Petróleos de Venezuela, S.A. (PDVSA) and its subsidiaries is a Corporation property of the Bolivarian Republic of Venezuela, subordinated to the Venezuelan State and profoundly engaged with the genuine owner of oil: The Venezuelan People. Its operations are controlled and supervised by the People’s Power Ministry of Petroleum, oil national policy governing body, within the framework of the Homeland Plan Law guidelines, Second Socialist Plan of the Nation’s Social and Economic Development 2013-2019.
Among PDVSA’s main functions we find: Planning, coordination, supervision and control of the activities of its companies, both in Venezuela and abroad. Additionally, its activities also include promotion or participation in those activities aimed at promoting the country’s comprehensive, organic and sustainable development, including those of agricultural and industrial nature, elaboration and transforming of goods and their trading and service delivery in order to achieve a proper linkage of the resources coming from hydrocarbons with the Venezuelan economy.
PDVSA’s strategic orientation is mainly based on the following guidelines given by the Shareholder:
• To enhance our hydrocarbons natural resources to the benefit of the Nation.
• To help our country’s geopolitical positioning at international level, with key objectives of Venezuelan foreign policy, like fostering a comprehensive cooperation with strategic allies and the Latin American integration, within the context of transition towards multipolarity.
• To act as an instrument for the country’s endogenous development, levering the social-economic development, through industrialization and social equity policies.
In Venezuela, the first news about oil date back to the medical and useful use it was given by the first settlers of the continent, located in natural oil outcrops or seeps, called “Mene” by our natives.
• June 15, 1579: Mayors Gaspar de Párraga and Rodrigo de Argüelles inform about an oil seep near Nueva Zamora city (Maracaibo) as well as four more on the outside, and they also describe the uses of such a substance.
• 1600: Spanish conquer Alonso de Ojeda mentions the use of the Menes by Maracaibo Lake inhabitants.
• 1799: Alejandro de Humboldt describes, for the first time and in a scientific way, the Venezuela’s asphalt deposits, highlighting the use of tar and asphalt by the natives, and prepares the first list of asphalt and thermal sources natural deposits in the coastal zone, from Trinidad to Maracaibo.
• 1825: Light oil samples from a seep located between Escuque and Betijoque are sent to the United Kingdom, France and the United Sates. The product was named “Colombio”. It seems it was commercially distributed in the region.
• 1830: Inhabitants of El Moján (Zulia state) explore Socuy River in Perija Sierra, where a natural gas seep had caused commotion in town, as it was mistaken for a volcano.
• 1839: José María Vargas, a Venezuelan wise, anticipates to the use of oil as a generator of wealth by introducing an analysis of samples coming from Betijoque (Trujillo state) and Pedernales (Sucre state), affirming that “the discovery of mineral coal and asphalt mines in Venezuela is, according to its current circumstances, more precious and congratulation worthy for Venezuelans and their liberal Government than the discovery of silver and gold”.
• 1850: Hermann Karstwen, a German geologist, publishes the first summary about Venezuelan Geology in the German Geological Society Bulletin. The following year he informs about an oil seep located between Escuque and Betijoque and, in year 1852, from Barranquilla (Colombia) about the abundant oil seeps disseminated around Maracaibo Lake.
Moreover, researches performed by authors like Arístides Rojas, Adolfo Ernst, Miguel Tejera and the engineer and general Wenceslao Briceño Méndez, Wilhelm Sievers, Charles Bullman, E. Fortín, H. Eggers and Clifford Richardson, as well as reports from the Ministry of Public Works, definitely contribute to recognize this wealth treasured by Venezuelan subsoil.
PETROLIA DEL TACHIRA
• 1878: Venezuela’s oil activity starts with the creation of the National Mining Company Petrolia del Táchira, and its production was enough only to provide the nearby cities with kerosene. Its relevance lies in the fact that it is not only the first oil company founded by a group of Venezuelans. Moreover, it deployed the whole oil activities both upstream and downstream by extracting, processing and trading hydrocarbons in our country.
CIPRIANO CASTRO IN VENEZUELAN OIL HISTORY
• December 19th, 1901: Banker Manuel Antonio Matos organizes the so called Liberating Revolution against Cipriano Castro’s government. The transnational New York and Bermúdez Company (NY&BC), takes part as the financer of the rebellion, whose background is the Venezuelan asphalt. Both the production of La Petrolia and the production of natural asphalt lake Guanacoco (currently Sucre state) in 1890, on the part of New York and Bermúdez Company (NY&BC), occur long before the world gets to know the wide commercial and strategic use of hydrocarbons in the future. Even without predicting the future boom of oil industry, our territory becomes a target of the imperialist powers due to the commercial industry already generated by the asphalt exploitation.
• December 1902/February 1903: Navies from England, Germany and Italy block the Venezuelan coasts, upon the argument that President Castro was not fulfilling his “international commitments”. Before this aggression to Venezuelan sovereignty, Mr. Cipriano Castro proclaims his famous phrase: “Venezuela, the insolent foreign plant has profaned the holy soil of our homeland”.
• August 14th, 1905: Cipriano Castro enacts the Mining Law which became the legal basis of oil concessions. It allowed concessions and rights transfer for oil exploitation during 50 years, with a tax benefit for the Venezuela state of Bs 2 per concession surface acre.
