[LINK] "Venezuela’s Giant Lake of Endless Oil Is a Filthy, Lawless Mess"

[rfmcdonald]

Bloomberg's Pietro Pitts reports on the parlous state of Venezuela's Lago Maracaibo, a brackish bay that hosts much of the country's oil industry.

From the moment the diver in red nylon coveralls and blue Chuck Taylor sneakers resurfaces after replacing rusted pipeline on the bed of South America’s largest lake, it’s a race against time. Coated head to toe in dark-black oil, he clambers aboard the service boat, rips off his makeshift uniform and scrambles to hose himself down with a special compound to wash away the contaminants.

For nearly a century, the petroleum deposits beneath giant Lake Maracaibo served as a cash cow for successive Venezuelan governments. In return, especially in the years since the industry was brought fully under state control by former President Hugo Chavez, it has received little back but neglect.

The Maracaibo basin is where Venezuela’s enormous energy bounty, including oil reserves that dwarf even those of Saudi Arabia, smacks up against the diminished capacity of the state-owned monopoly producer, Petroleos de Venezuela SA, to manage the twin demands of increased production and environmental protection.

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The economy began slowing well before the oil price rout of the past year. Growth now is solidly in negative territory, inflation is running above 80 percent a year, the highest in the world, according to Bloomberg News consensus forecasts, and the country’s benchmark bonds trade at about 41 cents on the dollar -- giving them a yield over 20 percent -- compared with a peak price of 129 cents on the dollar back in 2006. Venezuela is more reliant than ever on petroleum revenues, which account for 95 percent of export earnings and nearly half of government revenues, according to the country’s foreign ministry.

Even by the standards of a country as blessed with resource wealth as Venezuela, the Maracaibo basin is a marvel. It has been producing oil for a century, ponying up nearly 43 billion barrels so far. With 19 billion barrels of proven reserves remaining -- more than the total proven reserves for either Brazil or Mexico -- the lake could be providing greater relief if troubled Venezuela was more receptive to outside capital and expertise beyond China and Russia, Antero Alvardo and Carlos Rossi, analysts from Gas Energy Latin America and EnergyNomics, said in separate interviews.