PDVSA Ex-President Luis Giusti Says Co. Bankrupt

Instant Max AI

(Energy Analytics Institute, Jared Yamin, 14.May.2018) – Venezuela’s state oil company Petróleos de Venezuela, S.A. (PDVSA) is bankrupt, at least that what its former president Luis Giusti thinks.

“If you look at the signs … they all point to a company that is bankrupt,” said Giusti during a televised interview on the Bayly show on 27 April 2018 with host Jamie Bayly.

Giusti initiated his career at Shell Corporation in Venezuela. He later worked at Maraven, S.A., a PDVSA operating affiliate. In 1994, Giusti was named chairman and CEO of PDVSA, positions he maintained until March of 1999, according to data posted to the website of the Center for Strategy & International Studies (CSIS), an organization where Giusti served as a senior advisor directly after departing PDVSA in 1999.

At the helm of PDVSA, Giusti oversaw major reforms to the Venezuelan petroleum sector including opening the sector to private participation, which attracted foreign direct investments (FDI) between 1995-2004 estimated at around $30 billion.

An engineer by profession, Giusti graduated from the University of Zulia in 1966, and received a M.S. in petroleum engineering from the University of Tulsa in 1971.

What follows are short extracts from the interview:

BAYLY: Why has Venezuela sent so much oil to the U.S. over the years?

GIUSTI: A lot of Venezuela barrels always went to the U.S. for a reason that is clear and precise, and that is due to the decisions made by many refineries along the Gulf Coast to invest in deep conversion capacity and to buy cheaper raw material.

Of the seven refineries in Venezuela only one is operating and the reason is simple and much more than efficiency losses and installation deteriorations. They’re simply not operating because there is no petroleum in Venezuela to process. (See Note 1)

BAYLY: If the US asked you what it could do to assist Venezuela such as to cease imports of Venezuelan crude oil or cease exports of U.S. gasoline to Venezuela, what would you recommend?

GIUSTI: It’s a bit difficult because you need to surmise the crises the citizens are living right now and take into consideration whether such a measure could turn everything around to achieve a change in a reasonable time in Venezuela. I would say that is the main concern.

BAYLY: How much money has been stolen from PDVSA?

GIUSTI: Venezuela and PDVSA are in the situation they are now due to a mismanagement of funds, without even talking about corruption.

After ten years of discretional uses of resources under the mandate of Chavez, we know that much of the funds went to personal accounts. Over a good 10-year period of Chavismo the amount that has been stolen could easily surpass $100 billion.

BAYLY: Is PDVSA bankrupt?

GIUSTI: Since PDVSA is a company of the state, it will never declare in bankruptcy. But, if you look at signs such as: not being able to pay bond returns, the Chinese’s unwillingness to lend more money, declining production levels, and salaries around $5 per month, among others signs, they all point to a company that is bankrupt.

BAYLY: What about the fact that is now run by military personnel?

GIUSTI: Military personnel who could be good or bad in their profession run PDVSA, but they are military personnel that don’t know anything about the petroleum sector.

BAYLY: How does Venezuela exit this disaster?

GIUSTI: It’s a hard question to answer but we are in the presence of a binary decision. There will not be talks about our understandings, or that we will team up. The scenario comes down to the persons in power leaving or there’s no way to resolve this.

Editor’s Note 1: The PDVSA refineries located in Venezuela include: Amuay (645 Mb/d), Cardon (310 Mb/d), Puerto La Cruz (187 Mb/d), El Palito (140 Mb/d), Bajo Grande (16 Mb/d) and San Roque (5 Mb/d), according to PDVSA data.
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