Venezuela’s oil industry under a perfect storm

CARACAS (Sputnik) – 2020 has already begun with forecasts of a global economic crisis, and the COVID-19 pandemic aggravated the outlook. This and the US sanctions formed a perfect storm that still looms large over Venezuela’s oil industry.

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This Caribbean country has always been associated with oil. According to various certifications between 2009 and 2010, their Estimated crude oil reserves were 296.5 billion barrels, which would place it above Saudi Arabia.

Most of the oil that the South American nation has is found in the Orinoco Oil Belt, but it is a heavy crude, whose extraction is expensive and its result requires to be mixed with light crude to be commercialized.

In the midst of the energy transformation in which the world is pushing to replace hydrocarbons with less polluting energies, and a fall in oil prices due to the increase in supply, few are the eyes that turn to that bituminous massif, once considered a black gold mine.

Not only is it expensive to extract oil from the Belt, but since 2017, exporting it or establishing contracts for its exploration has become a risk that very few oil companies are willing to take.

And it is that any company or individual that uses the US financial system and establishes a contract with the Venezuelan State, the sole owner of the deposits, is exposed to their accounts being blocked and being sanctioned.

US sanctions

The White House considers that President Nicolás Maduro is a “dictator”, whom it accuses of violating the human rights of the population, committing acts of corruption, establishing links with drug trafficking and terrorism and imposing himself on the Government without submitting to elections ” reliable “.

For this reason, Washington has granted itself the license to suffocate the economy of Venezuela to provoke the departure of Maduro and has pushed other countries to follow in his footsteps.

However, what has happened so far is the economic depression of the Caribbean nation, the abrupt fall in its oil exports, on which 99% of the country’s foreign exchange earnings depended, and this happened after the crisis of 2014, when oil in the world went from about $ 100 a barrel to less than $ 18.

In 2020, Venezuelan production fell to levels of 1942, when the Second World War (1939-1945) was taking place. While Brazil, another political rival of Venezuela, is close to 2.5 million barrels per day.

PDVSA besieged

During a press conference that Sputnik had access to in November, Maduro confessed that Petróleos de Venezuela SA (PDVSA) was going through one of its worst moments.

“From October 2019 to October 2020 we did not sell a single barrel of oil due to the US siege and persecution,” he said.

The country’s flagship company “is not bankrupt, PDVSA is under siege,” said the president.

Although the head of state, since the blockade began or even since the price debacle began, has always been optimistic and has considered increasing production again to the 3 or 2.5 million barrels that PDVSA produced more than five years ago, the world oil prospects point to another scenario.

Although the government assures that PDVSA is besieged and not bankrupt, little has been reported as to whether this suffocation, caused by the US, could lead to its definitive collapse.

According to the November report of the Organization of the Petroleum Exporting Countries (OPEC), Venezuela produced 473,000 barrels per day in October, a fairly low figure, despite the fact that it reflects an increase of about 70,000 barrels per day in relation to September and August.

While the oil industry, the main source of income, finds itself without a solution at least in the short term from its crisis, the fall in its exports translates into less budget for imports in other areas and State investment in many sectors, especially in public services, health, and education.

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