 LATIN AMERICAN PETROLEUM SHOW IN MARACAIBO HELD THAT VIERMA WILL BE REPLACED AS VICE MINISTER AT THE BEHEST OF MINISTER RAFAEL RAMIREZ_ WHO WANTS VIERMA OUT BECAUSE "HE IS A BACKSTABBER." THE GOSSIPS CLAIMED THAT THE VICE MINISTER POSITION HAD BEEN OFFERED TO LUIS MARIN WHO TURNED IT DOWN IN ORDER TO RETURN TO THE PDVSA BOARD. CITGO VICE PRESIDENT FRANK GYGEX WAS RUMORED TO BE A POSSIBLE SUCCESSOR TO MARIN AS CITGO PRESIDENT. ¶4. (C) AT THE MINISTRY OF ENERGY AND MINES (MEM), HYDROCARBONS DIRECTOR EDITH GOMEZ HAS BEEN REPLACED BY VENEZUELA'S OPEC GOVERNOR, IVAN ORELLANA. AN INTERNATIONAL OIL COMPANY EXECUTIVE INFORMED ECONOFF JUNE 9 THAT ORELLANA MAY WELL BE DESIGNATED AS VICE MINISTER TO REPLACE VIERMA. INDUSTRY SOURCES TELL US THAT HE WOULD BE A SOLID CANDIDATE FOR THAT POSITION. -------------- THE TURMOIL CONTINUES -------------- ¶5. (C) THESE SENIOR LEVEL CHANGES ARE, OF COURSE, IN ADDITION TO THE CONTINUING PERSONNEL CHANGES AT LOWER LEVELS IN PDVSA. HERVE GEHIN, VENEZUELA COUNTRY MANAGER FOR THE GIANT SERVICE COMPANY SCHLUMBERGER, COMMENTED TO THE AMBASSADOR ON JUNE 12 THAT THE MANAGEMENT OF THE COMPANY IS ATOMIZED WITH DECISION-MAKING PARALYZED IN THE FACE OF POWER WRANGLING. GEHIN ADDED THAT FOUR DISTINCT GROUPS CAN STILL BE SEEN WITHIN PDVSA. ACCORDING TO GEHIN THE GROUPS BREAK DOWN AS FOLLOWS: THE ADHERENTS TO THE FATHERLAND FOR ALL (PATRIA PARA TODOS - PPT) PARTY LED BY ALI RODRIGUEZ; ADHERENTS OF CHAVEZ'S MVR PARTY STILL DEEPLY FRUSTRATED BY THE POWER OF THE PPT WITHIN VENEZUELA'S ENERGY SECTOR; THE MILITARY, SAID BY GEHIN TO BE ANXIOUS TO GET THEIR HANDS AS DEEPLY AS THEY CAN INTO PDVSA'S TILL; AND, FINALLY, THE "OPPORTUNISTS" WHO STAYED IN THE COMPANY AND CLIMBED UP THE LADDER FOLLOWING THE DEPARTURE OF MORE SENIOR (OR MORE TALENTED) EMPLOYEES. ¶6. (C) GEHIN COMPARED PDVSA TO THE IRANIAN NATIONAL OIL COMPANY, SAYING THAT THERE IS STILL TECHNICAL EXPERTISE THERE AMONG THE AGING TECHNOCRATS WHO HAVE BEEN WITH THE COMPANY SINCE BEFORE THE REVOLUTION, BUT POLITICS RULES THE DAY. GEHIN SAID THAT PDVSA NEEDS SCHLUMBERGER (AND OTHER SERVICE CARACAS 00002045 002 OF 002 UNCTIONS. PDVSA DECISION-MAKING IS PAINFULLY SLOW AND EVEN THE MOST MINOR DECISIONS MUST BE MADE AT THE TOP. HE NOTED THAT THE PDVSA ORGANIZATION CHART BEARS NO RELATION TO THE REAL POWER RELATIONSHIPS IN THE COMPANY. AS A RESULT, SCHLUMBERGER NOW INSISTS ON EVERYTHING IN WRITING. GEHIN'S COMMENTS TO THE AMBASSADOR ECHO THE STORIES WE REPEATEDLY HEAR FROM OTHER SERVICE COMPANIES AND THE INTERNATIONAL OPERATORS ABOUT THE FRUSTRATIONS THEY FACE IN DEALING WITH PDVSA ON A DAY TO DAY BASIS. -------------- COMMENT -------------- ¶7. (C) DESPITE THE PDVSA/MEM ROADSHOWS DESIGNED TO SHOW THE WORLD (AND PARTICULARLY THE FINANCIAL WORLD) THAT ALL IS NORMAL WITHIN THE VENEZUELAN ENERGY INDUSTRY, THIS IS STILL FAR FROM THE TRUTH. DECISION-MAKING IN PDVSA LOOSENED UP IMMEDIATELY FOLLOWING THE STRIKE IN THE EFFORT TO GET PRODUCTION GOING AGAIN BUT HAS SINCE RETURNED TO THE HANDS OF SENIOR MANAGEMENT IN CARACAS. THAT LUIS VIERMA STILL ENCUMBERS NO LESS THAN FOUR SENIOR MANAGEMENT POSITIONS DEMONSTRATES THE SHALLOWNESS OF THE MANAGEMENT POOL. THE CONTINUED SHUFFLING OF THE MANAGEMENT IN PDVSA AND THE MINISTRY PERHAPS DEMONSTRATES A LACK OF TRUST IN THEIR REVOLUTIONARY ARDOR. AT THE END OF THE DAY, WE WOULD NOT BE SURPRISED TO SEE THE MILITARY, ALWAYS CHAVEZ'S MOST TRUSTED LIEUTENANTS, TAKE MORE CONTROL OVER THE INDUSTRY. SHAPIRO NNNN 2004CARACA02045 - CONFIDENTIAL