The Venezuelan oil industry recovers production after a historic collapse | International

A line of motorcyclists wait to refuel at a gas station in Caracas, in August 2020.
A line of motorcyclists wait to refuel at a gas station in Caracas, in August 2020.Carlos BecerraBloomberg

If the rapprochement between the United States and the government of Nicolás Maduro translates into the expected results, some international oil companies will obtain special licenses to increase their volume of oil production in Venezuela, a country that is making efforts to return to the international crude oil market, recover its ordinary income and resume international presence.

It still does not seem realistic to consider the end of US sanctions against the government of Nicolás Maduro, but the trend towards flexibility is gaining ground in the context of the energy problems raised by the war between Russia and Ukraine.

Among these corporations, the case of Chevron stands out, one of the few US oil companies that has not left the country, and which has carried out, according to sources familiar with the sector, a long lobby for Washington to make some open political agreement with the authorities. nationals. Calculations by analysts linked to the oil business estimate that this corporation could increase its production in Venezuela in a range that goes from 200 to 300 thousand additional barrels of oil per day by the end of this year. The same could be considered, in the medium term, for other companies, such as India Reliance, which has a special interest in the national extra-heavy crude.

Two months ago, Nicolás Maduro announced that Venezuela had reached one million barrels per day of oil production, but all sources linked to the industry report that the average for the last three months is close to 800,000, regardless of the fact that, in December, As stated by the oil economist Rafael Quiroz, “a million barrels were reached in one or two days.”

Without having reached a million, Maduro is already promising that by the end of this year oil production will reach two million. “This year we are going to two million barrels per day, rain, shine or shine. We recovered oil production hand in hand with the working class”, he said in a television address in which he commented that his government was “very careful” to intervene and favorably stabilize the international energy market.

After a scandalous collapse due to rampant corruption, lack of maintenance and international sanctions, the government of Nicolás Maduro has been painstakingly increasing the production levels of Venezuelan crude oil – which reached just 300,000 barrels per day in 2020. – granting fields to operating companies totally unknown in the industry business. It has also had the help of Iran, a strategic ally of Caracas. The domestic fuel market, in a serious situation of scarcity for four years, is on the way to return to normal, and partial repair work has been carried out on national refineries.

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The circumstance, according to what the sources report, has allowed the state-owned Petróleos de Venezuela to improve its production capacity, recover its internal accounts and pay some debts in a context of high international prices.

Sanctioned, the state-owned company has during this time commercialized its crude oil on the high seas surreptitiously, relying on unknown intermediaries, particularly in the seas of Asia. These operations are carried out within the framework of the Anti-Blockade Law, sanctioned by the Chavista parliament.

“The sanctions against Maduro have not had the expected results, and this issue is being analyzed by the United States government,” says an important executive linked to the industry who preferred to keep his name confidential. “With sanctions, Maduro has recovered local production, has identified a route to market national crude oil, and has managed to recover income by working with unknown actors.”

Traditional international partners and private firms, including Russian and Chinese companies, have continued to produce, but PDVSA cannot pay them, nor can they receive revenue from the sanctions. The same happens with private Venezuelan oil operating companies.

“No serious international company, obliged to account for all its processes, would dare to sign service contracts within the framework of the Anti-Blockade Law,” comments another source who prefers anonymity. “There is no technical capacity or financial muscle for these companies that work with PDVSA, and that nobody knows, to increase production alone. They don’t have human resources and they don’t follow regulations”.

Sources consulted estimate that, without US sanctions, Venezuelan oil production could be reaching 1.6 million barrels per day. In normal times, the average national oil production was around 3 million barrels. The presence of the state-owned PDVSA in the management of the current oil increase constitutes a point in favor of the Chavista government. In the high revolutionary government there is a clear interest in modifying the current legal framework to favor private activity.

“By itself, Venezuela will be able to increase only very moderately the 700,000 – 800,000 barrels of oil it produces daily,” says economist Orlando Ochoa. For Ochoa, local oil production “has a ceiling” if international licenses are not finalized in the context of a political agreement.

“Corporate social responsibility must have love for the environment, but also for the dignity of people and democracy,” said opposition leader Juan Guaidó. “It is one thing to buy oil from Maduro and another from Venezuela. Where are the Venezuelan oil revenues of these years? The granting of licenses must be linked to Maduro’s commitments to return to legality.”

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