Luis A. Pacheco, Ph.D., is a nonresident fellow at the Baker Institute Center for Energy Studies. He has over 35 years of experience in the energy industry, including 17 years at PDVSA, Venezuela’s national oil company, where he held senior positions such as CEO of BITOR (PDVSA’s heavy crude subsidiary) and Executive Director of Corporate Planning.
He also served as Senior Vice President of Planning and Technology at Pacific Exploration & Production (2008–2016), the largest privately owned oil and gas company in Colombia and Peru.
Pacheco has taught at Simón Bolívar University (Venezuela) and delivered lectures at institutions including Universidad de los Andes (Colombia), Tecnológico de Monterrey (Mexico), Harvard, and Georgetown. He holds a degree in mechanical engineering from Universidad del Zulia (Venezuela), a master’s degree from the University of Manchester, and a Ph.D. from the University of London.
1. Professor Pacheco, from a historical and institutional perspective, what does Chevron’s exit from Venezuela represent for the national oil industry and its position within the global energy system?
General License 41B compels Chevron to halt operations where PDVSA is a partner, effectively reactivating sanctions on the state company. This is evidence that long-term investments, such as those in the oil sector, cannot be based on temporary authorizations like OFAC licenses or on institutional arrangements built on fragile political foundations. Today, unfortunately, and despite the licenses granted in recent years that have somewhat buoyed its oil industry, Venezuela is a minor player in the global energy world, far below the potential justified by its resource base. Chevron’s withdrawal — and that of other international oil companies — further diminishes its relevance in the sector.
2. Considering Chevron’s operational role in several joint ventures, what immediate technical, productive, and economic consequences do you foresee for the fields that will remain solely under PDVSA control?
One might speculate that in the short term, PDVSA and its technicians should be able to maintain production and facilities — besides, it’s not entirely clear whether Chevron will remain in the country, as it was before License 41, safeguarding its assets. It’s worth noting that Chevron has a signed contract with PDVSA, confidential by nature, which we can assume imposes certain obligations in this regard.
The challenges for the state company lie elsewhere. First: what market will the production now target, since under General License 41 it could be shipped to the U.S.? Asian markets, via “secondary” routes, apply significant discounts. Second: for Orinoco Belt production, where will the diluent come from, now that Chevron is no longer importing it? Without that diluent, producing diluted crude or transporting it to upgraders becomes complicated. Third: can PDVSA continuously operate the crude upgrader in the Belt? Of the four upgraders built during the Oil Opening, only one has remained operational: PetroPiar (Chevron), especially during License 41. Fourth: given the state’s deepening fiscal needs, how much investment in those contracts will the regime be willing to allow?
3. Is PDVSA’s current structure capable of absorbing, maintaining, and efficiently operating the assets left behind by Chevron, or are we facing a likely production decline and damage to the infrastructure Chevron operated?
The answer to this question is a combination of the answers to the previous ones. It’s not just a matter of personnel or structure, though those are important. The institutional and political arrangement under which PDVSA operates today shackles it. No matter how much technical capacity it may have, it cannot work miracles. The existence of licenses and the application of the so-called Anti-Blockade Law allowed it to bypass those structural obstacles, but, as I’ve said, that has proven to be a fragile and unsustainable framework.
4. What timeframe for production recovery do you consider realistic for the country, in the event of a change in political and regulatory conditions? Are we talking about years, decades, or an uncertain process?
Answering that with certainty is very difficult. Any political shift that improves the institutional framework and acknowledges — as the Oil Opening of the 1990s did — the need to attract private capital (as, in fact, chavista governments have done this century) would only be a first step. Turning words into actions will take years, at the very least, though the country has competitive advantages. It’s also crucial to remember that oil and gas are global businesses, and global market conditions will also play a key role.
5. You chaired the ad hoc Administrative Board of PDVSA. What assessment do you make of that experience as a mechanism for asset protection, and what lessons does it offer for a potential institutional reconstruction of the industry?
