Venezuela Chevron ramps up oil production

Washington- The Caribbean nation’s oil output has rebounded to more than 800,000 barrels per day (bd), driven by US recognition of Venezuela-based giant Chevron despite Washington sanctions, but experts warn the increase could hit a hard ceiling.

Venezuela recorded production of 819,000 bd in May, six months after Chevron received its license, according to the Organization of the Petroleum Exporting Countries’ (OPEC) latest monthly report released on Tuesday. The figure surpassed 800,000 bpd in April for the first time in 16 months.

The numbers, however, are light years away from the local oil industry’s best times: Supply from the country with the world’s largest oil reserves topped 3.2 million bpd two decades ago.

It closed 650,000 bd by 2022.

When the license was granted, production from the four Chevron-PTVSA joint projects “was at its lowest level”, 50,000 bpd, Pilar Navarro, an economist at UK-based firm EMFI Securities, told AFP.

“Right now it’s about 120,000 barrels,” the expert points out, which is 15% of Venezuela’s supply.

More problems than expected

Navarro asserts that “Chevron has had more problems than expected” due to the deterioration of infrastructure and the politicization of the industry.

In fact, according to data provider Argus Media, the U.S. revised its forecast downward, cutting its production estimate for the country by the end of the year from 200,000 bd to 175,000 bd.

The company cites an example: the poor condition of the strategic navigation channel in Lake Maracaibo in the oil state of Julia (northwest) “limits the amount of oil tankers Chevron can use.”

Venezuela’s oil industry collapsed due to lack of investment. According to the Baker Hughes Company, it consists of only two active exercises. This figure was exceeded one hundred and two decades ago.

PDVSA has been embroiled in a corruption scandal that has detained dozens of officials since March and the oil minister, the powerful leader Tareck El Aissami, has disappeared from public life.

Promise vs reality

As of 2018, before the ban was imposed a year later, Venezuela shipped 500,000 bd to the United States and 120,000 bd of light oil and solvents from that country to process its heavy crude. Chevron’s license allowed them to resume importing firearms.

Today, with licenses for Chevron and other oil companies, the United States targets 24% of Venezuela’s crude oil, according to figures provided by Francisco Monaldi, director of the Baker Institute’s Energy Research Center’s Latin American Energy Program. , at the consulting firm Ecoanalytic Venezuelan. China gets 62%.

After El Aissami left, Petroleum Minister Pedro Tellechea proposed bringing the country’s total production to one million barrels, a move viewed with skepticism by experts.

Navarro points out that there must be “broader licenses” because Washington’s current authorization effectively limits Chevron’s operations to the payment of Venezuela’s $5,000 million debt to the company.

Absent the new “flexibility” curbs, Monaldi indicated that the production ceiling would be around 850,000 bd.

In sum, the Chevron effect is “vital” for the weak Venezuelan economy, as part of the company’s income goes to the foreign exchange market – despite restrictions- to meet obligations in the local currency, explained to AFP Hermes Perez, Prof. A university student and former head of the central bank’s exchange desk.

The United States renewed the licenses of Halliburton, Schlumberger Ltd., Baker Hughes and Weatherford International in May to operate in Venezuela, after the Joe Biden administration announced it was ready to gradually lift sanctions without negotiations between the government of Nicolas Maduro and the opposition in Mexico. Agreements for next year’s presidential election in Venezuela.

With talks deadlocked, Navarro said, “I don’t see incentives to expand licenses in the Venezuelan oil industry, but I also don’t see a willingness on the part of the Biden government to increase the pressure.”

Therefore, the economist believes that the White House is committed to maintaining the current “status quo” in the oil market, which has been shaken by sanctions against Russia for its invasion of Ukraine.