Power cuts further erode Venezuelan fuel demand

New mandatory power conservation measures in Venezuela could ease pressure on state-run oil company PdV by forcing further reductions in local gasoline and diesel consumption.

The measures unveiled by the government yesterday following a widespread blackout include a power supply reduction of 1,500MW and a shortened workday for up to 2.6mn public-sector workers.

Oil consumption already appears to have declined because of the shrinking economy.

Lower oil consumption would allow PdV to reduce imports of gasoline and diesel that averaged around a combined 215,000 b/d at end-2014, including 100,000 b/d of gasoline and about 115,000 b/d of diesel. All of the diesel is earmarked for state-owned thermal power generation, energy ministry figures show.

Venezuela imported over 50,000 b/d of distillates from the US in December 2014, up from about 13,300 b/d in the same month of 2013, US energy information administration figures show. There have been no further distillates imports from the US since December, according to the EIA. Naphtha imports from the US, which PdV uses as a diluent in its expanding Orinoco extra-heavy crude upstream operations, averaged about 35,800 b/d in January 2015 and over 55,000 b/d in February.

PdV has imported growing volumes of gasoline and diesel since 2009 to compensate for recurring refining problems in Venezuela. PdV´s domestic refineries are currently operating at about 70pc of combined nameplate capacity of 1.3mn b/d.

"It's impossible to estimate by how much PdV might reduce some product imports because we still don't know by how much local consumption could fall this year," an energy ministry official said.

Contraband also will remain a "significant factor in national consumption until local gasoline and diesel prices are increased to cover PdV's costs and discourage smuggling," the official added.

An estimated 100,000 b/d of Venezuelan fuel is regularly smuggled to neighboring countries, mainly Colombia.

Local gasoline and diesel consumption already appears to have declined during the first four months of 2015, amid chronic shortages at service stations across the country.

PdV's chief executive Eulogio del Pino told visiting foreign journalists in mid-April that local consumption is 500,000-550,000 b/d, compared with 647,000 b/d reported in the company's externally audited financial results for 2014 issued this week. Local consumption was 686,000 b/d in 2013, according to PdV.

The International Monetary Fund projects that Venezuela´s GDP will contract by 7.5pc this year.

Electricity minister Jesse Chacon said last year that Corpoelec was consuming over 265,000 b/d of diesel and fuel oil in its thermal power plants, but expected to reduce that figure as new PdV gas supplies came on stream.

PdV plans to start new offshore gas production around the third quarter.

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