The Latin Oil Czar

By Tim Padgett/El Furrial

When Ali Rodriguez was one of Venezuela's communist guerrillas in the 1960s and '70s, his chief duty ostensibly was making bombs. But Rodriguez admits he knew less about explosives than about oil--the stuff of real political power in Venezuela, which possesses the hemisphere's mother lode of petroleum reserves. "In the mountains, I organized seminars on oil administration," says Rodriguez, 66, whom fellow combatants remember as being the same energy-policy wonk then that he is today. "I committed myself body and soul to it." Not surprisingly, his petro-philosophy was more Marx than Rockefeller, and his rhetoric even now might give a capitalist oilman cold sweats. "The people are the owners of their natural resources," says Rodriguez, "so we all have a proprietary actor's role on the oil stage."

Venezuela's revolutionaries never did seize that stage by arms. They took it via votes, when left-wing President Hugo Chavez was elected in 1998. Rodriguez became Energy Minister and then in 2002 won the role of his dreams as president of Petroleos de Venezuela (PDVSA), the nation's $46 billion state-run oil monopoly and one of the U.S.'s top three suppliers. Instead of theorizing from a mountain lair, Rodriguez is perched in an office above Caracas, helping shape the world oil market. "I never imagined I'd be sitting here," Rodriguez tells TIME. "But then, if you know exactly what your future is, it makes life less interesting."

The curtain is rising this summer on Rodriguez's most interesting act yet: a five-year, $37 billion PDVSA plan to revive and expand oil production while budgeting almost $2 billion a year for antipoverty initiatives ranging from potable-water to literacy projects. Making PDVSA (called Pedevesa) an oil firm cum development agency will be daunting, even with crude prices hovering near $40 a bbl. Venezuela's oil industry has been waylaid by political turmoil, including a reckless near shutdown by anti-Chavez managers and other employees at PDVSA in 2002 and 2003, intended to paralyze the industry and force Chavez's resignation. The stoppage, which Rodriguez calls "sabotage," at one point slashed the nation's oil output to a scant 50,000 bbl. a day and cost the economy well over $7 billion. It dented U.S. imports for months and ended in the dismissal of 19,000 PDVSA employees, half the company's work force. Though Rodriguez insists that PDVSA is pumping more than its prestrike level of 3.1 million bbl. a day, analysts say the company is barely reaching 2.5 million bbl. a day. "The market," says a U.S. oil analyst, "is watching Ali Rodriguez perhaps more closely than any other oil executive in the world right now."

Americans should be watching too. Venezuela, which sits atop 78 billion bbl. of oil--and as much as 270 billion bbl. of extra-heavy crude--is the world's fifth largest oil exporter. It's also a founding member of the OPEC oil cartel (the 11-nation Organization of Petroleum Exporting Countries). In past decades, to please consumers in the U.S.--PDVSA's biggest market, which buys two-thirds of its exports--Venezuela often ignored OPEC's guidelines, stepping up production even when oil prices hit rock bottom in the late 1990s. But Chavez, a harsh critic of the U.S. who accuses the Bush Administration of backing a failed coup against him in 2002--a charge the White House denies--has led a successful campaign to revive a demoralized OPEC, curtailing Venezuelan production to gain what Rodriguez calls "fairer prices."

Chavez--who faces a national recall referendum on Aug. 15--warned the U.S. this year that he'll turn off the oil spigot if the Bush Administration threatens to invade Venezuela over either politics or oil. U.S. officials dismiss that notion as absurd, but Rodriguez echoes the concern: "Many people here fear what happened in Iraq could happen to Venezuela." Still, Rodriguez, an attorney and a classical-music lover, emphasizes that Venezuela "doesn't want price volatility" and wants to continue being the U.S.'s most reliable supplier. "There is no contradiction between a strong alliance with OPEC," he says, "and a strong relationship with our principal client."

Though PDVSA supplies almost half the government's revenues, it once ran itself like a private corporation--acquiring subsidiaries like U.S.-based CITGO--and gained a global reputation as a model oil firm. But at home it was viewed as a den of arrogant, pampered technocrats--and a cookie jar for Venezuela's elite, whose corruption has left two-thirds of the population in poverty. Among the poor was Rodriguez's farming family. It made him all the more receptive to economists like Bernard Mommer, a German-born Marxist who taught Rodriguez at Caracas' Central University. As a Congressman, Rodriguez chafed in the 1990s as PDVSA opened up to what he considered excessive foreign investment and hiked production.

As Energy Minister, Rodriguez quickly made PDVSA more subservient to both the government and OPEC, which elected him secretary-general in 2001. PDVSA has also supplied Chavez ally Fidel Castro more than 54,000 bbl. a day on favorable finance terms. The politicized atmosphere at PDVSA--many workers say devotion to the Chavez revolution is a job requirement--helped provoke the 2002 strike. Says Ignacio Layrisse, who was afterward fired as production manager: "Ali Rodriguez may be a smart and capable man, but he's just a has-been lefty carrying out Chavez's plans to turn PDVSA into a mediocre state-run company."

The new five-year plan is Rodriguez's chance to prove once and for all that a lefty can run a major oil company as effectively as any capitalist CEO"more effectively," he insists. With giant new well projects at sites like Tomoporo and El Furrial, PDVSA hopes to increase daily output to more than 5 million bbl. by 2009, which Rodriguez now knows is critical to staying competitive. Some investors gripe that Chavez's 2001 hydrocarbons law makes it too difficult to participate in the lucrative quality-crude projects. But others praise Rodriguez (and more radical leftists berate him) for reserving more than a quarter of the $37 billion plan--$10 billion--for foreign investment, mostly in extra-heavy crude, marginal oil fields and Venezuela's massive natural-gas reserves. As one foreign oil boss in Venezuela assures skeptics, "There will always be investment opportunities here."

Executives at U.S. and European oil firms privately say the government is helping them find ways around the hydrocarbons law. If so, the extra capital could be good news for what Rodriguez considers the soul of his reforms--the PDVSA-financed social projects, whose popularity among the poor may spell the difference for Chavez in the referendum. "We're going to be an even more model oil company," says Rodriguez, "because we'll be as visible in the barrios as we are in the markets." The policy wonk, in other words, is still a rebel. --With reporting by Brian Ellsworth/Caracas

With reporting by Brian Ellsworth/Caracas