Caracas, December 14, 2022 (venezuelanalysis.com) – Venezuela’s crude production continues to hover below 700,000 barrels per day (bpd) as the industry enters its sixth consecutive year under US sanctions.
According to secondary sources from the latest Organization of Petroleum Exporting Countries (OPEC) report, November’s production stood at 656,000 bpd, down from the 682,000 bpd pumped in October. For its part, Venezuelan state oil company PDVSA reported 693,000 bpd, also below the previous month’s 717,000 bpd.
Despite the output standstill, exports increased moderately with 619,300 bpd of crude and refined products shipped in November, 16 percent more than in October, but still below August’s peak of 813,000 bpd, as registered by Refinitiv Eikon.
Most cargoes were sent to China, Caracas’s main buyer, using ship-to-ship transfers to bypass US sanctions. Iran was another key destination as the allied countries celebrated one year since signing a swap deal that has provided Venezuela with over 26 million barrels of crude oil and condensate to produce exportable crude grades, while Tehran has received about the same volume of Venezuelan heavy oil and fuel. The latest exchange took place on December 6 with the reported arrival of 2 million barrels of Iranian ultra-light oil in the Caribbean country.
The increase in exports likewise responded to the resumption of oil shipments to Europe. Last month, Italy’s Eni, a PDVSA joint venture partner, carried two cargoes with 1.85 million barrels of Venezuelan diluted crude oil (DCO) to be refined by Repsol in Spain. In May, both companies received licenses from the US Treasury Department to take Venezuelan crude in exchange for debt repayment.
Another surge in exports is expected by year-end as US corporation Chevron is reportedly ready to ship one million barrels of Venezuelan crude to US refineries in the Gulf of Mexico by late December. This would be the first US-bound shipment since 2018 following Washington’s financial sanctions against PDVSA the year prior.
The 2017 measures were followed by a full-fledged oil embargo in January 2019 as well as secondary sanctions and other threats throughout 2020. The sanctions were largely responsible for the country’s 1.9 million bpd crude output decreasing to less than 350,000 bpd in the second half of 2020 exacerbating an ongoing economic crisis and migration wave.
A source told Bloomberg that the California-based company will soon take over operations at joint ventures to process the Hamaca blend, a tar-like crude extracted in the Orinoco Oil Belt, and will use its own imported diluents to transport the sludgy Venezuelan oil.
A clause in the sanctions waiver prohibiting Chevron from paying taxes or royalties to the Venezuelan government has sparked debate. Some analysts have claimed that only joint ventures, where the US corporation has minority stakes, are in charge of such obligations, while White House officials have stated that all profits will go toward the repayment of Caracas’s US $3 billion debt to the oil giant. Neither party involved in the negotiations has clarified the terms.
Following the announcement, Venezuelan Oil Minister Tareck El Aissami and Chevron’s top representative in Venezuela Javier La Rosa signed contracts to kickstart operations in at least three of their four joint ventures. Details of the agreements were not disclosed.
“This is an important step towards the right direction, but yet insufficient. We demand the lifting of punishing measures that have hit our industry,” said El Aissami after signing the contracts at PDVSA’s Caracas headquarters.
On December 7-8, Venezuelan officials and Chevron executives visited the Petroboscán and Petropiar projects, located in western and eastern Venezuela, where they held closed-door meetings to discuss operations and management.
Currently, Chevron and PDVSA’s joint oil ventures are producing a reported 20,000-50,000 bpd, a significant fall from the 160,000 barrels a day pumped in 2018 and well below the 200,000 bpd maximum capacity.
Although there is room for an increase, Chevron officials have discarded an immediate boost in output. Earlier this month, the firm’s Chief Executive Michael Wirth said the company will not invest in exploration and production in the next six months, with the company instead focusing on shipping a reported 1.79 million barrels of exportable crude it has in stock to US refiners.
With future exports and rising oil prices, the Venezuelan government is expecting oil exports to finance 63 percent of its national budget in 2023, set at $14.7 billion, as revealed in documents seen by Reuters. The number is 8.5 percent higher than 2022’s $13.6 billion budget.
The Chevron license was issued in response to the resumption of talks between the Nicolás Maduro government and the US-backed Venezuelan opposition in Mexico after a year-long stalemate. The two sides agreed on a $3 billion~ plan using Venezuelan funds seized by Washington and its European allies in recent years. The resources will be channeled via United Nations to invest in social programs.
With Juan Guaidó’s self-proclamation as “Interim President” in 2019, the US government froze a number of Venezuelan assets, while handing control of some to the hardline opposition. President Maduro has warned that the talks would only resume if the right-wing negotiators comply with their side of the bargain before the year ends.
The Venezuelan president likewise welcomed the Chevron license to restart oil operations but emphasized it was “not enough for what Venezuela demands, which is the complete lifting of all criminal sanctions on the oil industry.”
Chevron’s sanctions waiver expires in May and Washington has conditioned its renovation on the continuation of the dialogue process and the discussion of electoral conditions ahead of the 2024 presidential vote. In response, Maduro has said that Venezuela wants “elections free of sanctions.”
Edited by Ricardo Vaz in Caracas.