Two of the world´s largest known oil deposits boast the names of late Venezuelan president Hugo Chavez and former Brazilian president Luiz Inacio “Lula” da Silva. The thinking goes, these are the towering figures who showered the wealth of their countries´ abundant natural resources on the people. Their deteriorating economic and political legacies now speak otherwise.
The rechristening of the Faja del Orinoco last year as the Hugo Chavez Frías Orinoco Oil Belt has not been accompanied by the massive investment needed to tap the vast extra-heavy crude belt that forms the backbone of the Opec country´s ambitious production growth plans. Even before oil prices started tumbling in 2014, state-owned oil company PdV didn´t have enough capital to pay for its share of the development. The naphtha and light crude needed to move the viscous resource to market renders the Faja a costly and complicated endeavor.Faced with their own tight capital budgets, foreign partners are reluctant at best to plow more than they already have into a country that can no longer feed itself. Nicolas Maduro, the Venezuelan president whom Chavez chose to succeed him in 2013, might not last out the year.
A few years ago in Brazil, the giant Tupi sub-salt field was renamed Lula, whom police have detained this morning in a dramatic twist to a gargantuan corruption investigation known as Lava Jato. The field, which state-controlled Petrobras is developing in partnership with Shell and Portugal´s Galp, is one of several big offshore deposits that are driving Brazil´s emerging role as a major non-Opec oil supplier.
Despite its plentiful reserves, Brazil´s production has stalled in recent months as Petrobras cuts investment and grapples with the fallout of the systemic kickbacks and bribery that the company used regularly. President Dilma Rousseff, Lula´s less charismatic heir, might not survive in office either.
Political turmoil aside, the colossal oil reserves in Venezuela and Brazil will not go away because of their formal names, however inappropriate they might seem to political detractors, and however uncomfortable they might make disenchanted supporters. After all, by any other name that which we call Chavez or Lula would fetch just as much value in the volatile oil market. But the political embrace of the Faja and the sub-salt play evoked by their designations has not fulfilled its economic promise in either country, regardless of the prevailing oil price. Changing names would be easier than possibly changing political course in the months ahead.