Venezuela promises another oil revival

Venezuela's embattled government is vowing to overhaul the national oil industry one day after the US administration sanctioned the Russian trading company that channels most Venezuelan crude to market.

In his latest national address late yesterday, Venezuelan president Nicolas Maduro issued an energy emergency decree and created a presidential commission headed by US-sanctioned senior associate Tareck El Aissami, to "defend, restructure and reorganize" the oil, natural gas and petrochemical industries.

The structure of the new commission suggests that El Aissami would supersede Manuel Quevedo, the current oil minister and chief executive of state-owned oil company PdV.

Venezuela, an Opec founding country, is producing around 800,000 b/d of crude, compared with 1mn b/d a year ago and 3mn b/d in the 1990s. Nearly all of state-owned PdV's 1.3mn b/d of domestic refining capacity is in disrepair.

US sanctions designed to oust Maduro have accelerated the industry decline over the past year by cutting off the key US market and blocking access to credit, supplies and services.

The ambitious overhaul will raise production to 2mn b/d, restart the refineries, launch upstream gas projects and recover the petrochemicals sector, Maduro said, without indicating how Venezuela would pay for it.

"I have a portfolio of over $25bn worth of investment offers for PdV," he said.

A presidential palace official told Argus that Russian state-controlled Rosneft "is first on the list of foreign companies willing to invest in PdV."

Rosneft is already partnered with PdV on the PetroMonagas heavy crude joint venture. As with PdV's other foreign partners, the Russian firm is effectively operating its assets on the ground, even though PdV controls the venture on paper.

In its most aggressive escalation of Venezuela sanctions, the US yesterday targeted Rosneft Trading, putting any companies that do business with the Russian firm at risk of sanctions as well. For Venezuela, the move further narrows the export channel for its oil production.

In yesterday's address, Maduro declared that among the commission's first tasks is to reinstate health insurance, housing benefits, food provisions and transportation for oil workers.

Thousands of oil workers have fled Venezuela in recent years, part of a historic migration estimated at 5mn people.

Maduro's ambitious announcements are the government's latest bid to revitalize the once-thriving oil industry that has been decimated by years of underinvestment, neglected maintenance, corruption, labor flight, political interference and, more recently, the US sanctions.

The commission's chairman El Aissami, who is part of Maduro's inner circle and heads the industries and production ministry, was sanctioned by the US in February 2017 for drugs trafficking. He is also sanctioned by the EU and Canada.

The commission's vice chair is fellow sanctioned official Asdrubal Chavez, who previously served as oil minister and chief executive of PdV's US refining subsidiary Citgo in Houston.

Quevedo, a National Guard major general who was plucked from the housing ministry to run PdV and the oil ministry in late 2017, is only a member of the commission.

The roster is rounded out by other US-sanctioned senior figures in the Maduro government, including a senior military contingent: defense minister Vladimir Padrino, interior and justice minister Nestor Reverol, armed forces strategic operational commander Remigio Ceballos, transportation minister Hipolito Abreu, labor minister Eduardo Pinate, and seven labor leaders from the ruling socialist party (PSUV).