After losing 1.4 mb/d in three years, output in Venezuela may be bottoming out, the International Energy Agency (IEA) said in its newly released Oil 2021 report. US financial sanctions, poor reservoir management and chronic underinvestment cut production to just 530 kb/d on average in 2020. That’s just a small fraction of the 3.4 mb/d peak level reached just before President Chavez took office in 1999.
“We have held our capacity estimate at 550 kb/d through the remainder of the forecast, although things could turn out quite different,” IEA said. “A turnaround in the political situation would provide the opportunity to rebuild the energy sector.”
IEA said OPEC+ producers forged a historic cut of nearly 10 mb/d with their April 2020 pact in response to the collapse in global oil demand. Since then, the agreement has been revised to ease the production cuts but, with the impact of the pandemic lasting longer than expected OPEC+ is likely to maintain active supply management at least during the early years of the IEA’s forecast.
“Iraq and the UAE are poised to build enough capacity for them to pump at fresh record highs, while Saudi Arabia and Kuwait benefit from a gradual increase of flows from the Neutral Zone,” IEA stated. “As for Venezuela, we have written off any prospect of an imminent recovery with the current Maduro Administration in place.”
IEA said its battle with a long-running drop in supply has seen Petroleos de Venezuela (PDVSA) shut in high-cost wells while output from mature conventional oil fields has plunged. Upgraders managed by foreign joint-venture partners in the vast Orinoco heavy oil belt have malfunctioned due to lack of maintenance and difficulty sourcing equipment, poor security, and corruption. PDVSA has also proposed a restructuring that would boost the participation of private companies. The government aims to raise production to 1.5 mb/d “with new mechanisms of production, financing and commercialisation,” according to President Nicolas Maduro. In any case, US sanctions are likely to temper investor enthusiasm, IEA pointed out.
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“If Venezuela’s diaspora of skilled oil workers return and investment capital were available, production could recover significantly over time. In the meantime, the Maduro government has looked to Russia and China to help revive the oil sector,” IEA said.