From a professional standpoint, it was a rewarding experience to contribute to what was defined at the time as a temporary strategy to safeguard assets that were at risk of being seized by creditors. The legal and operational work that board continues to do — despite difficulties and attacks from across the political spectrum — is admirable. The most important lesson, however, one we should have learned since the nationalization in 1975, is that the misalignment between short-term political interests and business goals is the greatest obstacle for a state-owned enterprise — and achieving alignment is almost always very difficult.
6. CITGO has been presented by many as the most valuable “strategic asset” still under the Republic’s control. What is your current assessment of its legal, operational, and political situation? Can it be a lever for national recovery, or is its fate at risk?
The president of Maraven used to say that when someone justified an investment as “strategic,” he would clutch his wallet, because it was probably a bad one. That said, what we now call CITGO — the remnant of PDVSA’s so-called “Internationalization” strategy in the late 20th century — was undoubtedly a successful effort to secure markets for the projected surge in heavy crude production. That strategy was later emulated by the Arabs, and more recently by PEMEX.
Since Hugo Chávez took power, and particularly under Rafael Ramírez’s leadership at PDVSA, that internationalization was dismantled — refineries in the U.S. and Europe were sold off in opaque processes with no declared destination for the proceeds. In the end, only CITGO remained, with three refineries and associated assets. Though it was not sold, it was pledged in debt arrangements by the current regime.
To the question: is CITGO a strategic asset today? The real question should be: what is the strategy today? If PDVSA had the production capacity to supply CITGO, then CITGO would be a valuable asset, depending on its profitability. If not owned by PDVSA, the same production could still go to CITGO or other Gulf Coast refineries under market conditions — very different from when the internationalization strategy was designed. Some believe that, in a political transition, owning CITGO would facilitate fuel imports to Venezuela — a legitimate view. But we must not forget that, in reality, CITGO’s ownership is in the hands of a judge in Delaware, overseeing a court-ordered auction to pay the Republic’s and PDVSA’s creditors — the result of actions by chavista administrations. CITGO has not been lost yet thanks to the legal work of the ad hoc board and the protection of the U.S. executive branch.
7. Beyond the Chevron case, what conditions do you believe must be met for national and international capital to regain confidence in Venezuela’s energy sector? What reforms are most urgent?
Although it’s a multivariable issue, I believe the most critical need is to restore the country’s institutional framework, which necessarily implies a political change grounded in fair and transparent elections. Respect for property rights, legal certainty in general, labor laws, and physical security conditions are all vital elements. If we look at Colombia in the early 21st century, those were broadly the areas they worked on to successfully attract capital to their industry. Companies are willing to take business risks if they see an institutional structure in place that mitigates surface risks.
8. Do you consider a new Hydrocarbons Law important? What key elements should it address?
A better Hydrocarbons Law is undoubtedly essential — but one that enjoys a robust political consensus to ensure its sustainability over time. Therefore, a new synthesis must be sought — between the statist vision that has accompanied us throughout most of our republican history (and led to the oil monopoly), and an honest understanding that such a model is not useful for developing the resources we have.
9. Finally, if you had to outline the core elements of a minimum roadmap for the restructuring of PDVSA or the hydrocarbon industry in general, what would be the fundamental pillars from a technical and governance standpoint?
There is no such thing as a “minimum” roadmap — you either undertake the necessary changes with proper consensus, or you risk being stuck halfway. In any case, I believe we must begin by defining our objectives. The discussion isn’t about the tools, but about what we want to achieve by developing a modern and dynamic oil industry.
If you ask an engineer, they’ll talk about barrels and cubic feet. Ask a lawyer, and they’ll talk about legislation. Ask an economist, and they’ll focus on royalties and taxes. Ask a politician, and they’ll think about how to distribute the rents.
Therefore, leadership must find effective syntheses among objectives that may be contradictory — and be willing to adapt to a dynamic reality. I could subscribe, for instance, to the idea of a National Hydrocarbons Agency, like in Norway or Brazil — but just as those agencies reflect the idiosyncrasies and realities of their respective countries, I must ask how to implement such an idea in my context so it works effectively. In short, perhaps the hardest question to answer. At least we have nearly 50 years of history to learn from — both our successes and our mistakes.
The views expressed by Dr. Pacheco are of his pesonal ownership and responsibility, and do not necessarily reflect the position of the company.
