Caracas, April 14, 2022 (venezuelanalysis.com) – Venezuela's oil production continues on a steady uptrend amidst ongoing uncertainty concerning US sanctions relief.
The Organization of Petroleum Exporting Countries (OPEC) placed Caracas’ March output at 697,000 barrels per day (bpd), according to secondary sources, 8,000 bpd more than in February. For its part, state oil company PDVSA announced a 728,000 bpd output, 60,000 bpd less than the previous month.
Venezuela’s oil exports receded in March due to returned cargoes over alleged poor oil quality, according to Reuters.
The Caribbean country's crude production and exports have tumbled under years of US sanctions, going from 1.9 million barrels per day in 2017 to less than 500,000 bpd in 2020. Last year, PDVSA halted the steep drop and rebounded to an average of 558,000 bpd, a 12 percent increase from the previous year.
The reanimated oil output was mainly driven by a swap deal with Iran which provided much-needed diluents to produce Venezuela's flagship exportable grades. Oil Minister Tareck El Aissami has likewise praised the state company workers for assuming crucial reparations and manufacturing key parts previously exported, contributing to ramped-up production.
Despite the recent boost, Venezuela is yet to reach 1 million bpd of monthly output, a feat only achieved momentarily in December 2021, according to PDVSA sources.
Nonetheless, the Nicolás Maduro government has set the goal of producing 2 million bpd by the end of 2022 as part of a broader economic strategy that has seen the country register its lowest monthly inflation in a decade. Economic stability has led to bullish forecasts, with Swiss bank Credit Suisse predicting a 20 percent growth forecast for 2022 on the expectation that Venezuela’s oil production will grow by more than 20 percent.
Sanctions against Venezuela’s oil industry began in 2017 when the US Treasury Department imposed financial measures against PDVSA, followed by an oil embargo in 2019 as well as secondary sanctions and threats against shipping companies and other intermediaries.
As a result, PDVSA has been left adrift of international markets, blocked from servicing debt, securing new capital and even procuring key parts to carry reparations in its Western-designed industry. Foreign companies were also forced to abandon drilling and trading operations in joint oil ventures in the country.
However, the prospects for Venezuela’s most important industry have begun to look up and catch worldwide interest after US officials visited the South American country in early March. The high-level meeting with President Maduro reportedly explored a return of Venezuelan crude to US markets following Russia's military operation in Ukraine and related sanctions against Moscow. Caracas used to export approximately 500,000 bpd to American refineries.
The geopolitical reshuffling of global oil supplies has led PDVSA to take preliminary steps in order to prepare for a scenario of sanctions relief that would allow for an expansion of production and exports. According to Reuters, the Venezuelan state company is in talks to provide crude or refined products as payment for new tankers in order to replace damaged vessels and boost its current fleet.
"PDVSA's tanker fleet is too short for any increases in oil production for domestic refining or exports," explained one of the sources involved in the negotiations.
In recent years, US sanctions have stopped PDVSA from renewing documentation for its vessels to be certified as seaworthy, leaving them stuck in Venezuelan waters. This has forced Caracas to rely on expensive third-party oil tankers and sell exclusively to Asian markets at significant price discounts.
PDVSA is not the only one gearing for possible sanctions relaxation. California-based oil corporation Chevron is reportedly still lobbying US officials for an expanded license that would allow it to take control of its four joint oil ventures in Venezuela and ship cargoes directly to the US in exchange for relieving Caracas’ unpaid past debts.
Chevron’s plan to ramp up crude production in Venezuelan oilfields has allegedly been greenlighted by Venezuelan authorities ahead of US approval, although no official statement has been made so far. Spain's Repsol, Italy's Eni, and India’s ONGC Videsh are also among the companies expecting to secure oil-for-debt licenses.
Pressure to ease sanctions against Venezuela’s oil industry has been gaining steam within the Caribbean country’s opposition sectors as well. On Wednesday, a group of Venezuelan politicians, businessmen, economists and analysts penned a letter to the Biden administration asking to lift measures that would permit the return of Western oil firms to the Caribbean nation.
The signatories demanded the US government overcome "domestic political pressures" that have hindered recent talks with Caracas. They equally urged the Venezuelan opposition led by self-proclaimed "Interim President" Juan Guaidó to "not be held hostage by extreme positions that only prolong the painful status quo."
After being sidelined in the recent high-level talks between Biden and Maduro, Guaidó has tried to persuade foreign oil companies to stop lobbying for sanctions relief, asking them to stick to “democracy.” The hardline opposition sectors have likewise pleaded with US leaders not to ease the blockade against Venezuela.
Edited by Ricardo Vaz from Caracas.