Nicolas Maduro’s regime is managing contracts with ally governments to trade crude for food and fuel.
Added to Venezuela’s severe production decline, which began at least four years ago, are now its inoperative refineries. Both situations are the result of the lack of maintenance, investment, and qualified staff. More recently, because of the U.S. sanctions that have deepened the crisis.
There have been several gasoline shortage episodes in 2019 and 2020. The country is currently undergoing one of such shortages and, at a time of health emergency and quarantine, authorities have been instructed to prioritize health professionals at service stations.
Mobility limitations caused by the COVID-19 lockdown also affect food transportation. Therefore, the regime is desperately seeking to restock on these products, in exchange for crude.
Desde que recibió su primer cargamento de petróleo venezolano a fines de 2019 bajo el contrato, Libre Abordo y una firma relacionada Schlager Business Group han recibido hasta el momento un total de 14.3 millones de barriles de crudo y combustible en 13 cargas, según PDVSA
— Maibort Petit (@maibortpetit) March 29, 2020
For its part, the government of Andres Manuel Lopez Obrador has defied U.S. sanctions against this South American nation. Because of this, Maduro was able to sign oil-for-food contracts with Mexican companies Schlager and Libre Abordo. Under these contracts, Venezuela will exchange 15 million tons of crude for 210,000 tons of corn and 1,000 tanks of clean water. According to ABC, in a more recent contract, the Venezuelan State offers five million barrels to Mexican company Jomadi in exchange for gasoline.
Maduro’s oil-for-food program
Venezuela’s storage capacity is around 65 million barrels, but many of the tanks used in the past are now inactive. According to the publication, a source in the oil sector with businesses in Venezuela, the country “is not selling crude. And there is nowhere to store it, which paralyzes operations because there is nowhere to put it.”
U.S. sanctions on Russian company Rosneft has left the Venezuelan regime without the path through which it distributed two-thirds of its crude in late 2019. After the Kremlin decided to exit the Venezuelan oil market, Maduro declared an “energy emergency” and announced a comprehensive restructuring of PDVSA. “I won’t accept more excuses, we either produce or we produce,” he said.
Gerente General de PDVSA Refinación Oriente, @JGamboaPDVSA presentó al Vicepresidente del Área Económica, @TareckPSUV el Plan Mínimo Económico de Recuperación Productiva de Refinación Oriente. pic.twitter.com/ivkKLvGpZG
— PDVSA (@PDVSA) April 6, 2020
Venezuela, the country with the world’s largest crude reserves, is forced to suspend nearly all of its oil operations. Several refineries, such as Paraguana and El Palito, are closed. In theory, the regime can refine 1.3 million barrels per day, but it only managed to refine 100,000 barrels per day.
Partial reopening of the El Palito refinery
“State-owned oil company PDVSA restarted a crude distillation unit and other processing units at its refinery in El Palito. Although, its catalytic cracker, key for fuel production, is not yet in service,” two sources familiar with the matter told Reuters.
PDVSA has yet to officially confirm the status of the recovery efforts. However, sources in the oil sector and independent analysts told Banca y Negocios that resuming fuel production would be feasible over the next days. But working conditions are complex due to a lack of spare parts and staff.
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