Venezuela’s oil output – which accounts for 90% of the country’s exports – has plummeted to levels not seen since 1940s.
A chronic lack of investment in the vital oil infrastructure, years of mismanagement and hyperinflation has sent the country’s oil production into ‘free fall’.
Since January, Venezuelan crude output has averaged 1.4 mill barrels per day, down by 0.6 mill barrels per day over the corresponding period last year, Gibson Shipbrokers said analysing the state of the country’s oil production.
This fall in output is reflected in crude exports. ClipperData indicated that this year the country’s total exports have averaged just under 1.2 mill barrels per day, down by 0.37 mill barrels per day, year-on-year.
The decline was witnessed both in the long haul and short haul crude trades. Shipments to Asia/Pacific, mainly China and India have averaged 0.57 mill barrels per day during the first 10 months of this year, down by 80,000 barrels per day on the 2017 figures.
Although this does not look like much, there also has been a notable decline in crude trade to the Caribbean, where PDVSA owns/leases crude storage facilities for transhipments. Exports to the Caribbean have fallen this year by 170,000 barrels per day year-on-year. The seizure of PDVSA’s assets by ConocoPhillips in May this year was a contributing factor behind the overall decline.
However, progress was made following a PDVSA payment to ConocoPhillips, using a combination of cash and commodities. Finally, on average, Venezuela has shipped less crude to the US this year, compared with 2017, although a minor rebound was seen in recent months.
Problems in the refining sector also intensified, as a lack of funds for repair and maintenance and the migration of skilled staff elsewhere, took its toll.
Venezuela’s biggest refinery, Amuay, is running at under 20% of capacity and other key refineries are barely functioning. This ongoing decline in crude refining runs means an increasing need to import products, mostly from the US.
It has been reported that large amounts of heavy naphtha have been shipped south to blend with Venezuela’s deteriorating local crude quality. Apart from more product shipments into the country, there are also logistical issues. Media reports suggested that delays have occurred in unloading fuel cargoes since most of the ports are more orientated for exporting rather than importing therefore contributing to shortages.
It was reported that one tanker bringing imported gasoline was highly contaminated forcing PDVSA to withdraw the product from distribution. The incident was thought to be caused by Venezuela having to seek fuel from ‘unreliable suppliers’, due to many companies being unwilling to do business with a country carrying US sanctions.
Going forward, the economic turmoil faced by Venezuela shows no signs of abating. There appears little upside to crude production levels, despite the country having one of the world’s largest oil reserves.
Many predict that 1 mill barrels per day will be the bottom of Venezuela’s production, although others have said that the output could be as low at 0.7 mill barrels per day by the end of 2019.
Nonetheless, Venezuela’s oil minister, Manuel Quevedo, said recently that even with all the problems faced, production has stabilised and that the government is hopeful that output will increase to 1.6 mill barrels per day by the end of this year, Gibson reported.