Venezuela, the country sitting on the world’s largest oil reserves, could be pumping as little as below 500,000 bpd of crude oil next year amid the economic and political crisis, IHS Markit said in an analysis on Tuesday.
The sweeping sanctions that the United States imposed on Venezuela’s oil industry have failed to result in a regime change nearly six months after opposition leader Juan Guaidó declared himself interim president and won the support of the U.S. and many other western nations.
According to IHS Markit, Venezuela’s oil industry has deteriorated so much since 2014 that any recovery would be a long time coming.
The protracted political crisis also means that the military and Maduro’s regime will intensify the stick-and-carrot approach to foreign investors, with whom Venezuela’s state oil firm PDVSA has joint ventures to produce heavy oil, Ford Tanner, a Principal Analyst at IHS Markit, says.
“The official use of hostility and inducement toward foreign E&P companies is expected to intensify amid a new phase of collapsing oil production,” Tanner said.
The U.S. sanctions on diluents that Venezuela needs to dilute its super heavy crude to make it flow for exports, as well as the U.S. pressure on buyers of Venezuelan oil, are expected to further constrain production, exports, and oil revenues in Venezuela, and crude oil production could drop below 500,000 bpd in 2020, according to Tanner.
In the latest Monthly Oil Market Report, OPEC’s secondary sources—the ones the cartel considers the official production figures—point that Venezuela’s crude oil production in June dropped by 16,000 bpd from May to stand at 734,000 bpd. To compare, Venezuela’s crude oil production in 2017 averaged 1.911 million bpd.
Despite the economic collapse, Venezuela’s crude oil and refined oil products exports rose by 26 percent in June compared to May, thanks to higher shipments under oil-for-loan deals with China.
Venezuela had to seriously reshuffle its crude and oil products export destinations earlier this year after the U.S. essentially prohibited Venezuelan oil imports to America. Unable to export its crude oil to the United States, Venezuela is now prioritizing shipments to Asia, especially to China, with which it has struck oil-for-loan agreements and has to repay those with oil to China National Petroleum Corporation (CNPC).
By Tsvetana Paraskova for Oilprice.com