Venezuela: Oil Production Shows Modest Uptick as Gov’t Seeks Foreign Investment

The country’s new “anti-blockade law” looks to boost conditions for foreign investors.

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Vice President Delcy Rodriguez presented investment opportunities to the country's diplomatic corps. (@CancilleriaVE)
Vice President Delcy Rodriguez presented investment opportunities to the country's diplomatic corps. (@CancilleriaVE)
By Ricardo Vaz
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Mérida, October 15, 2020 (venezuelanalysis.com) – The Venezuelan oil sector saw a slight increase in output in September.

The latest report from the Organization of the Petroleum Exporting Countries (OPEC) placed the country’s production at 383,000 barrels per day (bpd) last month, 32,000 bpd more than in August, according to secondary sources.

The numbers reported directly by state oil company PDVSA stood at 397,000 bpd, virtually on a par with 396,000 bpd the previous month.

The rise in output is expected to continue in the coming weeks as several foreign companies load their final PDVSA cargoes after being threatened by the US Treasury Department to wind down their Venezuela dealings.

Starting with financial sanctions in 2017, Washington has imposed several measures against the Caribbean country, including an oil embargo in January 2019 which was later expanded to a blanket ban on all dealings with Venezuelan state companies. Venezuelan oil output has fallen sharply from an average of 1.911 million barrels per day (bpd) in 2017 to just 796,000 bpd in 2019. This number has been halved over the past 9 months.

The Treasury Department escalated its actions in 2020 by imposing secondary sanctions against Russian energy giant Rosneft before targeting shipping companies and vessels.

The measures and threats of secondary sanctions saw companies increasingly move away from doing business with PDVSA, with transactions requiring special authorization from the Treasury Department. Other companies, such as US multinational Chevron, were granted consecutive three-month sanctions waivers to continue operating joint ventures with PDVSA.

With US elections on the horizon, Washington moved to wind down exemptions and drive away the companies still involved with the country’s oil sector, in particular by targeting crude-for-fuel (or crude-for-diluent) swap deals. The companies ending their long time dealings with the Venezuelan oil sector include ENI (Italy), Repsol (Spain), Reliance (India) and Tipco Asphalt (Thailand).

US sanctions have seen Venezuela increasingly turn to Iran for assistance to boost production and address fuel shortages.

Tehran recently supplied 500,000 barrels of condensate needed to blend Venezuela’s heavy crude into exportable grades. The very large crude carrier (VLCC) reportedly departed this week from the eastern Jose terminal carrying 1.9 million barrels of Merey crude, with its final destination unknown.

The falling oil production and economic crisis have also seen the Venezuelan government increasingly look to improve conditions for private sector investors.

Together with the “anti-blockade law” recently approved by the National Constituent Assembly, President Nicolas Maduro announced the creation of the International Center for Productive Investment, which will coordinate projects and offer alliance schemes with foreign companies so as to circumvent US sanctions.

The center will be run from the vice presidency, and on Tuesday Executive Vice President and Finance Minister Delcy Rodriguez presented a range of investment opportunities to the country’s diplomatic corps in the oil, mining, natural gas, agriculture and tourism sectors. She added that the new law “will protect investments.”

However, analysts have criticized the anti-blockade law and government overtures to investors as opening the door to privatizations as well as undermining the country’s sovereignty in strategic sectors.