Home News Local news HOVENSA CEO EYES SMOOTH VENEZUELAN TRANSITION

HOVENSA CEO EYES SMOOTH VENEZUELAN TRANSITION

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April 12, 2002 – The forced resignation of Venezuela's president early Friday was a hot topic for the speaker at the annual meeting of the St. Thomas-St. John Chamber of Commerce later in the day.
That speaker was Rene L. Sagebien, president and chief executive officer of Hovensa — a joint venture of Amerada Hess, the parent company of Hess Oil Virgin Islands Corp., and Petroleos de Venezuela, the huge state-owned oil enterprise that dominates the economy of the South American nation.
Labor and management unrest relating to Petroleos de Venezuela, commonly known by its acronym PDVSA, was at the heart of the removal of Hugo Chávez as president. In February, Chávez had replaced the president of PDVSA and five of its board members with political allies, enraging thousands of employees. Last week, office and factory workers began staging work slowdowns in protest.
Sagebien termed Chávez' removal "relatively peaceful." He did not say how he expected the change of government to affect Hovensa's operation, only commenting that "with the help of God" the transition would go smoothly. He said he knew some of the PDVSA officials who had been ousted by Chávez and were being reinstated by the interim government. "I've worked with them," he said.
There was a certain irony, Sagebien told the Chamber of Commerce members, that the man named to head the transitional government, Pedro Carmona Estanga, was the president of Fedecámaras, Venezuela's national federation of chambers of commerce. Carmona was installed as interim president at 6 p.m. Friday in Caracas, according to national news reports.
Venezuela's military high command forced Chávez to resign around 3 a.m. Friday after reports that at least 10 people were killed Thursday by armed personnel identified as Chávez supporters. News accounts said the gunfire broke out as hundreds of thousands of demonstrators marched peacefully on the presidential palace in the third day of a general strike called by labor and business leaders to protest the PDVSA management changes.
Venezuela, the world's fourth-largest oil producer, supplies about 15 percent of oil imports to the United States. PDVSA officials said Friday that production and refining operations would return to normal within four days, although industry analysts said it could take longer.
With the labor unrest, Venezuela's crude oil production had dropped from a normal 2.6 million barrels a day to about 1.4 million. The South American drama was being played out against the backdrop of see-sawing world oil prices after Saddam Hussein on Monday announced a 30-day halt to Iraqi oil exports in protest of Israel's military incursions into the West Bank but Saudi Arabia on Tuesday said it would meet global demands.
The New York Times reported that oil prices fell by 6 percent Friday with the news of Chávez' removal, the sharpest decline in five months. Venezuela, a member of the Organization of Petroleum Exporting Countries, ignored OPEC quotas in the mid-1990s, but Chávez ended that practice. In January, OPEC cut output by nearly 20 percent to hold prices up despite a drop in demand.
Following his brief remarks on the Venezuelan situation, Sagebien focused on the subject matter that he had intended to present at the annual meeting of the St. Thomas-St. John Chamber: the importance of the private sector in the Virgin Islands.
He noted that Hovensa is the territory's largest private employer. Since the joint venture was formed in 1998, he told about 150 persons attrending the luncheon gathering at The Pointe at Villa Olga, it has contributed $625 million in payroll and $150 million in property taxes to the economy of the Virgin Islands.
"We cannot continue to have the government be the largest employer in the territory," he said, drawing applause from the business leaders.
He also said the government needs to support the private sector as a matter of public policy, "not just when it is politically expedient." He added that the private sector needs to help the government, too, by providing jobs and training for workers.
Hovensa has spent $2 million to train workers to help them improve their skills as a means of moving up the corporate ladder, Sagebien said. "Our mission is not just to refine crude oil," he said. "Our mission is to be a responsible corporate citizen."
He reminded the group that after Hurricane Hugo devastated St. Croix in 1989, Leon Hess did not abandon the island but rather made a decision to keep his commitment and stay.
Back in what "we call the good old days," Sagebien said, Hess Oil V.I. Corp. was the largest refinery in the world. At the start in 1966, it was processing 40,000 barrels of oil a day; today the volume has grown to about 115,000 barrels.
In the 1970s and '80s, he noted, the refinery benefitted from an oil embargo in the Middle East. Once the embargo ended, however, the refinery had to make substantial investments to keep pace with the competition, he said.
The St. Croix refinery's coker project which is expected to be completed in the next month has cost $575 million — and that's $225 million more than initially projected, he said. At one point the project employed 5,000 people, and there are still 1,600 working on the coker, he said, adding, "It is very important to the people of St. Croix."
The bottom line, Sagebien said, is that the private sector and the government must become partners for the economic well-being of the territory. When that happens, he said, "we will be able to call ourselves successful."

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