The political role of national oil companies in exporting countries : the Venezuelan case

The philosophy of modern, capitalist economies favours the pursuit or maximization of profit and frowns upon rent and rent seekers. The international oil companies investing in oil-exporting countries of the Third World naturally shared this philosophy. They were faced, however, with landlord states most concerned with the maximization of ground-rent. Ultimately, nationalization was used by most of these states to achieve this goal. The national oil company came thus into existence as a rent collector for the landlord states. Yet its own interest, as in the case of international petroleum corporations, lies in the maximization of profit which calls for the minimization of the share of income taken in rent. There are tensions, therefore, between the demands of their owner - that is the landlord state - and their corporate motivations and goals. The central question raised by this paper is whether the national oil companies are able to develop new types of landlord tenant relationships that can cope with these tensions. To investigate this issue the author studies the national oil company of an important oil-exporting country - Venezuela. He assesses the difficulties encountered by Petroleos de Venezuela (PDV) in creating the necessary legal and institutional framework for operating as a truly commercial enterprise. One of the difficulties is the absence of a clear criterion for distinguishing the company profits from the rent element of its total revenues, and therefore for establishing the correct fiscal base. The study also refers to PDV’s position and role in the three joint ventures with foreign companies, already approved by the Venezuelan Congress. The assessment is that PDV did not succeed in establishing a clear definition of its position in these relationships with foreign investors. The author’s main thesis is that the central role of national oil companies is to create a viable modus vivendi between the state, acting as a rent maximising landlord, and the company itself, operating as a new commercial enterprise. He believes that this may be facilitated by an alliance with an actor which has been so far excluded from the scene, namely national private capital.