Create a new version of paste:

 
SIPDIS 
 
ENERGY FOR CDAY AND ALOCKWOOD 
NSC FOR JCARDENAS AND JSHRIER 
 
E.O. 12958: DECL: 01/12/2017 
TAGS: EPET, ENRG, EINV, ECON, VE 
SUBJECT: SINCOR\'S ROCKY TRANSITION TO PETROCEDENO 
 
REF: A. CARACAS 1481 
     B. CARACAS 1314 
 
Classified By:  Economic Counselor Andrew N. Bowen for Reason 1.4 (D) 
 
1. (C) SUMMARY: Strategic association Sincor\'s transition to 
Petrocedeno, a PDVSA-controlled joint venture, has been 
fraught with labor problems.  Labor union members have 
blocked the road to the upgrader 33 days so far this year. 
Approximately 100 employees have quit their jobs.  A work 
plan is in place with several major projects.  PDVSA has 
tried to cover up accidents and may be hiding information 
from its partners.  END SUMMARY 
 
--------------------------- 
A SOMEWHAT ROCKY TRANSITION 
--------------------------- 
2.  (C) Petroleum Attache met with Sincor Deputy General 
Manager Jane Nagy (strictly protect throughout) on August 20 
to discuss Sincor\'s migration from strategic association to a 
PDVSA-controlled joint venture, Petrocedeno.  Sincor is one 
of four strategic associations in the Faja.  Nagy is an 
employee of Statoil, the Norwegian state oil company, which 
seconded her to Sincor.  Statoil will have a 9.677% stake in 
the Petrocedeno joint venture.  PDVSA will control 60% of the 
joint venture and the French oil company Total will hold the 
remaining shares.  Nagy sits on the transition committee 
tasked with handling all of the major issues arising from the 
migration.  She began by noting that Sincor has had several 
labor-related problems.  She stated labor union members, 
upset over the fact that they do not have a collective 
contract, have blocked the road to the Sincor upgrader 33 
days so far this year.  The blockages have kept employees 
from arriving at work and had a disruptive effect on 
operations. 
 
3.  (C) In addition to the protests, approximately 100 
employees have resigned their positions following the 
announcement that Sincor would migrate to a PDVSA-controlled 
joint venture.  Nagy stated 80% of the departing employees 
had six to twenty years experience.  Among the departing 
employees were senior engineers and technicians.  Nagy stated 
the Faja is full of headhunters who are hoping to pick up 
experiences employees.  She stated almost all of the 
departing employees are looking for overseas positions.  When 
asked if Sincor employees had received their new Petrocedeno 
compensation package, Nagy replied that they were still 
waiting to receive it.  (COMMENT:  As reported in Reftel A, 
compensation packages at other strategic associations have 
contained pay cuts of over 30 percent.  We expect the 
packages that Sincor employees receive to contain similar 
cuts.  END COMMENT) 
 
4.  (C) Nagy also stated the recent firing of four new 
employees was the most difficult situation she has had to 
face in her career.  The employees, recent graduates who were 
recruited for a prestigious training program, were fired due 
to their political leanings.  The opposition newspaper Tal 
Cual interviewed some of the fired employees and printed a 
large story with plenty of details.  Nagy said Sincor 
employees placed considerable pressure on her to do something 
about the situation but there was little that she could do. 
She stated PDVSA\'s actions in the case and labor policies in 
general were the subject of an acrimonious transition 
committee meeting.  She stated she never received minutes 
from the meeting and it is not clear if PDVSA will ever pass 
them to Total and Statoil, its two private sector partners. 
 
------------------ 
ON THE BRIGHT SIDE 
 
CARACAS 00001655  002 OF 002 
 
 
------------------ 
5.  (C) On the positive side, Nagy stated Sincor\'s work plan 
is in place and includes major improvements in upstream 
facilities.  In addition, the Sincor upgrader is scheduled 
for major maintenance shutdown in February 2008.  Sincor will 
also go ahead with an enhanced recovery pilot project.  Nagy 
stated it is not clear at this point if Sincor will carry out 
a major debottlenecking project in the near future. 
 
6.  (C) Nagy also confirmed that Sincor\'s block size will 
remain the same after the migration to the joint venture. 
Senior BRV officials repeatedly stated during the migration 
negotiations that they would reduce the size of the strategic 
associations\' blocks.  Nagy added that Statoil retained 
control of marketing in the new joint venture.  (COMMENT: 
Chevron also stated that the block size in the Hamaca 
strategic association was not reduced as a result of the 
migration and that Chevron retained control of marketing 
(Reftel B).  END COMMENT). 
 
-------------------------- 
PDVSA PLAYS FAST AND LOOSE 
-------------------------- 
7.  (C) Nagy complained that PDVSA tries to hide accidents 
and other negative information from the outside world.  She 
stated Sincor recently had an accident at one of its wells. 
She stated the accident was not a blowout but rather an 
overflow.  Although the accident was not major in nature, 
Nagy stated she promptly reported it to Statoil\'s 
headquarters.  However, she stated PDVSA did not want to 
acknowledge the accident on the grounds that it was not that 
serious.  She attributed PDVSA\'s attitude to a desire to keep 
down accident statistics.  Nagy added she was concerned that 
PDVSA was hiding information from its private sector partners. 
 
----------------------------------- 
PORT FACILITIES ARE A MAJOR CONCERN 
----------------------------------- 
8.  (C) Nagy ended the meeting by opining that the USG should 
keep its eye on Venezuela\'s port facilities.  She claimed the 
BRV has not spent any money on port facilities or carried out 
basic maintenance in years.  She stated one of Sincor\'s 
berths is inoperable.  As a result, Sincor may have to reduce 
production in the next several weeks due to problems shipping 
its production.