Venezuela: New Power Outage as Oil Output Plummets

Caracas, April 10, 2019 (venezuelanalysis.com) – Venezuela suffered another widespread power outage on Tuesday evening, affecting as many as 20 of the country’s 23 states.

The blackout started at 11:20 PM, with Communications Minister Jorge Rodriguez explaining that a power overload failure occurred as a result of the damage caused by what the Venezuelan government has denounced as attacks against the electric grid.

Recovery so far has been much faster than on previous occasions, with power restored within 3 hours to Caracas, areas of nearby states Aragua and Miranda, and to eastern states such as Anzoategui and Monagas. Services such as the Caracas Metro also resumed service on Wednesday morning.

Within a few hours power had also been restored to other states such as Lara, Portuguesa and Yaracuy, and to parts of western states such as Zulia and Merida on Wednesday afternoon, although service remains unstable. Western states have suffered the most during the recent electricity crisis, waiting days to see power restored and only having electricity for a few hours at a time.

Venezuela has suffered from a series of widespread power outages starting on March 7, with the government denouncing cyber, electromagnetic and physical attacks against the electric grid and the Guri Dam, the country’s main electricity generator.

Venezuela’s electricity infrastructure has suffered from under-investment and lack of maintenance, as well as migration of qualified personnel, problems that have been compounded by US sanctions. Sanctions have stopped Venezuela from servicing equipment and from having the necessary fuel to activate backup thermoelectric plants.

Torino Capital Chief Economist Francisco Rodriguez has estimated that the March blackouts have cost Venezuela US $2.9 billion, or 3.3 percent of GDP, with losses affecting basic industries and oil operations that might have lasting consequences.

On top of US oil sanctions, the electricity crisis has contributed to the plummeting of Venezuela’s oil output, which took a further dive in March. According to the monthly OPEC report, Venezuela reported an output of 960 thousand barrels per day (bpd), whereas secondary sources reported 732 thousand bpd. These numbers are down from 1,432 and 1,021 thousand bpd, respectively. According to secondary sources, Venezuela’s output averaged 1,911 and 1,354 thousand bpd in 2017 and 2018, respectively.

Power outages in March severely affected oil production, with wells, refineries and export terminals paralyzed for days. Reuters reported on Tuesday that two of Venezuela’s four crude upgraders, which process extra-heavy crude from the Orinoco Belt into exportable grades, had been brought back online after being mostly inactive in March.

Venezuela’s oil production has also been crippled by successive rounds of US sanctions targeting state oil company PDVSA. OFAC measures have shut off PDVSA from financial markets, prohibited debt re-negotiations, frozen PDVSA’s US subsidiary CITGO, stopped imports of US-made refining products and imposed a de facto embargo on Venezuelan oil exports to the US. Oil shipments to US refineries fell from around 500 thousand bpd in late January to zero in March following a winding down period, before picking up to 139 thousand bpd in the first week of April.

Caracas has sought to find new destinations for its crude, looking to expand its deliveries to Russia, China and especially India, its main cash buyer. This has been made more difficult by US officials threatening India against increasing its dealings with Venezuela and repeatedly raising the possibility of imposing secondary sanctions against non-US companies.

Other sanctions imposed in recent weeks have targeted Venezuela’s mining and banking sectors as well. US officials have been overt in declaring that sanctions are meant to increase pressure and force the ouster of the Venezuelan government. Washington threw its support behind National Assembly President Juan Guaido following his self-proclamation as “interim president,” and has led international efforts to further isolate the Maduro government.

Venezuelan officials have repeatedly denounced sanctions, calling them illegal under international law. UN Special Rapporteur Idriss Jazairy has decried the imposition of sanctions against Venezuela.

“The use of sanctions by outside powers to overthrow an elected government is in violation of all norms of international law,” Jazairy said in a press release.

Former UN Independent Expert Alfred de Zayas similarly has likened sanctions to “medieval sieges” designed to bring countries “to their knees.” De Zayas has also claimed that sanctions can amount to crimes against humanity.