Released September 22, 2022 | SUGAR LAND
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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--The new Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Haitham Al-Ghais, visited Caracas last week on his first official trip to the South American country. Al-Ghais praised Venezuela for its energy potential, given its vast oil and gas reserves, and highlighted its role in the international energy markets.
The event was attended by Venezuela's President Nicolas Maduro, who welcomed the secretary general and declared that his nation is "ready to fulfil its role and supply the energy markets with the oil and gas that the world economy needs."
With oil reserves of more than 300 billion barrels and holding one of the world's top 10 largest natural gas reserves, Venezuela should be among the primary candidates to supply international energy markets amid the latest energy crisis sparked by Russia's war in Ukraine.
Nevertheless, the South American nation has seen its production dwindle over the last few years due to U.S.-imposed energy sanctions, lack of investments and technical issues across its energy infrastructure.
Venezuela produced some 678,000 barrels of oil per day (BBL/d) in August and 714,000 BBL/d in the second quarter of this year, according to OPEC. However, these numbers represent only a fraction of the volumes of Venezuela's output in the 2000s, when oil production averaged more than 2 million BBL/d.
With the west shunning Russian oil and the Kremlin's natural gas disruption, international energy markets are in search of alternatives to fulfil its energy demands.
Yet, is Venezuela ready to supply international markets?
Maduro boasted of Venezuela's readiness to supply oil, gas and refined products to the international markets. Yet the situation of PDVSA, the national oil company, casts doubts about the possibility of significantly ramping oil production over the short term.
PDVSA can slightly raise its oil production to fill part of the void left by Russian crude in international markets in the short term. Yet a significant increase in oil output would require massive mid- to long-term investments. In a policy brief written for the Baker Institute, Francisco Monaldi and Jose La Rosa Reyes argued that Venezuela would require between US$10 billion to US$12 billion over a decade to see oil production return to volumes between 2.5 million BBL/d and 3 million BBL/d.
Additionally, the U.S. sanctions on Venezuela have restricted energy exports to most international markets, further impacting PDVSA's production and worsening an already declining energy industry.
Nevertheless, relief from sanctions that occurred in June allowed companies with operations in Venezuela, such as Repsol (Madrid, Spain) and Eni (NYSE:E) (Rome, Italy), to import Venezuelan oil in a debt-for-crude agreement. These swaps, however, do not generate the cash that PDVSA needs to invest in the nation's energy industry.
So far, it seems unlikely that the U.S. will ease or remove sanctions on Caracas until a political agreement is reached with Venezuela's political opposition. Talks between the parties in Mexico have yet to be arranged.
Despite the government's willingness to supply energy markets, Venezuela can only offer a small fraction of the oil volumes produced and exported by Russia in the short term.
On the natural gas front, Maduro pointed out the country has a portfolio of more than 50 natural gas projects ready to attract international investment. Yet the nation's instability, nationalization campaigns and U.S. sanctions offer little incentives for foreign companies to commit to the long-term extraction of fossil fuels in Venezuela.
Just like with oil production, Venezuela's natural gas output will require years of development and massive funds to make the South American nation a candidate to offset some of the effects of the current energy crisis.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
The event was attended by Venezuela's President Nicolas Maduro, who welcomed the secretary general and declared that his nation is "ready to fulfil its role and supply the energy markets with the oil and gas that the world economy needs."
With oil reserves of more than 300 billion barrels and holding one of the world's top 10 largest natural gas reserves, Venezuela should be among the primary candidates to supply international energy markets amid the latest energy crisis sparked by Russia's war in Ukraine.
Nevertheless, the South American nation has seen its production dwindle over the last few years due to U.S.-imposed energy sanctions, lack of investments and technical issues across its energy infrastructure.
Venezuela produced some 678,000 barrels of oil per day (BBL/d) in August and 714,000 BBL/d in the second quarter of this year, according to OPEC. However, these numbers represent only a fraction of the volumes of Venezuela's output in the 2000s, when oil production averaged more than 2 million BBL/d.
With the west shunning Russian oil and the Kremlin's natural gas disruption, international energy markets are in search of alternatives to fulfil its energy demands.
Yet, is Venezuela ready to supply international markets?
Maduro boasted of Venezuela's readiness to supply oil, gas and refined products to the international markets. Yet the situation of PDVSA, the national oil company, casts doubts about the possibility of significantly ramping oil production over the short term.
PDVSA can slightly raise its oil production to fill part of the void left by Russian crude in international markets in the short term. Yet a significant increase in oil output would require massive mid- to long-term investments. In a policy brief written for the Baker Institute, Francisco Monaldi and Jose La Rosa Reyes argued that Venezuela would require between US$10 billion to US$12 billion over a decade to see oil production return to volumes between 2.5 million BBL/d and 3 million BBL/d.
Additionally, the U.S. sanctions on Venezuela have restricted energy exports to most international markets, further impacting PDVSA's production and worsening an already declining energy industry.
Nevertheless, relief from sanctions that occurred in June allowed companies with operations in Venezuela, such as Repsol (Madrid, Spain) and Eni (NYSE:E) (Rome, Italy), to import Venezuelan oil in a debt-for-crude agreement. These swaps, however, do not generate the cash that PDVSA needs to invest in the nation's energy industry.
So far, it seems unlikely that the U.S. will ease or remove sanctions on Caracas until a political agreement is reached with Venezuela's political opposition. Talks between the parties in Mexico have yet to be arranged.
Despite the government's willingness to supply energy markets, Venezuela can only offer a small fraction of the oil volumes produced and exported by Russia in the short term.
On the natural gas front, Maduro pointed out the country has a portfolio of more than 50 natural gas projects ready to attract international investment. Yet the nation's instability, nationalization campaigns and U.S. sanctions offer little incentives for foreign companies to commit to the long-term extraction of fossil fuels in Venezuela.
Just like with oil production, Venezuela's natural gas output will require years of development and massive funds to make the South American nation a candidate to offset some of the effects of the current energy crisis.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).
