Earnings plunged 53 percent at Venezuela’s state oil company last year

Earnings drop at Venezuela’s state oil company

CARACAS, Venezuela — Venezuela’s state oil company said Tuesday that its earnings plunged 53 percent last year, citing lower prices for crude on the international market as a primary cause.

The annual earnings of Petroleos de Venezuela SA, or PDVSA, dropped from $9.5 billion in 2008 to $4.4 billion in 2009, the state company said in its annual report.

Company president Rafael Ramirez said the lower earnings resulted from the sharp drop in world oil prices and also production cuts mandated by the Organization of Petroleum Exporting Countries.

According to PDVSA’s official figures, oil output declined from more than 3.2 million barrels of oil a day in 2008 to just over 3 million barrels a day last year. Some independent analysts say those figures are inflated and that Venezuela is actually producing roughly 2.4 million barrels a day.

Venezuela relies on oil income for about 32 percent of its government budget and 95 percent of its export earnings — making the decline in revenues a damaging trend for President Hugo Chavez as he attempts to pull his country out of a recession.

PDVSA’s revenue dropped 41 percent last year. Its debt is also rising while the firm has been reducing investment.

PDVSA’s debt grew to $21.4 billion last year, including $4 billion owned to contractors, contributing to a pattern that has seen PDVSA’s debts triple over the last nine years.

Ramirez, who is also Chavez’s oil minister, played down criticism that the company’s debt is becoming a burden, saying it is managing what he called a “conformable” level of debt.

Investment fell to $13.5 billion last year — an 11.5 reduction from the $15.3 billion that PDVSA invested in 2008, according to Tuesday’s report. The company, which is the lifeblood of Venezuela’s oil-dependent economy, plans to invest $16.4 billion this year while also seeking financing from allied nations such as China and Russia.

PDVSA’s payroll, meanwhile, is growing. The company hired 10,000 new employees last year, bringing the total number of workers both in Venezuela and abroad to about 92,000, according to the report.

Angel Garcia Banchs, an economy professor at the Central University of Venezuela, said PDVSA’s troubles are rooted in the world financial crisis that depressed oil prices, OPEC output cuts and the company’s bloated payroll.

The firm hired more than 13,200 new employees between 2008 and 2009, he noted.

The company, which Chavez has used to finance a wide range of social programs, also has cut spending on those initiatives. It says it spent roughly $3 billion on social programs last year, compared to more than $12 billion in 2008.

Garcia Banchs criticized Chavez’s use of PDVSA to finance social programs, saying “it compromioses reinvestment in oil-producing activities.”