OPEC Finds Venezuelan Oil Production Below Last Year's Peak

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

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Summary

Venezuelan crude oil production hasn't improved much since its president was captured in January. While the conversation shifts to the Middle East, the OPEC founder may have a long road ahead.

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Output Below Third-Quarter Peak

While the international market focus is squarely on oil in the Middle East, data released Thursday from Organization of the Petroleum Exporting Countries (OPEC) economists show Venezuelan crude oil production remains below year-ago levels.

The price for Brent crude oil, the global benchmark, topped $100 per barrel on Thursday as Iranian military forces hit vessels moving through the Persian Gulf and the Strait of Hormuz. Two tankers were ablaze Thursday off the southern coast of Iraq. In his first official statement, Iranian Supreme Leader Mojtaba Khamenei said the strait needed to remain closed to punish adversaries.

Prior to the joint U.S.-Israeli military offensive against Iran that began on February 28, killing Supreme Leader Ali Khamenei--the current leader's father--and a handful of top Iranian officials, much of the energy-market focus was on the potential revival of the Venezuelan oil sector.

A founding member of OPEC, Venezuelan crude oil production peaked in the 1970s at around 3.7 million barrels per day (BBL/d). That's about what Iran produces now.

Years of chronic mismanagement, sanctions and the lack of investments have taken a toll on Venezuela's dilapidated energy infrastructure. In their latest monthly market report, OPEC economists found Venezuelan crude oil production hit more recent highs last year during the third quarter, with an average of 946,000 BBL/d.

On Thursday, OPEC reported that secondary sources put production at 903 million BBL/d for February. U.S. military forces seized former Venezuelan President Nicolas Maduro and his wife from their compound in Caracas on January 3.

U.S. President Donald Trump had claimed tacit control over the nation after the attack on Caracas, saying a new era for Venezuela would bring in the massive investments necessary to overhaul the nation's energy sector.

Excessive Exuberance?

After a visit to Venezuela last month, U.S. Energy Secretary Chris Wright said he believed the country could add substantially more barrels to production by the end of the year. Several hundred thousand barrels a day in additional production were expected by the secretary.

Multinational trading houses such as Trafigura and Vitol are already doling out Venezuelan crude, with much of it going to the dense network of refineries along the U.S. Gulf Coast. Over the seven-day period ending March 6, the U.S. federal government reported that Venezuela delivered an average of 232,000 BBL/d to refiners. The four-week average for the similar period last year was 203,000 BBL/d.

OPEC's monthly economic report made little mention of Venezuela, saying only the influx of barrels into U.S. Gulf Coast refineries meant more high-sulfur fuel oil (HSFO) was available. HSFO is typically used in power generation and shipping, though the latter sector is moving away from heavier fuels as part of a U.N.-backed climate measure.

Venezuela sits atop the world's largest oil reserves. Last week, several media outlets reported that state-owned Petroleos de Venezuela (PDVSA) signed new contracts for supplies of crude oil and refined products to the U.S. market.

This week, Reuters reported that Chevron Corporation and Shell plc were close to finalizing the first major production deals in Venezuela since Maduro's capture. Chevron, the only U.S. company with a license to work in Venezuela, is expected to work in the lucrative Orinoco Belt.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project and Plant databases can learn more about Venezuela's energy sector--including capacities, investment values and necessary equipment--from this list of detailed plant profiles.

A February report in the journal Foreign Affairs found that Venezuela needs to rebuild its economy and commit to long-term rules on private investments before making any meaningful progress on the energy sector's future. So far, interim leaders, including acting President Delcy Rodriguez, are not in the position to advance those goals.

Francisco Rodriguez, a senior research fellow at the University of Denver's Josef Korbel School of Global and Public Affairs, said, "Investors know that these authorities could well lose power if elections are held in Venezuela and that any commitments they made could easily be undone."

By the Numbers

• 232,000 BBL/d to U.S. refiners last week
• 203,000 BBL/d to U.S. refiners during the same period last year

Key Takeaways

• Venezuelan oil sector recovery is slow.
• PDVSA recently signed U.S. supply contracts.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
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 over 250,000 current and future projects worth $30.2 Trillion (USD).