The Strategist

Maduro carries a reshuffle in Venezuelan oil industry

08/25/2017 - 12:01

Venezuelan Oil Minister Nelson Martinez and President of the state oil company Eulogio del Pino will switch roles, while production in the South American country is falling, and money resources are declining, reports Bloomberg.

Del Pino will soon fly abroad to strengthen alliances before the summit of heads of state. The summit’s goal will be agreements on the oil and gas prices, said Venezuelan President Nicolas Maduro on state television.

"Eulogio, you will fight in the international arena, this is your main mission," Maduro said, "Eulogio helped to conclude agreements both within OPEC and with countries outside the cartel."

Maduro's decision was made after Petroleos de Venezuela SA's profits fell by almost 90% in the last year against a background of declining production and oil prices. Investors are closely watching Venezuela and PDVSA, as US sanctions against key government officials and consolidation of power by President Nicholas Maduro are threatening to disrupt financial flows.

Eulogio del Pino worked in the PDVSA for about 30 years. He led the company and served as the oil minister from 2014 to January 2017. Then his dual role was divided, and Nelson Martinez, who previously headed Citgo Petroleum Corp. division in the US, became the new minister.

Del Pino was said to have planned to leave PDVSA to run as a delegate to the Constituent Assembly convened by Maduro, Bloomberg’s source in the company said. Petroleos de Venezuela SA has been preparing to retire Del Pino for several months.

In January, there were reshuffles in the company's management with subsequent replacement of some managers in the processing sector. According to Maduro, Martinez, as head of the PDVSA, will work to strengthen cooperation with foreign companies in the Orinoco oil belt.

In late July, the US Administration imposed sanctions against the Venezuelan state oil and gas company PDVSA, the country's defense ministry, and 13 top government officials of Venezuela. 

The consequences of sanctions imposed on the Venezuelan oil sector may be far-reaching, commented Stephen Brennock, an analyst at PVM Oil Associates.

"Venezuela will lose much-needed oil revenues, US refineries will suffer from a decline in the profitability of refining, and American motorists will suffer from higher gasoline prices," he said.

"Other major countries importing crude oil, such as India and China, can win if they are offered Venezuelan oil at a significant discount," Brennock said.

Meanwhile, the US Vice President Michael Pence said that the US will be increasing pressure on the authorities of the republic until they hold "free and fair elections" and will not stop "repressions against the people of Venezuela."

After Venezuela held elections to the Constitutional Assembly (CA), which without a preliminary referendum can reform the system of government and change the basic law of the country, US National Security Adviser Herbert McMaster said that Washington now considers Maduro a dictator. The US also imposed sanctions on Venezuelan president and the CA members.

President of the United States Donald Trump previously stated that he does not exclude the possibility of a military solution to the Venezuelan problem. According to him, Washington has "many options for Venezuela," including "a possible military option" if necessary.