La Apertura, The Quest, and the man who tried to reverse Venezuela’s oil slide

There have been reviews published recently of Daniel Yergin’s new book, The Quest: Energy, Security and the Remaking of the Modern World. Only a professional reviewer, given an advance copy, could have finished this massive tome by now; it was released less than two weeks ago.

The little meter on my Kindle tells me I’ve read 12% of the book. And already, I’ve encountered a terrific tale of one of the oil industry’s more significant developments in recent history: la apertura.

It means “the opening.” It refers to the time when Venezuela in the mid 1990’s, under the leadership of PDVSA President Luis Guisti, held a process to bring foreign investment into the petro-state and develop some of its long-ignored resources. It was fascinating to be at Platts the morning of the actual bid submissions, as our correspondent in Caracas sent in what we call “flashes,” one after the other, reporting that the bidding for most of the fields had hit preset caps, with the companies then going to the la apertura equivalent of a tiebreaker. Everybody wanted in.

Guisti was the man behind this. According to The Quest, based on an interview Yergin held with Guisti, then-presidential candidate Hugo Chavez in 1999–several years after the completion of the bid round–held an informational session with the PDVSA president about la apertura and other oil issues. He ended the meeting warmly and thanked Guisti for his efforts toward reviving Venezuela’s industry. Chavez then stepped outside and promptly ripped Guisti to shreds in public, vowing to fire the PDVSA president if elected, which of course he was. Guisti beat him to the punch and quit before the expected Chavez dismissal.

We’ll share two other stories about Guisti, one from the book, and one from a personal recollection:

–According to The Quest, Guisti needed to persuade Venezuela President Rafael Caldera that the country’s nationalistic approach toward the country’s reserves was not working. Outside investment would be needed, which was the basis of la apertura.

Guisti prepared a voluminous set of bound documents and forwarded it to the president. Guisti later saw at a meeting that Caldera had read them thoroughly to the point of marking individuals pages with paper clips…lots of them. But Guisti needed more.

Guisti knew a man named Tito Boesi, who was a geologist and a painter. Paint me a mural, Guisti implored, that would demonstrate the industry’s resources and its potential that could be exploited only with outside investment. And one other thing: do it now.

Boesi inquired as to Guisti’s sanity. “I need it,” Guisti said, according to the book. “I know you’re a very good artist, Tito. But it doesn’t have to be a masterpiece.”

The mural was painted, Caldera loved it, la apertura was completed…and Chavez has undone almost all its gains during his still-running tenure as president.

–A more personal recollection: during this time, in 1997, Guisti spoke at the annual Latin American meeting ofThe Institute of the Americas in La Jolla, California. It was a packed meeting, with a power lineup of such speakers as Mauricio Gonzalez of the Bolivian state oil and gas company, talking about his own vision of Bolivia’s apertura (implemented but also later reversed by a left-wing president), and Rebecca Mark, the glamorous Enron vice president who was fired about a year before that company started to implode, presumably making her the person in human history most grateful to have been canned.

And then there was Guisti. The press hung on his every word. So did the audience. And when he finished his speech, he needed to head right to the airport, so no post-speech press conference.

He was surrounded by the media and by well-wishers as he made his way up the escalator to a waiting car. It was a mob scene that suggested the oil industry had minted its own version of a celebrity, the J-Lo of petroleum.

At least one reporter–me–couldn’t squeeze on to the “up” escalator because of the crowd, so I ran up the “down” escalator and actually met Guisti at the top. He wasn’t impressed, refused questions, brushed by all of us and jumped into the car. He came, he saw (and spoke), and he most definitely conquered.

And now Venezuela is producing about 2.1 million b/d. It tells the world it’s producing far more, but nobody believes that. Had Giusti’s la apertura continued, it is easy to imagine output in excess of 3 million b/d. PDVSA has gone from one of the most respected state oil companies to one considered nothing but an arm of Venezuelan politics.

And it’s The Quest that brought back all these recollections. With 88% of it still to come, I can only imagine what other stories lay ahead.

Platts