Venezuela is cranking up oil production in a reflection of the Opec country's moderate success in adapting to operational constraints imposed by prolonged US sanctions.
Output has surpassed 600,000 b/d as PdV incorporates Iranian condensate to help dilute extra-heavy crude from the Orinoco oil belt, which is now pumping out around 400,000 b/d.
Venezuela's state-owned PdV has partially restarted the 190,000 b/d PetroCedeño upgrader after EU minority partners TotalEnergies and Equinor formally withdrew in July. And PetroPiar, PdV's top-producing joint venture with minority partner Chevron, is back on line after a brief outage.
The condensate, which Iran is supplying in exchange for Venezuelan heavy crude, is better suited for blending than for upgrading, a PdV veteran told Argus. The company still has some preferred naphtha diluent that it recycles through its integrated upgrading system running from the oil belt to the Jose export terminal on the eastern coast.
That precious naphtha supply took a hit in mid-October when a storage tank at PdV's mothballed Petro San Felix upgrading project exploded, underscoring chronic operating challenges.
In PdV's mature eastern and western divisions, production is slowly recovering too, but pipeline ruptures, gas compression outages and other infrastructure problems are daily fare that the company has grown adept at patching up, often at the expense of worker safety and the environment.
Operations that function most smoothly sometimes reflect the work of seasoned local contractors that supply PdV with small rigs and other equipment and services, which the company pays for in cash offshore or in kind.
Distorted data
The integrity of Venezuelan production data remains questionable. While some estimates peg flow as high as 750,000 b/d, these likely include gas liquids and tend to overlook sizable water content and sediment. Even where data is considered more reliable, a tendency by local managers to embellish performance to meet unrealistic targets imposed by Caracas headquarters and the erosion of measurement expertise and functional metering equipment remain distorting factors.
Still, Venezuelan output is undoubtedly growing. And that has emboldened PdV's senior management to aim higher, with new 2021-25 scenarios all starting from a projected 650,000 b/d at the end of this year, up from less than 400,000 b/d at the end of 2020.
Largely driving PdV's tentative upstream recovery are steadier export channels, with scant concern among obscure intermediaries over sanctions that Washington now seems loath to enforce. With frequent ship-to-ship transfers and sporadic blending along the way, most Venezuelan cargoes still wind up in China, where 16°API Merey -- fruit of more than one recipe -- remains a coveted feedstock. Sharply higher oil prices in recent months mean that PdV's steep discounts and China's import tax on diluted bitumen — the category generally assigned to Venezuelan supply in that market — are easier to absorb.
PdV is now rebuilding inventories in anticipation of bulking up exports on more lucrative very large crude carriers (VLCCs), with some supply earmarked for limited domestic refining. Stock-building contributed to a decline in October crude exports to roughly 300,000 b/d, about half of the September level.
Awaiting the ballot
The US imposed financial sanctions on Venezuela in August 2017, and oil sanctions in January 2019. After initially signaling a willingness to gradually relax the punitive measures, President Joe Biden's administration is now waiting until after Venezuela's 21 November regional and local elections to rethink the failed approach it inherited from its predecessor.
Also on stand-by are negotiations between President Nicolas Maduro's government and a fractured US-backed opposition coalition. Maduro pulled out of the talks last month, but these could resume after the elections, seen as a key test of his willingness to cede some power. In a win for Caracas, the Atlanta-based Carter Center said on 27 October that it will dispatch "a limited international electoral expert mission" to assess the voting, following in the footsteps of the EU.
A more consequential political milestone comes in early January, when fading opposition leader Juan Guaidó loses his claim to a US-endorsed interim presidency. Leading allies already abandoned him on 2 November in a struggle over scandal-ridden fertilizers company Monómeros.
