Caracas, August 12, 2022 (venezuelanalysis.com) - Venezuela's oil output and exports have receded following a series of operational setbacks while recently renewed shipments to Europe have been reportedly halted.
According to the latest Organization of Petroleum Exporting Countries (OPEC) report, Venezuela's July output stood at 661,000 barrels per day (bpd), a slide from June's 710,000 bpd, as measured by secondary sources. It is the lowest mark this year. For its part, Venezuelan state oil company PDVSA reported 629,000 bpd, below the previous month's 727,000 bpd.
The Caribbean country's oil exports have also declined with 460,323 bpd of crude and refined products shipped in July, a significant drop from the 630,500 bpd in June, reported Reuters. Most shipments were bound for China, the main destination for Venezuelan oil.
Caracas' oil operations were affected by mechanical disruptions caused by alleged attacks against oil facilities. On July 16 a natural gas pipeline explosion and a power outage interrupted PDVSA's supply to its main crude production and export hub, the Jose Antonio Anzoategui industrial complex in eastern Venezuela.
The Jose facility has three heavy-oil upgraders: Petrocedeno (owned solely by PDVSA since last year), Petromonagas (part-owned by Russia's Rosneft) and Petrosanfelix (owned by PDVSA). The emergency forced two upgraders to shut down, reducing the production of exportable crude blends.
On a live TV broadcast, Venezuelan Oil Minister Tareck El Aissami denounced that the fire was caused by a terrorist attack and showed material allegedly used to sabotage the oil infrastructure. "These are the same terrorist groups that have always acted against national interest to affect the lives of our people," he tweeted.
The Jose industrial complex was reportedly put back online following a days-long operation to extinguish the fire and repair the affected pipeline.
#EnDetalles || El Ministro de Petroleo, @TareckPSUV destaco que se realizaron labores de contencion del gasoducto en 48 horas, ademas, preciso que se encontro una infraestructura improvisada, en la que se hallaron materiales utilizados para ejecutar el ataque.#19Jul pic.twitter.com/KFFQOvdm9V
- Vicepresidencia Vzla (@ViceVenezuela) July 19, 2022
With the operational disruption depleting Venezuela's lightest oil grade stocks, Iran recently began to increase its supply of 29.5API blend, a lighter alternative to Venezuela's 16API Merey, in order to boost fuel production and free domestic upgraded blends for exports.
In July, PDVSA received a reported 4 million bpd of Iranian crude, an increase from the 1.07 million bpd imported in June, as well as some 2 million barrels of Iranian condensate to boost blending operations. The shipments are part of the allied countries' energy cooperation deal which has seen Venezuela exchange its heavy oil for Iranian gasoline, condensate, lighter crude, refinery parts and technical assistance.
Caracas and Tehran's cooperation likewise includes repair works in PDVSA's 146,000 bpd El Palito refinery in Carabobo state and the Amuay (645,000 bpd) and Cardon (310,000 bpd) refineries in Falcon state. In early June, President Nicolas Maduro visited Iran to sign a 20-year cooperation agreement with his Iranian counterpart Ibrahim Raisi.
The Iranian assistance has helped jumpstart Venezuela's oil industry after years of US sanctions crippled production and exports, cutting off the country's historical main source of foreign income. In 2017, Washington imposed financial sanctions against PDVSA and levied a full-fledged oil embargo in 2019 followed by secondary sanctions, a clampdown on swap deals and a raft of other measures throughout 2020.
As a result, foreign companies gradually wound down operations as well as oil agreements with Venezuela. The country's crude output fell to historic lows, going from 1.9 million bpd in 2017 to less than 500,000 bpd by the end of 2020. Caracas finally halted the free fall in its oil production to reach an average of 636,000 bpd last year. The number has mostly remained steady with some slides throughout 2022.
Venezuela's oil prospects got another boost following the restoration of crude imports from the Latin American country to Europe after a two-year suspension caused by US sanctions. In May, the US Treasury Department granted limited licenses to Italy's Eni and Spain's Repsol to implement oil-for-debt swap deals with Caracas.
Since June, Eni received a total of 3.6 million barrels of Venezuelan diluted crude oil (DCO), a less exportable grade due to its high sulfur and water content, reported Reuters. For its part, Repsol carried around 3 million bpd in July. The resumption of oil shipments to Europe helped PDVSA boost sales with overall exports reaching 545,000 bpd in the 60-day period.
However, anonymous sources revealed that Caracas might suspend crude cargoes to Europe while the industry recovers from recent setbacks. PDVSA is reportedly negotiating the terms of the oil-for-debt agreements with Eni and Repsol to receive fuel while still settling long-standing debts owed to the two companies.
Neither Venezuela's Oil Ministry nor PDVSA has issued statements confirming the alleged halted shipments to Europe or the renegotiation of the swap deals.
For its part, US corporation Chevron also made headlines lately regarding negotiations with PDVSA. In June, Bogota-based US Ambassador James Story visited Caracas alongside a representative from the US Treasury Department's Office of Foreign Assets Control (OFAC). They reportedly met with Chevron's Venezuela chief operator, Javier La Rosa.
According to sources, the OFAC official was briefed on the current state of the talks between Chevron and the Maduro government concerning the company's return to Venezuela and the resumption of the oil-for-debt swap deals. Chevron is expected to receive an answer by September or October about whether or not it can begin shipping Venezuelan crude to US refineries.
Chevron currently maintains a minimum presence in Venezuela under a Treasury license that allows it to preserve its assets after being banned from drilling, processing or selling Venezuelan oil since April 2020. The California-based energy giant has stakes in four joint ventures with PDVSA that have a crude production capacity of about 200,000 bpd.
Edited by Ricardo Vaz in Caracas.
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Andreina Chavez Alava | source: venezuelanalysis