BUSINESS

Venezuelan officials announce operations resume at refinery hit by explosion that killed 42

08/31/2012 11:45 EDT | Updated 10/31/2012 05:12 EDT
CARACAS, Venezuela - Operations resumed Friday at the Amuay refinery where an explosion set off a raging fire and killed 42 people and injured more than 150 others, Venezuela's state oil company announced.

The accident had nearly paralyzed work at the oil installation in western Venezuela since the huge explosion early Saturday, which authorities blamed on a gas leak. Amuay is one of the largest refineries in the world and is part of the PDVSA oil monopoly's Paraguana Refining Complex, which includes the adjacent Cardon refinery.

"Operational activities have resumed safely and gradually" at Amuay, said Paraguana CEO Jesus Luongo, who is also director of PDVSA Refining.

Venezuelan officials had initially said the refinery would be back in operation within two days, but later said it would be two days after fires were put out. In the end, the last fire was extinguished Tuesday and it took about three days for production to resume.

The disaster has prompted questions about whether Petroleos de Venezuela SA has neglected maintenance while funneling its revenues into social programs run by President Hugo Chavez's socialist government.

A document released Thursday by two national Venezuelan newspapers said that months before the explosion, a study by engineers had found failures in the complex's maintenance and listed dozens of accidents. The report, which was also obtained by The Associated Press, was prepared in March by RJG Risk Engineering for the international insurance company QBE.

The study said there had been 222 accidents at the Paraguana Refining Complex last year. It said 100 of those involved fires, and 60 were breaks and leaks in pipes that carry combustible liquids.

Critics have said that in addition to refinery failures from delayed maintenance, PDVSA's operations have also suffered from the firing of 45 per cent of the company's 18,000 oil workers in 2003 for joining a strike called by Chavez's political opponents to press demands that the president resign.

It was not until last March that the company was able to match pre-layoff levels and begin to increase production.

In recent years, Chavez's government has increasingly used a share of earnings from PDVSA to bankroll social programs known as "missions." Its contributions to such programs rose from less than $1.6 billion in 2004 to $10.4 billion last year.

Pressure on PDVSA to generate funds for programs that shore up Chavez's political support has led to a "deterioration that PDVSA has had in its refining activities," Asdrubal Oliveros, an economist and director of the consulting firm Ecoanalitica, said this week.

He said PDVSA has concentrated bigger investments in oil production to prevent output from slumping "but has neglected other activities, among them refining."

Government officials counter that PDVSA has invested $6 billion in maintaining refineries over the past five years.

In other countries, such a refinery disaster would likely bring higher costs at the pump for customers. But Venezuela has for decades offered its citizens highly subsidized gasoline at the cheapest prices in the world: about 9 U.S. cents per gallon (2 U.S. cents per litre).

Oil Minister Rafael Ramirez has said Venezuela has plenty of fuel on hand to meet domestic demand in the aftermath of the disaster and won't have to increase imports, but he has not discussed the possible financial impacts for the state oil company.