Venezuela is heavily dependent on oil production for government revenue, social subsidies and imports of basic goods and medicines. But over the last few years, the Venezuelan economy has been severely impacted by a combination of low oil prices, declining production, and unsustainable public debts. Bellorín argues that a key reason behind the decline in petroleum production is exemplified by the case of the giant oil field El Furrial. With tremendous potential but a very complex geology, El Furrial needed constant inputs of complicated technology provided by international oil service contractors. As the government and state-owned oil company PDVSA moved to nationalize part of the petroleum industry, they did not ensure that they had the technical capacity to operate the field with the same efficiency. Both recoverable reserves and annual production fell markedly. This is a cautionary tale for governments considering an increase in their direct involvement in oil operations.
Thomas Lassourd is a senior economic analyst with the Natural Resource Governance Institute (NRGI).