Venezuela's PDVSA oil company is bloated, 'falling apart'

— -- La VICTORIA, Venezuela — Beatriz Rodriguez sits in a long line under a sweltering sun, waiting for state oil company Petróleos de Venezuela to deliver cylinders of natural gas she uses to cook her family's meals.

She and her neighbors haven't had gas for two weeks, and her patience is running out.

"I complained, and they told me I should use firewood," Rodriguez, a mother of three, fumes. "Firewood, they told me. And we're supposedly an oil power."

Venezuelan President Hugo Chávez points to the state takeover of his country's oil industry as one of his revolution's great successes. He boasts that his renegotiation of oil agreements made by his predecessors has improved oil production and allowed Venezuelans to guide the direction of its major export.

New discoveries have pushed Venezuela, which was the USA's. fifth-largest crude supplier last year, to No. 1 in the world for proven oil reserves. .

Exploration of Venezuela's 21,000-square-mile Orinoco belt shows that its oil deposits exceed the proven reserves of even Saudi Arabia. But critics claim that the there's no telling much of the oil will ever make it out of the ground. They say Chávez is diverting profits toward social spending rather than investing in Venezuela's energy production.

Chávez's "Socialism for the 21st century" policies have included the confiscation of foreign-owned facilities and the bloating of state oil company Petróleos de Venezuela S.A., or PDVSA, with patronage hires. As his election approaches, some experts believe mismanagement of Venezuela's oil could be the issue that derails Chávez's hold on power.

"The lack of direction, investment and maintenance are wrecking the oil and natural gas industries," says Jose Bodas, secretary general of the FUTPV, one of the country's largest oil unions. "PDVSA is falling apart."

Oil and petroleum products account for about 95% of Venezuela's exports and contribute more than a third of its GDP. Petrodollars also fuel Chávez's socialist spending.

But reliance on oil revenue has led to the abandonment of other economic sectors. Much tillable farmland remains idle amid attempts by Chávez to increase food output, and Venezuela continues to import two-thirds of its food. Chávez uses oil revenue to subsidize the cost of the imported food, but shortages of basic goods are not unusual .

Chávez has also used the oil wealth to underwrite artificially low domestic gasoline prices of 11 cents a gallon, which is among the cheapest in the world.

Chávez, who has been undergoing cancer treatments in Cuba, says PDVSA is running better than ever. Upon the recent drilling of a new well, he posted an online message May 3 to Oil Minister Rafael Ramirez: "Venezuela, an oil power! Doing well, Rafael and PDVSA. Congratulations and onward."

Critics charge that the president is destroying the company by packing it with loyalists rather than qualified personnel. PDVSA's payroll has more than doubled to 115,000 employees since Chávez took office in 1999, and debt has risen 10-fold since 2006 to $34 billion.

Those increases have seemingly accomplished little: Venezuela's oil production has dropped more than 25% since 1998 to its current 2.4 million barrels a day, according to OPEC.

Accidents plague the company's operations as well, causing frequent shutdowns of PDVSA's four domestic refineries and blamed in the deaths of 67 workers since 2004.