-Caveat Lector- President-Elect Vows to Shake up Oil Monopoly AP 23-DEC-98 CARACAS, Venezuela (AP) -- It's one of the world's largest oil companies and an island of efficiency in a country wracked by bureaucratic anarchy. But President-elect Hugo Chavez is vowing to shake up Petroleos de Venezuela, or PDVSA, the state-owned oil monopoly he claims has become an elitist, money-squandering giant accountable to no one. "PDVSA has become a state within a state," he said at a news conference hours after his landslide Dec. 6 victory. "That is going to end in the administration of Hugo Chavez Frias." His plans for the No. 1 foreign supplier of oil to the United States and the franchiser of 14,500 U.S. gas stations through its Citgo Petroleum Corp. are alarming PDVSA executives who fear he will dismantle the company that is Venezuela's biggest source of export earnings. They worry a government shakeup will derail or slow a multibillion-dollar expansion plan involving Mobil Corp., Exxon Corp., Atlantic Richfield Co. and others. "There is no company that is more supervised, controlled or audited than PDVSA," said Luis Giusti, the company's highly regarded, University of Tulsa-trained president. He boasts of PDVSA's international reputation for excellence. Chavez, who led a failed 1992 coup attempt against the government, already has announced that he will fire Giusti, divert some of PDVSA's profits to social spending and rein in plans to sharply boost production. At the election-night press conference, he denounced the company's "Saudi-style use of airplanes, out-of-control costs and gold-card culture" in a country where public hospitals lack needles and bandages and well over half the population lives in poverty. Giusti scoffs at the attack. "A CEO of Exxon earns $5 million a year. We earn $250,000 a year," he said, adding that he's received job offers that "maybe will allow me to live like a rich man." Venezuela nationalized its oil industry in 1976, booting out international companies and giving PDVSA exclusive control over the world's largest proven oil reserves outside the Middle East. The foreign companies that are now permitted to pump Venezuelan oil must sell all of their output to PDVSA. But Chavez and other critics claim PDVSA has hijacked the nation's oil policy, creating tax havens for its own benefit and blocking external audits. "There is no control, not by the Ministry of Energy and Mines ... nor the Congress, nor the comptroller general, not even the president of the republic," says Chavez. One result is that the company maintains overseas operations such as Tulsa, Okla.-based Citgo and Veba Oel AG in Germany that barely turn a profit, he says. "It's a mystery." Giusti defends Citgo, the fourth-largest gas station chain in the United States in terms of market share, as providing a guaranteed distribution outlet for Venezuelan oil, and rejects charges that PDVSA escapes government oversight. Citgo reported earnings of $211.2 million on revenue of $8.5 billion for the first nine months of this year. Industry experts say PDVSA has become highly independent partly by default because the government is so disorganized. The government often turns to PDVSA's huge pool of professionals for help on everything from setting up a foreign exchange control system to solving the Year 2000 computer problem. PDVSA officials fear Chavez may appoint inexperienced people who could ruin the company. They also fear he may raid its coffers to finance a growing national budget deficit now estimated at $5 billion. Oil accounts for about three-quarters of Venezuela's export earnings. "You could quickly wreck the company, which would be disastrous," said Robert Gay, Latin America strategist at New York-based investment bank BT Alex. Brown. PDVSA "is the golden goose." Chavez and PDVSA also are clashing over the company's plans to boost output capacity of 3.8 million barrels a day to 5.8 million barrels a day by the year 2007. To help meet that goal, Venezuela is inviting back industry giants such as Mobil, Exxon and Conoco Inc., which are lining up billions of dollars to invest in joint ventures with PDVSA. Chavez says the plan is too much, too fast, and he wants the foreign companies to focus on refining crude oil and producing petrochemical products instead of just drilling wells and exporting crude oil. He argues that a worldwide cut in production orchestrated by the Organization of the Petroleum Exporting Countries is what's needed to boost prices that this year hit a 12-year low. That collapse in oil prices not only has hit PDVSA, but also forced Venezuela to slash its national budget by $2 billion as revenue from the oil monopoly dried up. PDVSA, which has a long history of cheating on OPEC production limits, says long-term production cutbacks would be unrealistic. Its officials argue the days of strictly enforced OPEC quotas are over. If Venezuela cuts its production over the long run, they say, other countries will simply fill the gap. Copyright 1998& The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. ================================= Robert F. Tatman [EMAIL PROTECTED] [EMAIL PROTECTED] Remove "nospam" from the address to reply. NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. 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