By Dan Molinski
Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Venezuela state oil company Petroleos de Venezuela, or PdVSA, saw its profits drop sharply during the first half of the year as lower global oil prices took their toll.

PdVSA's total consolidated net profit for the first six months fell to $3.15 billion from $9.5 billion in the year-ago period, the company reported on its Web site Thursday.

"It's not what we made last year, but it is a profit," said PdVSA President Rafael Ramirez, who is also the country's oil minister, in a televised interview Thursday on Venevision.

Global oil prices have been recovering lately, but at around $78 a barrel they are still only about half of July 2008's record high of $147 a barrel.

PdVSA also attributed its lower profits in 2009 to a decrease in production based on the Organization of Petroleum Exporting Countries' December 2008 agreement to reduce its overall production ceiling, amid slackening demand.

PdVSA said average daily crude production through June 30 was 3.1 million barrels a day. That was down from 3.2 million barrels a day through the first half of 2008, but equal to production at the end of the first quarter of this year.

The lower profit by PdVSA is causing pain for the economy in Venezuela, which relies heavily on oil sales to fund government spending programs and boost consumption. The economy shrank 4.5% in the third quarter and 2.4% in the second, suggesting it is in recession.

PdVSA's overall income, including overseas subsidies, fell to $32.5 billion for the first six months, less than half of the $67.7 billion seen during that same period in 2008. But costs also shrank, to $27.6 billion from $51.6 billion during the first six months of last year.

The oil company has issued more than $6 billion in debt this year to help pay suppliers and to meet rising labor obligations. Venezuela nationalized many oil-related companies as part of Chavez' push toward socialism, and put many workers from those firms on PdVSA's payroll.

But Ramirez noted that these moves have also allowed PdVSA to become "the fourth most-important oil company in the world," reflected by the company's rising assets.

Through the first half of this year, PdVSA had property, plants and equipment worth nearly $76 billion, up from $73 billion at the end of June 2008. Total assets were $137 billion at the end of June, up from $132 billion at the end of the first half of last year.

Due to the lower oil prices in the first half of 2009, PdVSA said it didn't set aside any money to the Fonden development fund, the preferred social spending vehicle of President Hugo Chavez. In the first half of 2008, the company contributed about $6 billion to Fonden.

According to a government rule, contributions to Fonden automatically are halted when oil prices fall below the $60-a-barrel level projected in this year's budget. In July, Chavez announced contributions to Fonden had been re-started, as oil prices began to rise.

-By Dan Molinski, Dow Jones Newswires; 58-212-284-5651; dan.molinski@dowjones.com