Mérida, May 15, 2021 (venezuelanalysis.com) – Venezuela’s crude output fell in April after six months of steady growth.
The latest Organization of Petroleum Exporting Countries (OPEC) monthly report placed the Caribbean nation’s April production at 445,000 barrels per day (bpd), down from 526,000 bpd in March, according to secondary sources. State oil company PDVSA’s directly communicated figures were not available at the time of the report’s publishing.
Last month’s fall reversed a trend that had seen Venezuela recover from historic lows in the second half of 2020. However, output was still way below averages of 1.9 million, 1.354 million and 796,000 bpd in 2017, 2018 and 2019, respectively.
The country’s most important industry has suffered from a brain drain, lack of maintenance, corruption and especially US sanctions. Following financial sanctions against PDVSA in 2017, Washington imposed an oil embargo and secondary sanctions while also targeting shippers and other intermediaries. The unilateral measures have been widely condemned and classed as “collective punishment.”
The recent recovery was also hampered by an explosion in a gas pipeline in eastern Venezuela in late March. The incident caused a reduction in light crude output needed to blend the extra-heavy crude from the Orinoco Oil Belt into exportable grades.
Additionally, PDVSA has been forced to divert part of its Mesa and Santa Barbara light grade stocks to refineries in an attempt to address severe fuel shortages caused by US sanctions. According to Argus Media, the measure led to a decline in the Orinoco Oil Belt from 350,000 bpd in March to 230,000 in mid-April.
The Venezuelan government has prioritized addressing the diesel shortage following the US Treasury Department’s clampdown on swap deals in October 2020. The lack of diesel has affected public transportation, electricity generation and especially food production and distribution.
Besides addressing short-term fuel shortages, the Nicolás Maduro administration has likewise vowed to recover crude output, with the PDVSA leadership setting a 1.5 million bpd target by the end of 2021.
Under the weight of US sanctions, Caracas has increasingly looked to court foreign capital to invest in the oil industry.
A document titled "Investment Opportunities" from PDVSA’s planning and engineering division, seen by Reuters, outlines different possibilities to attract private sector stakeholders under “new business models.” The plan estimates the industry would need $58 billion in investments to recover output to 3.4 million bpd.
In total, the document contains 152 "opportunities" totaling $77.6 billion to boost oil and gas output as well as pipeline infrastructure recovery. The main mechanism would be production services agreements (ASPs) whereby the private sector partners would run oilfields and receive a portion of the output as payment.
The prospective opening of the oil industry has come alongside a flexibilization of the country’s legislation, with a reform of the 2001 landmark Hydrocarbon Law deemed a priority both for the pro-government National Assembly and private sector representatives. Additionally, the former National Constituent Assembly approved the so-called “Anti-blockade Law” granting the government permission to confidentially implement measures or suspend legislation in order to boost investment.
However, the enforced and proposed changes have sparked fierce debate as they represent a reversal of former President Hugo Chávez’s policies. Under Chávez, PDVSA assumed a central role in the industry, with legislation requiring that the state company hold at least a 60 percent stake in joint ventures as well as run all oilfield operations itself.