A Friend In Need?

From the penthouse of Petróleos de Venezuela, S.A. you can hear the shouts and sirens as crowds of demonstrators clash with troops loyal to President Hugo Chávez. It's a familiar cacophony on the streets of downtown Caracas these days--part of a general strike that has paralyzed the country and all but shut down oil production. It's precisely the kind of civil unrest Alí Rodríguez Araque tried to foment during a 15-year career as a Marxist guerrilla in the 1960s and 1970s. But now the head of the state-owned oil company, PDVSA, is on the other side, appointed by Chávez to contain the divisive politics that threaten to tear PDVSA--and Venezuela itself--apart. With 78 billion barrels of proved oil reserves (to the U.S.' 22 billion) and uncounted trillions of cubic feet of natural gas, Venezuela has the largest hydrocarbon deposits in the Western Hemisphere. Its exports of 1.2 million barrels a day to the U.S. trail those of Saudi Arabia, Canada and Mexico today, but that could change if war disrupts the flow of oil from the Middle East. Energy Department planners believe Venezuela will outstrip Mexico as an exporter to the U.S. by 2020, as Mexico's fast-growing demand eclipses production of 4.4 million barrels a day. By that point Venezuela could also be a significant exporter of refined products like gasoline and jet fuel, as environmental controls and poor investment returns keep the U.S. refining industry from expanding to meet demand. To boost production, Rodríguez must contend with venomous politics in Venezuela and within PDVSA, which is seething with anti-Chávez plotters starting at executive grades immediately beneath his own. A strike at PDVSA helped spark the short-lived coup that briefly unseated Chávez in April; oil employees, a key force behind the current strike, are demanding Chávez's resignation.