Guayaquil, Ecuador, March 16, 2022 (venezuelanalysis.com) – Venezuela’s oil production has returned to an upward trend as US officials lower expectations on sanctions relief.
According to the latest Organization of Petroleum Exporting Countries (OPEC) report, the Caribbean country produced 680,000 barrels per day (bpd) as measured by secondary sources, 22,000 bpd more than January. Comparatively, state oil company PDVSA registered a 788,000 bpd output, 33,000 bpd higher than the previous month.
Following years of US sanctions, Venezuela’s oil sector has begun to take small recovery steps with production moderately ramping up throughout 2021. On March 9, Oil Minister Tareck El Aissami restated that PDVSA is prepared to continue increasing output and set a two million bpd target by the end of the year.
“We are ready to widen the horizon of our oil industry and we have proposed to take crude production to two million barrels per day. We have the plan, the resources, the experience, and now we are developing sovereign technology,” said El Aissami.
The oil minister explained that PDVSA workers have undertaken repair work of the country’s oil infrastructure after Washington’s crippling sanctions barred imports of key supplies, new equipment and foreign investment. “We have built valves that were previously imported. Their purchases were blocked to destroy the country’s productive capacity.”
Authorities reported that the import substitution policy has saved the oil sector over 70 percent in spending.
“We are carrying out major maintenance interventions in plants, which were previously done by transnational companies. In 2022, we will manage to have a country with independent and sovereign [oil] production chains,” concluded the Venezuelan official.
However, long-term oil output recovery in Venezuela highly depends on Washington lifting sanctions against PDVSA.
Starting in 2017, the US Treasury Department has levied financial sanctions against PDVSA followed by an oil embargo as well as secondary sanctions and threats against shipping companies and other intermediaries. The state oil company was barred from international markets, while foreign companies were likewise forced to wind down operations in joint ventures. As a result, crude output fell from 1.9 million barrels per day in 2017 to less than 500,000 bpd by the end of 2020.
Over the years, Venezuelan calls for sanctions relief have gone unheard by past and present White House tenants. However, a recent turn of events has opened the possibility for a sanctions policy review, following the suspension of crude imports from Russia.
Earlier this month, a US high-level delegation met with President Maduro in Caracas to explore a negotiation process in order to resume oil shipments to US markets. Soon after, Caracas announced its return to the dialogue table with the US-backed opposition and released two imprisoned US citizens in the wake of the encounter.
But the bilateral talks’ future is unclear after both Republican and Democratic lawmakers rejected the prospect of establishing dialogue and sourcing oil from Venezuela.
With midterm elections ahead in November, Biden administration officials have begun backtracking on the depth of the negotiations with the South American country. On Monday, White House press secretary Jen Psaki told reporters that resuming imports of Venezuelan oil was “not an active conversation at this time.”
US National Security Adviser Jake Sullivan also stated on Sunday that the lifting of any sanctions against Venezuela must be “tied to concrete [political] steps that Maduro and the people around him take.”
Despite the uncertainty regarding sanctions relief, US oil giant Chevron and other PDVSA partners have continued pushing Washington to ease measures against Caracas in order to receive Venezuelan oil cargoes as debt payment. According to Reuters, Chevron is already preparing to take operating control in its four joint oil ventures in western and eastern Venezuela, which produced 200,000 bpd before sanctions were levied against the industry.
The California-based firm has reportedly begun sorting visas and assembling a trading team to begin shipping Venezuelan oil to US refineries as soon as next month. If Chevron secures a license, Venezuela’s oil output and exports would receive a significant boost while easing a long-standing US $3 billion debt with the US company.
Similarly, chief executive A.K Gupta of India’s second-largest oil company ONGC Videsh spoke to Reuters about ongoing talks with the US State Department to allow the company to receive Venezuelan oil cargoes to settle a $420 million debt.
“It is logical from the companies’ viewpoint since it’s not tantamount to any investments (in Venezuela),” explained Gupta in relation to Washington’s “maximum pressure” campaign that seeks to strangle the nations’ economy by impeding any foreign income.
Washington is likewise reportedly weighing similar oil-for-debt licenses to Spain’s Repsol and Italy’s Eni, both of them long-term PDVSA partners.
PDVSA’s repeated attempts to service its outstanding $34.9 billion have been blocked by US sanctions. On March 12, Venezuela Vicepresident Delcy Rodriguez restated the country’s disposition to resume payments to bondholders and blamed Washington’s “anachronistic” sanctions program for negatively impacting international corporations as well.
Edited by Ricardo Vaz from Caracas.