In April 2019, Venezuela’s crude oil production averaged 830,000 barrels per day, down from 1.2 million barrels per day (Mmbpd) at the beginning of the year, according to the Energy Information Administration.
Last month’s average is the lowest level since January 2003, when a nationwide strike and civil unrest largely brought the operations of Venezuela’s state oil company, Petróleos de Venezuela, S.A. (Pdvsa), to a halt, Kallanish Energy reports.
Widespread power outages, gross mismanagement of the country’s oil industry, and U.S. directed at Venezuela’s energy sector and Pdvsa have all contributed to the recent declines.
Significant production decrease
Venezuela’s oil production has decreased significantly over the last three years. Production declines accelerated in 2018, decreasing by an average of 33,000 Bpd each month in 2018, and the rate of decline increased to an average of over 135,000 Bpd per month in the first quarter of 2019.
The number of active oil rigs also fell, from nearly 70 rigs in the first quarter of 2016, to 24 rigs in the first quarter of 2019.
The declines in Venezuelan crude oil production will have limited impact on the U.S., as America’s imports of Venezuelan crude oil have decreased over the last several years.
Lowest production since 1989
EIA estimates U.S. crude oil imports from Venezuela in 2018 averaged 505,000 Bpd, the lowest since 1989. EIA expects Venezuela’s crude production to continue decreasing in 2019, and declines may accelerate as sanctions-related deadlines pass.
These deadlines include provisions that U.S. companies, including oil service companies, involved in the oil sector must cease operations in Venezuela by July 27.
Venezuela’s chronic shortage of workers industrywide and the departure of U.S. oilfield service companies, among other factors, will contribute to a further decrease in production, according to EIA.
Additionally, U.S. sanctions banned U.S. exports of petroleum products, including unfinished oils that are blended with Venezuela’s heavy crude oil for processing, to Venezuela.
Power outages cause big problems
January’s Executive Order also required payments for Pdvsa-owned petroleum and petroleum products to be placed into an escrow account inaccessible by the company.
A series of ongoing nationwide power outages in Venezuela that began on March 7 cut electricity to the country’s oil-producing areas, likely damaging the reservoirs and associated infrastructure, according to EIA.
In the Orinoco Oil Belt area, Venezuela produces extra-heavy crude oil that requires dilution with condensate or other light oils before the oil is sent by pipeline to domestic refineries or export terminals. Venezuela’s upgraders, complex processing units that upgrade the extra-heavy crude oil to help facilitate transport, were shut down in March during the power outages.
EIA forecasts Venezuela’s crude oil production will continue to fall through at least the end of 2020, reflecting further declines in crude oil production capacity.
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