• 1913: The first oil field in Venezuela is discovered: Guanoco, by the successful drilling completion of well Barbui 1. The Caribbean Petroleum Company, majority owner NY&BC and subsidiary of Royal Dutch Shell, intensifies geological exploration in the whole territory.
• 1914: The Caribbean Petroleum successfully drilled well named Zumaque I (Maracaibo Lake Eastern Coast), with an initial production of around 200 barrels a day (b/d), which allowed the discovering of the first Venezuelan oil field of world relevance: Mene Grande field.
• December 14th, 1922: The country’s oil potential was fully confirmed when Barroso 2 well blew out, (Maracaibo Lake Eastern Coast) expelling about 100.000 b/d in an uncontrolled manner during nine days. By that time approximately 6.000 b/d were produced in the country.
• 1928: Venezuela produces more than 290.000 b/d, and exports about 275.000 b/d, ranking the country as the world’s second largest producer and first exporter country. Its production levels were strongly increased over time, until 1970 when it reached maximum ceiling of 3.780.000 b/d. Since 1928 to 1970, Venezuela was the world’s first largest oil exporting country.
• January 7th, 1936: Orinoco Oil Belt is discovered with the drilling of the well named La Canoa 1, located approximately at 50 km river north, in Monagas state. December 14th, 1936: An oil strike begins in the oil areas of Cumarebo (Falcón state) and Cabimas (Zulia state). Several cities in the country support the strike against imperialism, oil transnational companies and their Creole agents.
OIL CONCESSION: SOVEREIGNTY CONCESSION
In Venezuela, the first concessions were generally ruled by mining legislation. Until year 1920, there was no proper oil legislation. During the first years of industrial activity, oil concession was the instrument by means of which transnational companies agreed with the owner States to explore and exploit the wealth in the oil fields discovered in their territories. The obtention of such concessions, as well as the control of the world oil market, gave rise to discussions among the transnational oil companies, as well as wars among the nations in order to control oil production. Since then, Venezuela, given its condition as an oil country, became an interesting actor for the international oil monopoly.
• August 24th, 1865: Jorge Surtherland, Constitutional President of Zulia Souvereign State, grants the first concession to oil exploitation in Venezuela, “to drill, extract and export oil or naphtha in the whole Zulia state” to Camilo Ferran, a North American citizen.
• 1883: Horatio Hamilton and Jorge Phillips receive the grant over asphalt lake Guanacoco, lately conveyed to New York&Bermudez Co.
• 1909: Juan Vicente Gómez’ government reestablishes dealers’ rights to the NY&BC. After this decision, John Allen Tregelles and N.G. Burch, attorneys of The Venezuelan Development Co., a British oil company, receive a grant of 27 million acres, which included Zulia, Sucre, Delta Amacuro, Monagas, Anzoátegui, Carabobo, Falcón, Táchira, Mérida, Lara, Trujillo and Yaracuy states.
• 1911: Tregelles-Burch grant is cancelled.
• 1912: Max Valladares, a Venezuelan banker, obtains Tregelles-Burch grant which is later conveyed to Caribbean Petroleum, a subsidiary of General Asphalt. During Cipriano Castro’s government, Venezuelan oil exploitation was in the hands of the Anglo-Dutch company Royal Dutch Shell and the Standard Oil, from the United States. At the end of this year, the Caribbean Petroleum was taken over by Royal Dutch Shell, which, apart from the asphalt business, begins with explorations in pursuit of oil.
• October 24, 1829: Simón Bolívar, The Liberator, enacts his famous Decree in Quito (Ecuador), strengthening and guaranteeing national property over “any type of mines” including hydrocarbon mines, establishing the formal legal link that would allow Venezuela to keep sovereignty over the property of its subsoil resources. This principle has been the cornerstone of the state property over hydrocarbons and of the concept of Sovereignty over the natural resources.
• 1918: First Regulatory Decree on Coal, Oil and Similar Substances. It fixes the royalties between 8% and 15%. It also establishes, for the first time, that at the end of the concession, mines should revert to the Nation – including all facilities, machineries and related works – with no payment from the government.
• 1920: First Hydrocarbons Law. It fixes a minimum royalty prize at 15%. It also establishes the figure of national reserves, a concept according to which, once the initial exploration period is over, half of the explored surface had to be reverted to the nation. Moreover, concessions area was reduced and the oil fields state property was clearly reaffirmed. These measures disliked foreign companies. That is why their national lackeys, the concessions traders, put pressure on Gomez’ government until they defeated Minister Torres and his incipient national intents.
• 1943: The most significant hydrocarbons laws previous the Hydrocarbon Law of 2001 were enacted by National Congress on March 13th 1943, after a large national census. It was forged upon the basis of the precedent regarding Mexican oil nationalization in year 1938, in the middle of the II World War. This Law not only unified, but also increased taxes and royalties. Royalties reached a minimum of 16.66% of what was produced, measured at the mouth of the well and, only in some exceptional cases, when a decline of the oil fields productive capacity occurred, it could be lowered in order to keep the exploitation trade value. The state tax sovereignty was established, with the attribution to modify taxes by means of income tax laws.