Oil sector

In 20 century, oil became the most important part of Venezuela’s economy. The biggest oil production was from 1929 to 1970. Within the mentioned period, Venezuela was the biggest oil exporter in the world.

The first oil well drilling in Venezuela occurred in 1917. After the first world war, the US and British international oil companies commenced to exploit crude oil in this country. Weak laws respecting wage and tax plus unclear local and national policies encouraged different oil companies to invest enormously in this sector of this country.

Development of corruption among foreign oil companies and increment of domestic pressures by labors and intellectuals caused to nationalize the oil industry of this country in 1974. A national commission was also formed by the President Perez to manage and lead this industry. Nationalization Oil Industry Act was approved in 1975. A leading company under the name of PDVSA was established to supervise all activities related to oil industry in 1977. This company when established included 14 foreign companies and one national company. When oil prices went up in 1981, the oil income of Venezuela was considerably increased. A lot works were carried out with the support of this income by Venezuelan government during 1970s. Of course, this situation caused to increase foreign debts of this country. After recession in the oil market in 1986 and reduction of oil price up to 50%, the Venezuelan government faced to a financial crisis. The government decided to develop the industry diversification plan to reduce the economy emphasis on oil income. This program caused to develop the oil and gas refining industry, petrochemistry industry, various mines and exploration of new reserves. Oil exploration was the most important plan of PDVSA remaining from 1980s. In fact, there was no attempt to explore more oil reserves after nationalization of oil industry in 1976. Since oil companies predicted this event in Venezuela from 1958, hence fewer attempts were carried out to explore new oil reserves during 1960s and 1970s. Various crude oil reserves were explored and almost the proved reserves of this country increased twice.

Different stages of oil industry development in Venezuela

Specifications	Stage name	Stage
At this stage foreign and private oil companies have tendency towards participation in this industry and this situation cause to promote this industry.	Discovery of oil and commencement of production	1920-1975	Stage 1
With regard to income obtaining from this industry, it nationalized and became under the control of government.	Nationalization	1975-1985	Stage 2
Due to decrement of oil price in early 1980s, Venezuela oil production reduced therefore private foreign investments assimilated to increase Venezuelan share in the global market and increase production.	Participation and foreign investment assimilation	1985-up to now	Stage 3

According to the oil and gas journal of Venezuela, this country has 77.2 billion barrel of proved reserve, which is the biggest oil reserve in the western hemisphere. If the probable and unexplored reserves of this country are calculated, its hydrocarbon reserves will reach up to 270 million barrel. Venezuela is a member of OPEC and has a great effect on the oil price in the international market. This country produced about 3.081 million barrels of crude oil and exported $48.39 billion in 2006. The following graph indicates the rate of oil production, consumption and export of Venezuela within 1980 to 2004.