The Latin Oil Czar

(2 of 2)
C

havez — who faces a national recall referendum on Aug. 15--warned the U.S. this year that he'll turn off the oil spigot if the Bush Administration threatens to invade Venezuela over either politics or oil. U.S. officials dismiss that notion as absurd, but Rodriguez echoes the concern: "Many people here fear what happened in Iraq could happen to Venezuela." Still, Rodriguez, an attorney and a classical-music lover, emphasizes that Venezuela "doesn't want price volatility" and wants to continue being the U.S.'s most reliable supplier. "There is no contradiction between a strong alliance with OPEC," he says, "and a strong relationship with our principal client."

Though PDVSA supplies almost half the government's revenues, it once ran itself like a private corporation — acquiring subsidiaries like U.S.-based CITGO — and gained a global reputation as a model oil firm. But at home it was viewed as a den of arrogant, pampered technocrats — and a cookie jar for Venezuela's elite, whose corruption has left two-thirds of the population in poverty. Among the poor was Rodriguez's farming family. It made him all the more receptive to economists like Bernard Mommer, a German-born Marxist who taught Rodriguez at Caracas' Central University. As a Congressman, Rodriguez chafed in the 1990s as PDVSA opened up to what he considered excessive foreign investment and hiked production.

As Energy Minister, Rodriguez quickly made PDVSA more subservient to both the government and OPEC, which elected him secretary-general in 2001. PDVSA has also supplied Chavez ally Fidel Castro more than 54,000 bbl. a day on favorable finance terms. The politicized atmosphere at PDVSA — many workers say devotion to the Chavez revolution is a job requirement — helped provoke the 2002 strike. Says Ignacio Layrisse, who was afterward fired as production manager: "Ali Rodriguez may be a smart and capable man, but he's just a has-been lefty carrying out Chavez's plans to turn PDVSA into a mediocre state-run company."

The new five-year plan is Rodriguez's chance to prove once and for all that a lefty can run a major oil company as effectively as any capitalist CEO"more effectively," he insists. With giant new well projects at sites like Tomoporo and El Furrial, PDVSA hopes to increase daily output to more than 5 million bbl. by 2009, which Rodriguez now knows is critical to staying competitive. Some investors gripe that Chavez's 2001 hydrocarbons law makes it too difficult to participate in the lucrative quality-crude projects. But others praise Rodriguez (and more radical leftists berate him) for reserving more than a quarter of the $37 billion plan--$10 billion — for foreign investment, mostly in extra-heavy crude, marginal oil fields and Venezuela's massive natural-gas reserves. As one foreign oil boss in Venezuela assures skeptics, "There will always be investment opportunities here."

Executives at U.S. and European oil firms privately say the government is helping them find ways around the hydrocarbons law. If so, the extra capital could be good news for what Rodriguez considers the soul of his reforms — the PDVSA-financed social projects, whose popularity among the poor may spell the difference for Chavez in the referendum. "We're going to be an even more model oil company," says Rodriguez, "because we'll be as visible in the barrios as we are in the markets." The policy wonk, in other words, is still a rebel.