PDVSA

Stock performance

History

Petróleos de Venezuela (PDVSA) was created on January 1, 1976, when President Carlos Andrés Pérez's government nationalized the foreign oil companies that had developed Venezuela's fields since the 1910s. For two decades it was regarded as one of the best-run state oil companies in the world and bought the US refiner Citgo, but after a 2002-03 strike against President Hugo Chávez, the government fired about 18,000 employees and turned PDVSA into an instrument of social spending, after which investment and technical capacity steadily eroded.

Business model

PDVSA controls the exploration, production, refining, and export of Venezuelan oil, much of it extra-heavy crude from the Orinoco Belt that must be blended with lighter diluents before it can be shipped. It works with foreign partners in joint ventures, with US sanctions since 2019 limiting who can buy its oil and on what terms, and with special licenses allowing a few companies such as Chevron to operate.

Market position

Venezuela holds the largest proven crude oil reserves in the world, but PDVSA's output collapsed from more than 3 million barrels a day in the late 1990s to well under 1 million barrels a day by the late 2010s, a decline driven by mismanagement, underinvestment, and sanctions rather than geology.

Country impact

Oil has long provided the overwhelming majority of Venezuela's export earnings, so PDVSA's collapse was the central cause of one of the deepest peacetime economic contractions on record, hyperinflation, and the emigration of millions of Venezuelans. Any economic recovery depends heavily on rebuilding its production and on the trajectory of US sanctions policy.