Venezuela’s Oil Industry, Reopening to Investors, Is Major Polluter
By Kejal Vyas and Patricia Garip, Feb. 22, 2023, WSJ

Across Venezuela’s once-thriving oil industry, environmentalists say rusty pipelines and storage tanks routinely leak contaminants into the ground.

Frequent spills stain the mangroves of national parks with oil. Refinery explosions in recent years have sent black smoke billowing into the sky. And Venezuela’s national oil company, unable to process the natural gas that is a byproduct of oil
production, burns enough each day to supply the state of Georgia.

Following the Biden admin’s decision last year to ease sanctions to allow Chevron Corp. to resume its Venezuelan operations, U.S. and European oil companies have been lobbying the U.S. for clearance to pump oil amid market upheaval stemming from the
war in Ukraine, people close to the companies say. But Venezuela’s neglect and mismanagement reflect the challenges before the Western energy companies and investors looking to return to the country, which sits atop some of the world’s largest oil
and gas reserves.

ConocoPhillips, which abandoned Venezuela after its assets were nationalized in 2007, is now open to a deal to sell the country’s oil in the U.S. as a way to recover the close to $10 billion it is owed by Venezuela. A few companies that never left but
curtailed operations in the face of sanctions and unpaid debts—among them Spain’s Repsol SA and Italy’s Eni SpA—are holding talks with the Venezuelan national oil company Petróleos de Venezuela SA, or PdVSA so they can jack up production,
according to people close to some of the firms. And Shell PLC, a pioneer of Venezuela’s oil industry, says it is in the running to bring gas from a Venezuelan offshore field to neighboring Trinidad and Tobago.

The interest is deepening even as environmental and workplace advocates warn of hazards across Venezuela’s decrepit energy industry, where regulatory oversight is lax, according to oil-industry workers, analysts and environmental activists, even as
President Nicolás Maduro’s government is working to raise output. Morningstar Sustainalytics, which assesses environmental, social and governance risk for investors, ranks PdVSA as a “severe risk” because of its broad exposure to and management of
environmental problems.

Most of the companies didn’t respond to requests for comment on Venezuela’s enviro situation. Conoco declined to comment.

PdVSA “is focused on squeezing out any production they can, rather than tending to the enviro situation,” said Ausberto Quero, a Venezuelan civil engineer and expert on the oil industry’s environmental impact. Venezuela’s Information Ministry and
PdVSA didn’t respond to emails seeking comment.

Maduro has blamed capitalism for climate change and asserted that U.S. sanctions against his govt are responsible for his administration’s inability to maintain the industry.

Quero lives near Lake Maracaibo, where shipwrecks lie near corroded pipelines that ooze gas and chemicals into the blackened waters of what was once the heart of a bustling oil sector.

“It’s not even happening once in a while anymore, we’re now talking about spills and leaks that are practically constant because there’s no personnel to handle them,” Mr. Quero said. Venezuela has seen many experienced oil field technicians and
laborers flee the country over the past decade as the economy tanked and as the collapse of the local currency, the bolivar, rendered salaries the equivalent of a few U.S. dollars a month, oil union leaders say.

PdVSA hasn’t reported data on oil spills and workplace accidents since 2016. That year, it recorded more than 8,000 spills, four times as many as in 1999, when Venezuela’s ruling leftist government first took office and Venezuela produced far more
oil.

“We are completely in the dark when it comes to hard scientific information about the environment in Venezuela,” said Bram Ebus, an environmental researcher who tracks Venezuela at the International Crisis Group, a nongovernmental organization
dedicated to preventing conflict.

The lack of official data has led advocacy groups to track industry accidents through social media and local press reports. The Observatory on Political Ecology of Venezuela, a group that tracks vulnerable ecosystems in the country, documented 86 oil
spills during 2022, up from 77 the previous year. Another organization, the Venezuelan Observatory on Environmental Rights, cataloged about 200 spills between 2016 and 2021, a majority of which it said were never made public by authorities. Both groups
say that because of the information blackout, the true number of accidents is probably much higher.

Venezuela’s government had for decades made fuel virtually free for its nearly 30 million residents, which environmentalists and economists have said encouraged waste and helped to put the country in the ranks of the region’s biggest CO2 emitters,
per capita, according to data platform Climate Watch.

Although emissions fell as oil production contracted 70% since 2015 to about 700,000 barrels of oil daily today, environmental groups say a lack of investment and maintenance, along with the exodus of skilled workers, have left the country’s lifeblood
industry decidedly dirtier and more prone to accidents.

The contamination from the oil industry has hit ordinary Venezuelans, such as the fishermen on Lake Maracaibo’s eastern coast. Yohan Flores, who has been researching an oil spill that idled fishermen there since January, said there is little hope for
an end to environmental calamities.

He said the government has ignored the call by the group he directs, the Azul Environmentalists Foundation, for cleaning up a spill that can be seen in satellite images. “Those of us who live around here just want to be able to enjoy the beach again,
maybe even see some tourism,” said Mr. Flores.

Oil industry executives and analysts say allowing Western companies to return to Venezuela could help to clean up the industry by raising environmental and safety standards and bringing in modern technology. The White House didn’t respond to emailed
questions seeking comment about how the Biden administration sees the pollution problem in Venezuela.

“The sheer nature of the international standards and compliance factors of those firms will translate to their operations in Venezuela,” says Jeremy Martin, vice president for energy and sustainability at the Institute of the Americas think tank at
the University of California, San Diego. “Western firms and contractors adhering to ESG [environmental, social and corporate-governance issues] and compliance factors will accelerate the positive impact.”

But the lingering risk of sanctions and political uncertainty are keeping most investors at bay, said oil economist Orlando Ochoa. “Who’s going to risk putting money into Venezuela for what’s needed if you have a situation like this?” he said.

Among potential newcomers is former Shell executive Mounir Bouaziz, who is seeking to process Venezuela’s flared gas into exports and cooking fuel that is sorely needed for the domestic market.

PdVSA burns about 2 billion cubic feet of gas daily, double the commercial volume that neighboring Colombia’s energy industry produces. Most routine flaring takes place at aging fields in the east. Flaring quadrupled over the last decade, more than in
any other country studied by the World Bank’s Global Gas Flaring Reduction Partnership, which ranked Venezuela as the sixth-highest flaring country in the world in 2021 though it ranked 26th in oil production.

Tapping into his gas experience in Iraq, Bouaziz had previously worked on a project to help PdVSA capture the flared gas. But U.S. sanctions, followed by the pandemic, shelved plans.

Now working for his own Dubai-based consulting firm, BEE Energy, Bouaziz is reviving the pitch to Caracas, which he said would require only “tens of millions of dollars” of investment and would stimulate Venezuelan exports while cutting harmful gas
emissions.

“At a time when the world is looking for quick and immediate energy supplies, my God,” Mr. Bouaziz said, commenting on the energy potential he sees in Venezuela.

https://www.wsj.com/articles/venezuelas-oil-industry-reopening-to-investors-is-major-polluter-35ab2d97

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