Former Hub of Venezuela's Oil Wealth Turns to Hunger and Rust

CABIMAS, Venezuela -- Oil from brackish Lake Maracaibo transformed this country a century ago from a tropical backwater into the world's biggest oil exporter and, for a time, South America's richest country.

Here at the lake today, thousands of idle derricks stretch to the horizon, crippled by lack of spare parts and routine maintenance. At its dozen oil ports, hundreds of barges, rigs and speedboats sit rusting in the scorching sun.

Workers here once enjoyed the country's highest wages, company perks and elite schools; in December, the local oil union evacuated an entire rig after finding its oilmen malnourished.

Corruption, political purges and collapsing investment at state oil company Petróleos de Venezuela SA, known as PdVSA, have slashed output across this nation to levels last seen in the 1980s.

Venezuela still holds the world's largest reserves of crude oil, according to BP PLC. But a close look at its decaying oil industry shows it will struggle to get those reserves out of the ground anytime soon, deepening the country's worst economic contraction on record.

Output in the Lake Maracaibo region in Venezuela's west has halved since 2015 to an estimated 350,000 barrels a day, according to consultancy IPD Latin America. That is a big reason why Venezuela's daily overall oil output plunged by 649,000 barrels in December from a year ago to 1.6 million barrels a day, according to figures released Thursday.

In the north, the Paraguana refining complex, the world's third-largest crude processing facility, is operating at 15% of capacity, according to a local oil union leader.

Paraguana was last near full capacity in the 1990s; PdVSA President Manuel Quevedo said this week he would bring operations to 100% of capacity this year, without explaining how he would engineer such a turnaround.

"There's no maintenance as such here anymore," said plant operator Pablo Céspedes. "They sucked everything out of PdVSA without investing. There's nothing to squeeze out anymore."

Nowhere is the collapse more visible than around the 5,000 square-mile Lake Maracaibo, an estuary that opens onto the Gulf of Venezuela.

For decades, the lake area was the jewel in PdVSA's crown. Workers lived in leafy company compounds with bowling alleys and cinemas. They shopped in company supermarkets and vacationed at its private beach resorts.

Nowadays, that seems like a distant dream.

"It's as if we were animals, some wild beasts," said one rig worker, Jesús, who asked that his family name be withheld for fear of government reprisal.

PdVSA didn't respond to requests for comment about company operations and worker conditions.

On a recent Wednesday afternoon in the lakeside oil town of Ciudad Ojeda, PdVSA workers sat in empty air-conditioned offices adorned with Socialist Party posters.

Roberto, a foreman, said his oil barge had been waiting for three months to sail. Each day something was missing: food, motor oil, a tugboat. His team of a dozen people comes back each day and waits -- until it is time to go home.

After two decades in PdVSA, Roberto earns an equivalent of $8 a month. This Christmas, for the first time, he had no presents to give his seven children.

"I see the look in their eyes when they stare at the empty Christmas tree, I feel such a pain here," he said, pounding his chest.

Most international service companies, such as Schlumberger Ltd. and Weatherford International Ltd., have cut operations to a minimum after years of unpaid bills, according to workers. The companies declined to comment.

Dozens of local service companies were expropriated by PdVSA in 2009, their ships and barges abandoned or cannibalized for spare parts.

They have been replaced by military-controlled contractors and local firms like S&B Terra Marine Services, which took over the operations of Schlumberger's six rigs in the lake last year. Only four of those rigs still work, according to oilmen who have worked at both companies.

Of PdVSA's 560 speed boats in the lake, only six are operational, according to oil union activist Hector Berti.

S&B Terra Marine Services operated the PdVSA rig which was evacuated in December; some of the two dozen workers were taken to a hospital with dehydration and high blood pressure.

The company's owner, Basil Al-Abdala, made local headlines in 2016 when he threw a lavish Aladdin-themed party for 1,500 people, featuring Colombian reggaeton star Maluma, to celebrate his daughter's 15th birthday.

Rig worker Jesús, who worked at Schlumberger and now works at S&B Terra Marine Services, said his salary was slashed by two thirds last year and that he hasn't been paid for four months. Supplies sent by the company to his offshore rig in the lake usually run out days before the end of the shift, he said. To cope, workers ration lunches of boiled plantain or spaghetti with mayonnaise.

"It's very painful to work hard and not provide for your family," he said.

Mr. Al-Abdala didn't respond to requests for comment on labor conditions and his daughter's party. Calls to the company's offices were repeatedly disconnected.

Venezuela's economic downturn has led to explosion of crime. Production platforms and entire towns have been left without power by the theft of miles of copper cable, resold for scrap. Gangs of pirates roam the lake at night, terrorizing and fishermen and oilmen. Several attacks occur each week, and and at least half a dozen fishermen and oilmen have been killed in the past year, according to workers and local residents.

In November, Jesús' rig was attacked at night by nine pirates in balaclavas armed with machine guns. They knocked out two workers with pistol butts, took a female worker hostage and went cabin to cabin, collecting each worker's valuables, including loaves of bread, before releasing the hostage and leaving.

Elsewhere in the country, lack of repairs have turned refinery jobs into dangerous ventures.

Last month, Mr. Céspedes, the Paraguana plant operator, was lighting an obsolete gas oven by hand because of a broken electric switch. The oven exploded, landing him in the hospital with third-degree burns.

"I wake up at night scared, thinking of that oven," the 30-year-old mechanic said from his hospital bed. "I don't want to go back there."

The explosion was the last straw for his shift partner, Rene González. Mr. González made $2 a month at black market exchange rates, forcing his family to skip meals. When his young pregnant wife started to hemorrhage last year, he couldn't afford the medicine. She lost the child.

A week after the explosion, Mr. González, 27, quit the company. He plans to move to the island of St. Martin in March, joining thousands of PdVSA workers leaving the country in search of a better life.

"I prefer to sell empanadas on the streets than to pray all day at work to stay alive," said Mr. González.

--Kejal Vyas in Caracas contributed to this article.

Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com

(END) Dow Jones Newswires

January 19, 2018 05:44 ET (10:44 GMT)