Guayaquil, Ecuador, January 20, 2022 (venezuelanalysis.com) – Venezuela has lifted gasoline production with four major refineries back online.
State oil company PDVSA is currently producing almost 160,000 barrels per day (bpd) of gasoline, local sources told Reuters. The number is an important jump from the 82,000 bpd reported at the end of last year. If the higher output continues it would successfully cover domestic demand which currently stands at around 110,000 bpd.
In contrast, the South American country is only producing 38,000 bpd of diesel, falling drastically short of meeting the roughly 100,000 bpd demand. Diesel is crucial for public transportation, electricity generation and agriculture.
The recent increase in gasoline output resulted from activating four important refineries in recent weeks. The 146,000 bpd capacity El Palito refinery (Puerto Cabello, Carabobo state) has reportedly resumed production at about 56,000 bpd following 12 months of paralysis.
Simultaneously, the 645,000 bpd Amuay refinery ramped up output to some 64,000 bpd, while its partner, the 310,000 bpd Cardón refinery was also put partly back online. The neighboring industrial plants form the Paraguaná Refining Complex in Falcón state, the largest in the hemisphere.
To round up, the 187,000 bpd Puerto la Cruz refinery in eastern Venezuela has likewise begun stabilizing fuel output at about 33,000 bpd.
Venezuela’s refining network has the capacity to produce 1.3 million bpd of fuel, which used to surpass domestic demand allowing for considerable exports. However, the industry was grounded to a halt as Washington’s unilateral coercive measures heavily compounded maintenance issues. Starting in 2017, the US Treasury Department has imposed financial sanctions and an oil embargo against PDVSA, while also targeting shipping companies and multinational corporations.
Additionally, the former Trump administration clamped down on swap agreements that saw the country exchange crude for diesel, gasoline or diluents needed for refining. The measure saw Venezuela be gripped by fuel shortages in the second half of 2020.
Iranian assistance has been essential to reactivating Venezuela's oil industry, with Tehran sending technicians, equipment and materials needed for revamping refineries. This has allowed handling a more diverse slate of crude grades to produce more gasoline and diesel.
The fuel production boost came as the country raised its oil output levels in recent months. Iran played a key role as well providing an average of 2.1 million bpd of condensate per month to mix with Venezuela’s extra-heavy oil, facilitating transportation and exports and allowing PDVSA to use lighter crudes for refining purposes.
The latest Organization of Petroleum Exporting Countries (OPEC) report placed the South American nation’s December production at 681,000 bpd, up from 661,000 bpd in November, according to secondary sources. The number supplied directly by PDVSA stands at 871,000 bpd, compared to the previous month’s 824,000 bpd.
Following last year’s positive trend, Oil Minister Tareck El Aissami has announced a new target of two million barrels per day by the end of 2022. The previous goal set by the government was one million bpd, which officials said was momentarily achieved in December.
However, whether PDVSA can continue to ramp up oil production is unclear, given that US financial and trade sanctions have blocked the state company from servicing debt and accessing international markets.
In response, the Venezuelan government is looking to re-engage the international financial community by attempting to restructure its obligations, especially with PDVSA bondholders. "The lines of communication were never closed, but now they are more open," a local source told Argus Media. Bloomberg likewise reported a conference call with bondholders on Wednesday.
According to a government statement, PDVSA’s financial debt rose 1.2 percent last year, reaching the outstanding amount of US $34.9 billion.
The Venezuelan government is also hoping to maintain the recent economic upward trend. During his annual address before the National Assembly (AN), president Nicolás Maduro stated that the economy grew by more than 4 percent in 2021, following years of recession that spurred an unprecedented migration wave.
“After five years of economic war and blockades, Venezuela is back on track for economic growth,” Maduro said on Saturday. He added that exports jumped 33 percent last year as well.
The Caribbean nation’s relative recovery has coincided with inflation slowing down, registering 7.6 percent in December, the fourth consecutive month with single digits. Annual inflation last year stood at 686 percent, down from nearly 3,000 percent reported in 2020, according to the central bank.
The downward inflation spiral has been largely attributed to the stabilization of the exchange rate between the digital bolívar and the US dollar. Despite the improvement, high prices continue to hit working-class families with the minimum monthly salary currently worth around $2.
Although positive economic signs have been lauded by government officials, analysts agree that a sustained recovery remains difficult as long as US sanctions continue to weigh down on the country.
Edited by Ricardo Vaz from Caracas.