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HomeBusinessVenezuela's Oil Industry faces stagnant output

Venezuela’s Oil Industry faces stagnant output

  • International partners have rushed to complete crude purchases before the expiration of General License 44.

By Ricardo Vaz

CARACAS, (venezuelanalysis.com) – The Venezuelan oil sector is facing uncertainty over the looming expiration of a temporary sanctions waiver.

The latest OPEC monthly report placed the Caribbean nation’s average March output at 809,000 barrels per day (bpd), down from 822,000 in February. Venezuela’s production had grown for four straight months to reach the highest output since early 2019.

The figures reported directly by state oil company PDVSA stood higher at 874,000 bpd, but also with a 3,000 bpd decrease compared to the previous month.

In contrast, exports in March hit a four-year high of 884,935 bpd of crude and refined products and 463,000 metric tons of oil byproducts and petrochemicals, according to Reuters. The 32 percent month-to-month increase took place as customers rushed to purchase cargoes ahead of the April 18 expiry of a US Treasury six-month license authorizing dealings with the Venezuelan oil industry.

After imposing financial sanctions, an oil embargosecondary sanctions and several other measures targeting Venezuela’s most important economic sector, Washington issued a temporary waiver in October 2023. General License 44 (GL44) followed a political agreement between the Maduro government and the US-backed opposition as well as US efforts to stabilize global energy markets.

However, US officials were quick to warn corporations that GL44 was not a “call for investment.” Since October, the South American country’s output has seen a steady increase but without reaching the one million bpd target.

Caracas did benefit from the possibility of selling crude openly to international destinations without the need to apply significant discounts or depend on unreliable intermediaries.

Indian refineries, both state- and privately-owned, stepped up to resume purchases of Venezuelan blends that had been halted under US threats of secondary sanctions. Companies including Reliance Industries have secured 16 million barrels of Venezuelan crude this year but are reportedly suspending transactions ahead of the April 18 deadline.

PDVSA likewise shipped two million barrels of its Merey grade to PetroChina’s Jieyang refinery in late March. China became the main destination for Venezuelan crude in recent years but via intermediaries as Chinese companies sought to avoid being blacklisted by the US Treasury Department.

Venezuelan oil officials have sought to expand its alliances with foreign partners to secure new markets and much-needed investment. This week, Colombian president Gustavo Petro brought up negotiations between PDVSA and Colombia’s Ecopetrol to jointly produce oil and natural gas. The reimposition of sanctions would jeopardize all such cooperation deals, depending on Washington’s zealousness in levying secondary sanctions.

While PDVSA’s international dealings face uncertain prospects, US oil giant Chevron is eyeing a higher output in its Venezuela projects. According to reports, joint venture Petroindependencia has launched a new drilling plan in the Orinoco Oil Belt that aims to add 65,000 bpd from 17 new wells.

Chevron owns minority stakes in Petroindependencia and three other ventures with a current combined maximum output of 200,000 bpd. It received a US Treasury license to resume and expand its Venezuela operations in November 2022.

With the GL44 expiry approaching, US and Venezuelan representatives held a meeting in Mexico City on April 9. The Biden administration has repeatedly threatened the reimposition of sanctions after the Venezuelan Supreme Court upheld a political ban against US-backed far-right candidate María Corina Machado.

Caracas reacted angrily to White House officials leaking details of the “private” discussions to the press. In a statement, the government’s dialogue delegation stated that Venezuela will not accept foreign meddling in its July 28 presidential elections and reiterated demands for an immediate removal of all unilateral coercive measures against the country.

A Washington Post report speculated that the Biden administration might reimpose prohibitions on exports paid in cash and only allow swap agreements that will grant Venezuela access to diluents and fuel or debt relief.

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