Maduro taps major general to lead Venezuela's ailing oil industry in move seen as solidifying his power

CARACAS – Venezuelan President Nicolas Maduro on Sunday tapped a National Guard major general to lead state oil company PDVSA and the Oil Ministry as the OPEC member labors under near 30-year lows in oil production.

Manuel Quevedo takes over from two industry veterans to become one of the most powerful players in the country, which is home to the world’s largest crude reserves.

Industry analysts and sources said the surprise appointment was a bad omen for the country’s already deteriorated oil industry.

A former housing minister with no known significant experience in the energy sector, Quevedo inherits corruption scandals and an attempted debt restructuring, amid a deep recession and debilitating U.S. sanctions.

“The time for a new oil revolution has come,” leftist Maduro said in his televised Sunday address, urging Quevedo to purge PDVSA of corruption.

Last week, six executives from U.S.-based Citgo Petroleum Corp., or Citgo, a Venezuelan-owned refiner and marketer of oil and petrochemical products, were arrested in Caracas on graft allegations. About 50 officials at state oil company PDVSA have been arrested since August in what the state prosecutor says is a “crusade” against corruption.

Sources within PDVSA and the oil industry said Maduro’s administration was using corruption allegations to sideline rivals and deepen its control of the industry, which accounts for over 90 percent of export revenue.

Quevedo, a Maduro ally, vowed on Sunday to bring PDVSA closer to the ideals of late leftist leader Hugo Chavez.

“We’re going to turn PDVSA into the sacred temple of the people!” tweeted Quevedo, who Maduro said would still dedicate 20 percent of his time to the “Grand Housing Mission,” a Chavez-era project.

It was unclear how Quevedo planned to increase oil production, or what position he would have in Venezuela’s complex attempt to restructure its debt.

A half dozen current and former PDVSA sources, who were taken aback by Quevedo’s appointment, said his arrival would likely deepen a brain drain and could complicate everything from daily operations to negotiations with bondholders.

One PDVSA source, who asked not to be named, said a PDVSA board reshuffle was due in the next few days.

Quevedo’s rise also highlighted the increasing power of the Venezuelan military. Current or former members of the armed forces make up a significant portion of the Cabinet and an army-run oil services company was created last year.

While military appointments had also been increasing in the oil industry, PDVSA until Sunday was led by chemist Nelson Martinez and the Oil Ministry by engineer Eulogio Del Pino.

“The military has achieved its aim of controlling PDVSA. The forecast is somber,” said Francisco Monaldi, a fellow in Latin American energy policy at the Baker Institute in Houston.

The opposition has accused Quevedo of violating human rights because of his role in the National Guard during anti-government protests in 2014.

“This is a game changer for international oil companies. If political and reputational risk could get any higher for oil companies, this is it,” said Raul Gallegos, an analyst with the consultancy Control Risks.

PDVSA is closely allied with Russian state oil giant Rosneft and state-owned oil major China National Petroleum Corp., although Western oil companies like U.S. major Chevron and French oil major Total also operate in Venezuela.

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