Exploration and Production of Petroleum

By: Jesus Rodriguez and Pedro Rojas

First Years

Since the beginning of the oil exploitation, people started to talk about a petroleum economy.

New towns were founded. The first one was La Aquitrana, Tachira, established by the Venezuelan company la Petrolia in 1882.

It was abandoned on 1934, since the production of oil was not enough.

1916-1933 The companies Caribbean and Shell founded

Mene Grande (1916), in Zulia state. The company of La Creole founded Judibana (1922), in the Falcon Peninsula. This population was considered the first oil community.

The Venezuelan Oil Concessions established a camp in Cabimas; when the oil well of Los Barrosos 2 blewout, the town soon became a suburban center (1924).

1916-1933 The oil activity was involved in the

foundation of El Tigre, Anzoátegui (1932). On that same year the Gulf Oil Company

created the Office Camp 1, and the population began to grow, and it was the second most important city of the region in the 1950’s.

1937-1939

• In 1937, president Eleazar Lopez Contreras founded Ciudad Ojeda, constructed by the oil companies of the region.

In 1939, in the Monagas state, Creole founded Jusepin, which was given to the Corporación Venezolana del Petroleo which in turn donated it to the UDO (Universidad de Oriente) for the creation of School of Petroleum.

1941- 1943

The town Punta de Mata, Monagas, was an established oil camp for operations for companies such as Sinclair, Mito Juan and Vistaven.

In 1943, the exploitation of Campo Las Mercedes, El Sombrero, began, and the companies Las Mercedes and Texaco restored the town. In 1979, Deltaven gave it to the military.

Impact on Oil Explotation

Oil caused big transformations. Cities looked different, means of communications were built, modern buildings were built, educational plans were done. Also, subsidy was granted to industrial sectors.

Economic Changes

The Agricultural economy was transformed into a mining-exporting, mono-productive and mono-exporting economy.

The export of oil surpassed traditional coffee and cacao.

The country established bonds of economic dependence with foreign money, which were mainly from American, English and Dutch companies.

Economic Changes

The commercial sector was hereby released of the agriculture because of poor exportation of coffee and cacao.

The Latifundistas took benefit from the rent of their lands when they were paid by oil companies (0.75 annual bolivares per hectare). They also took benefit from the selling of urban lands at speculative prices in association with the government and commercial banking.

An important amount of the petroleum incomes were transferred to the construction sectors.

Political Changes

Two opposing political forces emerged in the process of transition towards the oil-producing Venezuela.

On one side, the traditional and autocratic form of the government represented by the Gomecismo.

On the other side, the hope of change and the aspiration to live in democracy.

Political Changes

The country unified territorially and it became centralized -the power of the State-; the different regions were isolated.

In the international grounds, Venezuela came under the U.S. geopolitical influence.

Social Changes

The isolation of the agricultural production by landowners and merchant importers and exporters, who stopped assisting the producers, put Venezuelan peasant under a situation of uncertainty.

Rural people migrated to the north central cities of the country, and to new ones that developed around oil camps.

Social Changes

The Venezuelan workers increased with their appearance of the industry, the construction, the commerce and the transportation.

The living conditions and the work of the oil workers were poor and exploited.

The social problems of agricultural Venezuela such as, illiteracy, endemic diseases, the lack of hygienic homes and lack of means of communication, started to be confronted by the State with educational, sanitary and housing plans.

Cultural Changes

With the arrival of new foreign technologies and the entailment with companies, managers, professionals and workers that came from the United States a process of transculturation started.

This process changed Venezuelan customs, behavior, language and music.

The American and European influence accentuated the media, such as the radio, the cinema and the television. However, the Venezuelan culture enriched, since this media allowed them to spread and know values from Venezuela.

Economic Dependence

Beginning of the XX century, the economy has depended on the petroleum so the economical and social state could develop.

From the first years of the commercialization, the administration of the incomes has become a political problem.

The execution plans and constructions in the country depended entirely partially or entirely on the income from the petroleum.

Economic Dependence

To break up with the oil dependence, it is necessary to invest the income on the creation, development and strengthening of industries such as the textile, food and car industries.

The oil industry must turn into an economic accelerator of goods and services.

Oil Policies

Since 1926, oil became the main product of exportation, and the major source of income for the country. The production methods increased to 3,366,011 daily oil barrels.

However, most part of the income from petroleum were done by foreign businesses like: Standard Oil of New Jersey, and Creole Petroleum Corporation, both from United States,and Shell from the Dutch capital.

Oil Policies

Policy of “No más Concesiones.”- After Perez Jimenez was defeated, in 1958 the democratic governments started to accomplish the direct participation of the State in the oil industry.

In 1959, the policy of granting concessions to foreign companies for exploration and exploitation of oil was eliminated.

In 1960, the CVP (Corporacion Venezolana de Petroleo) was created.

OPEP

On September 14, 1960 at a conference in Bagdad, representatives from Iraq, Saudi Arabia, Iran, Kuwait, and Venezuela met to create the OPEP (Organización de Paises Exportadores de Petroleo), this was created to protect the prices of the petroleum world wide.

After that, the countries of Qatar, Libya, Indonesia, United Arab Emirates, Nigeria, Ecuador and Gabon started to be part of this organization.

During the first years of the OPEP it was ignored by the developed countries until 1965 ,when it was mentioned by the United Nations.

Oil Nationalization

The initiation of the nationalization was in the year of 1943 with the approval of the law of Hydrocarbons.

The nationalization of the oil industry advanced because of the decision of international companies to not continue the exploration and extraction of petroleum.

(1971) Ley de Rervesión de los Bienes Afectos a la industria Petrolera and the Ley Reserva el Estado la Industria del Gas Natural promulgated, and in (1973) Ley Reserva al Estado el Comercio Interno de los Productos Derivados del Petroleo were promulgated.

Oil Nationalization

Finally, in 1975, the National Congress approved the Ley Organica Reserva el Estado la Industria y el Comercio de los Hidrocarburos, also known as Ley de Nacionalizacion del Petroleo.

Opening of Venezuela’s Oil Industry

The nationalization of Oil in 1976 included the Article- 5 empowered the State to celebrate agreements with private associations or companies, from inside and outside the country.

In 1992, the state and the international companies associated to exploit the Strip of the Orinoco, and the natural gas reserves.