Strike Scorches Venezuelan Blenders


For the past two months, the global lubricant industry has felt the pinch of civil unrest in Venezuela. A strike that sidelined the national oil company of the worlds fifth-largest oil exporter has been blamed for a run-up in crude oil prices. Naphthenic base oil refiners around the world lost their largest feedstock supplier. Latin America found itself without one of its chief sources of paraffinic base oils.

But the difficulties for the industry outside Venezuela have paled in comparison to those heaped on the lubricant market inside the country. Not only did the strike cause the closure of the nations largest lube producer; it also cut off base oil supply for 32 days and counting. To make matters worse, lube companies, like the rest of the country, have had to cope with shortages of fuel and cash flow.

Although the political debate in Venezuela has not been resolved, the government has managed to reopen Venezuelas oil industry during the past few weeks. Political differences aside, operations could not return to normal too soon for the nations lubricant market.

Fuel has been very difficult to obtain, said Antonio Colarusso, president of Maxilub, a Caracas-based distributor of imported Pennzoil and Quaker State products. Distribution of lubricants has been near zero. We are only supplying our biggest and most essential customers.

The government claims this week that oil production has reached 1.8 million barrels per day. The oppositions estimate is 1.1 million b/d. Employees of companies other than Petroleos de Venezuela S.A. ended their strike last weekend, but observers said that does not necessarily mean that oil workers will soon return to their jobs. In fact, the government has fired a quarter of the 33,000 people employed by PdVSA when the strike began. Some sources suggest that this loss of experience will hamper operations even after the strike ends for PdVSA.

The general strike was organized by an opposition political party, Venezuelas main labor union and an association of businesses to protest the presidency of Hugo Chavez. On Dec. 2 workers around the country walked off their jobs, and businesses closed to show their support. PdVSA, the national oil company, did not participate initially, but management and most employees joined the strike eight days later.

The action virtually shut down a 3-million-barrel-per-day oil industry. PdVSA is easily Venezuelas largest finished lubricant producer, claiming 40 to 45 percent of the market. It also holds a monopoly on base oil sales, so supplies were cut off for Venezuelan and international companies blending within the country.

Supplies remained cut off until Jan. 6, according to Medardo Cabello, general manager for Puramin C.A., a lubricant and additive blender and packager located in Judibana, in the northwest corner of the country. Aided by loyal and retired PdVSA employees, as well as foreign oil industry workers, the government had resumed limited operations of the oil business and began tapping inventories. Base oil supply continued for more than three weeks but ceased again Friday when inventories were exhausted.

We stopped producing lubricants when the strike began Dec. 2, Cabello said Friday. When PdVSA started supplying base oil again, we resumed blending for our clients. Today they advised that they have run out and that no base stocks will be available again until the refinery is back on line.

While blenders had some base oil inventories when PdVSA first joined the strike, supply was cut off long enough that lubricant production eventually ground to a halt, sources said. Some companies had even larger stockpiles of finished lubes, as much as three months worth. But in cases where companies still had lubes to sell, some had difficulty getting products to customers because of gasoline and diesel shortages that afflicted much of the country.

Companies that have been able to make deliveries have in some cases had to balance between serving customers and supporting the protests. Some businesses feared negative publicity if they were seen continuing to operate.

Finally, even when companies make deliveries, they dont necessarily receive monetary benefit.

No one wants to pay their bills, Maxilubs Colarusso said. All our accounts receivable are now overdue, but we still have to meet our payroll and pay bills for things like electricity. Our fixed costs are killing us.

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