Venezuela’s PDVSA continues to explore foreign investments in joint ventures such as Petrocedeño. (CVP)
Caracas, October 17, 2024 (venezuelanalysis.com) – Venezuela’s oil industry continues to record modest production growth despite challenges caused by US sanctions and energy market fluctuations.
According to secondary sources, the latest monthly report from the Organization of the Petroleum Exporting Countries (OPEC) shows that Caribbean countries’ production in September was 877,000 barrels per day (bpd). This is an increase of 2,000 barrels per day compared to August.
Meanwhile, state oil company PDVSA reported production of 943,000 barrels per day last month, up from 927,000 barrels a day the previous month.
According to Reuters, Venezuela’s oil exports fell by 9% compared to August. Crude oil and fuels averaged 842,600 barrels per day, and petroleum by-products and petrochemicals 267,000 tonnes. Asian markets received the majority of cargo, with the United States in second place.
Since 2017, Venezuela’s oil sector has been the target of US-led economic coercion measures. The U.S. Treasury Department has imposed financial sanctions, export bans, secondary sanctions, and a number of other orders aimed at crippling the country’s main source of revenue.
The six-month exemption, General License 44 (GL44), allows PDVSA to freely export crude oil without relying on unreliable intermediaries or charging discounts. The Biden administration reimposed broad sanctions in April, claiming that Nicolas Maduro’s government was not honoring agreements with U.S.-backed rebels.
Venezuela’s oil production plummeted from 1.9 million barrels per day before the first sanctions to around 350,000 barrels per day in 2020, the lowest level in decades. Since then, the oil production industry has steadily recovered, but has yet to reach the 1 million barrel per day milestone.
Maduro’s government is looking to foreign investment to revitalize the oil industry. However, the US Treasury has threatened secondary sanctions if companies engage with PDVSA without seeking permission.
Since the expiry of GL44 in April, India’s Reliance Industries has been the only company to receive permission from the US Treasury to import Venezuelan crude oil. The country’s ultra-heavy crude oil blend remains in high demand in India, with trader Vitol reportedly planning to ship 2 million barrels to state-run refineries in November.
Despite this, PDVSA suffered a setback when the proposed agreement with Jindal Power fell through. The company, which is part of the giant OP Jindal Group, was seeking to acquire a minority stake in the Petrocedeño joint venture, which was previously owned by France’s Total and Norway’s Equinor.
According to Bloomberg, the deal collapsed due to disagreements over the operational management of the 160,000 barrel-per-day project. It is unclear whether Mr. Jindal sought approval from the U.S. Treasury Department. Another company in the same conglomerate, Jindal Steel & Power, currently operates Venezuela’s largest iron ore complex.
Venezuela’s current struggle to secure foreign investment is exacerbated by plummeting oil prices. As stated in the latest OPEC report, PDVSA’s main export to Asian markets, Merry 16 Blend, fell by 11.6% in September from US$62.15 to US$54.91 per barrel.
Merry prices remain down 27% from April’s high of $74.91 per barrel. It is currently nearly $15 below the West Texas Intermediate (WTI) benchmark. And Venezuela’s revenue has taken a further hit as it has to offer discounts to avoid sanctions.
Oil prices have rebounded recently on concerns about instability in the Middle East. Investment bank JP Morgan expects oil prices to rise in the last quarter of this year.
While Venezuelan authorities aim to step up and increase oil production, US officials have openly threatened to impose new sanctions on the South American country’s oil sector.
The Biden administration has endorsed claims by Venezuela’s far-right opposition party that its candidate Edmundo González won the July 28 presidential election. The campaign secured Maduro a third six-year term, ending in January 2031. Venezuela’s Supreme Court approved the results in August.
Hardline US representatives have told the White House that US oil giant Chevron and European companies Repsol (Spain), Eni (Italy) and Morel & Prom (France) are allowed to operate in a joint venture with PDVSA. It called for the existing license to be revoked.
