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Venezuela crude production sinks to new low

14 Mar 2018, 2.48 pm GMT

Venezuela crude production sinks to new low

Caracas, 14 March (Argus) — Venezuela's official crude production sank to 1.586mn b/d in February, pushing the Opec country further into historically low territory not seen since the 1980s oil glut.

According to figures directly supplied to Opec by Venezuela's energy ministry, output dropped by 183,000 b/d from the January level of 1.769mn b/d.

The February level slightly surpasses the average of 1.548mn b/d for the month from secondary sources, including Argus, and widens the gap with Venezuela's Opec production quota of 1.977mn b/d.

The February official figure is the lowest for the same month since the 1.548mn b/d registered in February 1987, not including a sharp decline during a 2002-03 oil sector labor strike, according to historical data from the energy ministry.

Around 100,000 b/d of the decline last month came from the Orinoco heavy oil belt, officials at state-owned PdV and the energy ministry tell Argus.

The extra-heavy crude from the vast deposit can only be lifted and transported with diluent in the form of imported naphtha, which is now arriving sporadically because of PdV's lack of cash. Suppliers routinely demand upfront payment from the financially distressed firm."Suppliers are demanding full prepayment for cargoes and tankers before dispatching anything to PdV terminals," an energy ministry official says.

"Naphtha arrives every month but not in a planned way because of the financial problems with the payments," a senior PdV official says, characterizing the February result as a "disaster".

PdV's Orinoco joint ventures with minority foreign partners shut down production altogether in February because of a lack of diluent and storage for the extra-heavy crude, the local officials say. The affected ventures include PetroIndependencia with Chevron, Mitsubishi and local partners; PetroCarabobo with Repsol and Indian partners; PetroJunin with Italy's Eni; PetroUrica with China's CNPC; and PetroMiranda with Russia's Rosneft.

PdV's traditional eastern and western divisions are producing a combined 600,000-700,000 b/d of light and medium grades, a volume that each legacy division used to produce on its own.

The PdV official says March production is currently running around 50,000 b/d less than in February, reinforcing the decline trend.

Venezuela produced more than 3mn b/d in the late 1990s.

A chronic lack of investment, a shortage of cash, unstable power supply and a more recent labor exodus are contributing to the Venezuelan oil industry's stunning decay. Oil accounts for nearly all of the government's revenue.

President Nicolas Maduro blames corruption for the downfall in production, an assertion that may be partially supported by a new lawsuit alleging conspiracy by oil trading companies that cost the industry billions of dollars in losses since 2004.

General Manuel Quevedo, PdV's chief executive and energy minister appointed late last year, has pledged to add 1mn b/d of production by the end of 2018, a short-term goal that is universally dismissed as impossible, although a long-term upstream recovery is seen as feasible.


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