The Venezuelan oil industry has seen output decline steeply from 1.911 million and 1.354 million bpd in 2017 and 2018, respectively, following the imposition of crippling US financial sanctions in August 2017.
The country’s oil output fell throughout 2019 before stabilizing in the last trimester, with output averaging 796,000 over the year.
The latest report by Organization of the Petroleum Exporting Countries (OPEC) placed the Caribbean country’s March output at 660,000 barrels per day (bpd), down 100,000 bpd with respect to February.
The numbers reported directly by state oil company PdVSA stand higher, at 718,000 bpd, down from 865,000 bpd in February 2020.
With sanctions driving away foreign companies, Rosneft had been buying as much as 60% of PdVSA’s output before rerouting to other destinations, keeping Venezuela alive.
In response to the US unilateral measures, Rosneft ended its operations in Venezuela and transferred its assets to a company directly owned by the Russian government.
Oil operations were further paralyzed by a steep fall in global oil prices in recent weeks. Brent crude was trading at $27.00 on Thursday having stood over $60 for most of the past year.
For some of PdVSA’s heavy oil extraction projects, some of them joint ventures with foreign companies, this has meant prices are now below production costs.
Washington has also told foreign companies such as India’s Reliance Industries not to supply fuel to Venezuela.
The crisis has led the Venezuelan government to implement a rationing plan, prioritizing vehicles such as ambulances and food-carrying trucks. President Nicolas Maduro recently vowed that the problem would be overcome in the coming weeks.
Venezuela’s fuel shortages are owed both to reduced imports and output from its refineries. However, PdVSA announced on Wednesday that the El Palito refinery in Carabobo State had been reactivated following months of repair work by its workers.
The refinery can process a maximum of 80,000 crude barrels a day, and will produce 35,000 daily drums of gasoline.
Venezuela is set to resume production in two joint oil ventures in the country’s Orinoco Oil Belt, Reuters reports.
Petrocedeño, run by PdVSA together with France’s Total and Norway’s Equinor, as well as Petromonagas, run by PdVSA with Russia’s Rosneft, are scheduled to restart operations in May and July, respectively.
The facilities are being converted into blending plants in order to produce the Merey grade favored by Asian markets.
President Nicolas Maduro created a presidential commission to overhaul the country’s oil industry. The commission will be led by Economy Vice President Tareck El Aissami.
It also includes former oil minister Asdrúbal Chávez and the current ministers for transport, work, interior relations, science and technology, and defene, as well as armed forces commander Remigio Ceballos.
Nine oil worker representatives will also join the commission, including the president of the largest oil workers’ union, Wills Rangel, and the directors of the Jesus Rivero Bolivarian Worker’s University, Jesus Martinez and Luis Rodriguez.
The body has “plenipotentiary” powers for the restructuring and re-organisation of the state oil firm PdVSA, and is charged with increasing production to two million barrels per day (bpd) by the end of 2020.
It is also tasked with “Defending” the industry from crippling US sanctions and the derailing fraudulent “Imperialist Aggression.” The US banks have confiscated about $7 billion in deposits and damaged the Venezuelan economy for over $100 billion.
Venezuelan Analysis / ABC Flash Point News 2020.