Venezuela the No. 2 Oil Exporter to U.S. Refiners

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

With Middle East barrels curtailed by the ongoing fighting in the Middle East, Venezuela leapfrogged Mexico to become a top crude oil exporter to the United States. Gas associated with oil reserves could enhance its potential.

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U.S. Looking to Crude Oil from Americas

As Venezuela recovers from powerful June earthquakes, so too apparently has its energy sector as it moved into the No. 2 spot for U.S. crude oil imports amid Middle East supply bottlenecks.

Citing Venezuelan government statistics, various media outlets this week reported the death toll from twin earthquakes in June has topped 6,000. Based on other estimates from the United Nations, about 17% of the 2.1 million tons of wreckage has been cleared.

Industrial Info Resources data show all of Venezuela's refineries were operational as of Friday, August 14, and the power sector appears to be intact. La Guaira, a coastal state just north of Caracas and host to the country's international airport, remains a disaster zone, however.

While hesitant, Venezuela's energy sector has drawn international interest since U.S. military forces seized former President Nicolas Maduro from his compound in Caracas in January. In April, Petropiar S.A., a Venezuelan joint venture in which Chevron holds a 30% stake, secured rights to develop parts of the Orinoco Belt, one of the richest oil deposits in the world.

Interest has come as a result of the ongoing war in the Middle East as well. On Friday, the United Kingdom Maritime Trade Operations center (UKMTO) reported that a tanker was hit by a drone while traveling outbound from the Strait of Hormuz, suffering minor damage and highlighting ongoing bottlenecks for regional shippers.

The conflict has sidelined shipments from the likes of Iraq, Kuwait and Saudi Arabia. Even Libya was targeted recently in the conflict, limiting OPEC-member supplies from the Mediterranean.

With a hefty appetite for heavier crude slates, that leaves U.S. refiners scrambling for supplies. Federal data for the week ending August 7 show U.S. refiners are leaning heavily on the Americas for supplies.

For that week, Venezuela was the No. 2 supplier to the United States with an average of 743,000 barrels per day (bpd). Mexico is a distant third with 303,000 bpd over the reporting week.

Associated Gas a New Frontier?

While much attention has been paid to its vast crude oil deposits, its associated gas reserves could support the nation's recovery even further. A profile of the natural gas potential from the Center for Strategic and International Studies from April found Venezuela holds around 197 trillion feet of reserves that are associated with crude oil deposits.

"Venezuela's gas resources have long been a stranded asset, trapped by ideology and mismanagement," the report read. "If political stability holds in Caracas, gas may prove to be the fastest and most pragmatic pathway to reintegration, delivering wealth to the Venezuelan people, the Western Hemisphere, and its allies."

To that end, British energy company BP on Thursday said it reached deals in Venezuela to help develop parts of the Loran natural gas field, which the comapany believes holds some 4 trillion cubic feet of recoverable gas reserves.

Meg O'Neill, the chief executive officer at BP, said the award reflects the progress both sides have made since signing a memorandum of understanding a few short months after Maduro was arrested by U.S. military forces.

It would take years to overcome chronic under-investment and poor management of the nation's energy sector, however. Much of its infrastructure is deteriorating, complicating efforts to improve the energy infrastructure in a country that's been previously saddled by international sanctions.

By the Numbers

• 743,000 bpd of Venezuelan oil taken by U.S. refiners last week
• 4 trillion cubic feet in associated gas reserves for BP

Key Takeaways

• Venezuelan energy shows resilience during earthquake recovery
• The country's associated gas reserves could be part of an energy sector revival

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