Merida, December 6, 2018 (venezuelanalysis.com) – Venezuela’s state owned oil company, PDVSA, boosted crude production in November following over twelve consecutive months of collapsing output, offering modest hopes of a recovery in the key industry.
According to an extra-official Reuters survey published November 30, oil output rose from 1.18 million barrels per day (bpd) in October to 1.23 million bpd in November. Venezuela’s oil production has dropped by around 700,000 bpd over the last year.
The Venezuelan government, which is yet to release official figures for November, has set a target of producing 2.5 million bpd by the end of 2019 and has been consulting workers and international specialists on how to achieve this goal. Meanwhile, workers have been taking matters into their own hands, repairing deteriorated infrastructure as part of the Workers’ Productive Battalions.
Joint CNPC-PDVSA refinery to move forward
Positive signs have also come from China, where financial publication Caixin reported that China’s National Petroleum Corporation (CNPC) has relaunched a decade-old joint plan with PDVSA to construct a 400,000 bpd refinery and chemical plant in the Guangdong province of China.
The project, which will be 60 percent financed by CNPC and 40 percent by PDVSA, is due to cost US $9.53 billion, meaning that PDVSA would be due to pay some US $3.81 billion over the next two years. It had previously been put on ice following the collapse in oil prices and resulting economic strains in Venezuela, but is now expected to be finished and start trial operations in October 2021.
China has offered extensive credit lines to Venezuela’s oil industry this year in exchange for stakes in local development projects being carried out by PDVSA.
More debt payments honoured
It has also been reported that PDVSA has begun honouring outstanding dividend payments to India’s Oil and Natural Gas Corp (ONGC), further quashing rumours of debt default or worries of asset seizures.
PDVSA made an initial payment of US $32 million for dividends on ONGC’s 40 percent stake in the San Cristobal project in western Venezuela, which produces 17,000 bpd. The payment forms part of the agreements signed in 2016 to honour outstanding dividend payments worth US $537 million, of which PDVSA has paid US $90 million to date, Reuters reports.
“It is a good development,” stated Managing Director of ONGC Videsh N. K. Verma, the overseas investment branch of ONGC. “In between (2016 and now) there was some break because of financial strain in their country. We hope now PDVSA will be regular and the agreed mechanism will continue,” he continued.
The news comes as PDVSA likewise made an initial payment of US $425 million to Canadian mining firm Crystallex last month as part of the settlement of a US $1.2 billion arbitration award.
Decreasing exports to US
Despite the apparent increase in PDVSA’s liquid financial capacity and the marginal rise in production, it was also reported this week that Venezuela’s oil exports to the US, one of its major trading partners, fell once again to 482,517 bpd in November, equivalent to some 30 shipments. Despite being the second consecutive month in which exports to the US have fallen, the figure does, however, represent 1.5 percent more oil exports than twelve months ago, according to Refinitiv Eikon data.
The decline follows deteriorating recent relations between Caracas and Washington. The Trump administration has imposed round after round of sanctions on Venezuela over the past year, including a financial ban on PDVSA restricting the repatriation of US $1 billion per year of profits made in its US subsidiary, Citgo, among other deleterious effects, which analysts find have contributed to declining production levels. President Maduro has previously expressed interest in increasing oil exports to alternative markets, such as Russia and China.
More oil imports to satisfy national demand
PDVSA has also raised fuel imports into Venezuela in order to cover local demand, Reuters has reported based on “internal documents”.
This year, PDVSA reportedly had to import 253,000 bpd, of which 19,000 bpd was crude oil and 234,000 was refined products such as diesel, naphtha –used to dilute Venezuela’s extra heavy crude – as well as components to make motor fuel.
Total imports in the oil-producing country are believed to be up some 40 percent from 180,250 bpd last year, and include products sent by PDVSA’s own CITGO, Russian oil firms Lukoil and Rosneft, CNPC, and Reliance Industries of India, amongst others.
Domestic oil demand is estimated to be around 325,300 bpd, of which PDVSA fulfilled ─ between domestically produced and imported products ─ only 83 percent, causing sporadic fuel shortages in certain states across Venezuela over the last six months.
Edited by Lucas Koerner from Caracas.