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Venezuela output down another 118,000 b/d: Opec

13 Dec 2017, 9.35 pm GMT

Venezuela output down another 118,000 b/d: Opec

Caracas, 13 December (Argus) — Venezuela produced 1.837mn b/d of crude in November, down 118,000 b/d from October's output of 1.955mn b/d, Opec said in its monthly market report, citing official energy ministry figures.

Opec's secondary sources calculated Venezuela's crude output in November at 1.834mn b/d, for a 42,000 b/d decline compared with the previous month's output of 1.836mn b/d. Argus calculates November's real crude output at about 1.83mn b/d.

Secondary sources used by Opec estimate the drop in PdV's crude output during the first 11 months of 2017 at 320,000 b/d, from 2.154mn b/d at end-2016 to 1.834mn b/d last month.

Venezuela's official crude output figures that the energy ministry provides Opec show that crude output by state-owned PdV and its joint ventures with foreign oil companies fell by 536,000 b/d, or 22.5pc, during the first 11 months of 2017 — to 1.837mn b/d last month from 2.373mn b/d at the end of 2016.

Venezuela's official crude production numbers dropped by roughly 20,000 b/d monthly during the first nine months of 2017.

But PdV's crude output shrinkage has accelerated sharply in the fourth quarter 2017 with monthly production declines of 130,000 b/d in October and 118,000 b/d in November, accounting for a combined almost 54pc of the total upstream output capacity of 536,000 b/d lost during the first 11 months of the year.

PdV's crude output could decline a further 100,000 b/d in December, bringing the year's total crude production decline to about 636,000 b/d, a western division upstream executive based in Maracaibo told Argus.

"PdV's crude production is at risk of falling to as low as 1.73mn b/d by the end of 2017, its lowest level since the 1970s, if efforts to halt the output contraction this month fail to generate positive results," the upstream executive added.

It is unclear what steps PdV is taking to reverse the decline.

New energy minister and PdV chief executive general Manuel Quevedo has launched audits of all PdV procurement contracts, with initial contract review efforts focused on the company's 42 joint ventures with foreign oil companies.

Quevedo also has initiated a review of all PdV managers in what critics within the company describe to Argus as "a political purge" that aims to replace most of the current management structure with appointees chosen for their military background and proven political loyalty to president Nicolas Maduro.

Quevedo since his appointment on 29 November also has met with foreign oil executives representing a majority of PdV's joint venture partners, including state-controlled CNPC of China, Russian state-controlled Rosneft, Total of France, Norway's Statoil, Repsol of Spain and Italian major Eni.

But the continued decline in Venezuela's crude output has negated recent modest gains in the Opec country's year-to-date average export price of $46.04/bl as of 8 December, leaving the cash-poor company unable to finance urgent capital expenditures for its core upstream and downstream operations. PdV also has been unable to secure new financing from foreign lenders and its joint venture partners, a senior energy ministry official told Argus.

The senior energy ministry official acknowledged to Argus privately that PdV's output decline has accelerated since end-September because of the combined effects of US financial sanctions imposed in August 2017 and the government's expanding corruption probe within the oil industry. This has led to the detention of 67 PdV executives, including former energy minister Eulogio Del Pino and former PdV chief executive Nelson Martinez.

An aide to acting attorney general Tarek Saab also told Argus today that an arrest warrant is likely soon against former energy minister and PdV chief executive Rafael Ramirez, whose present whereabouts outside Venezuela remain unclear.

The government's expanding corruption probes within PdV now involve over 400 companies including over 230 PdV subsidiaries and up to 200 private companies that secured procurement contracts from PdV between 2003-17, the chief prosecutor's aide said.

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