Amid the oil production cuts agreed by the OPEC and its allies, Venezuela, one of the organization’s founding members, has increased crude exports. The country managed to do this despite U.S. sanctions, the termination of agreements between Rosneft and PDVSA, the continued production drop, and low global demand.
After the U.S. government sanctioned two Rosneft subsidiaries for bolstering the regime of Nicolas Maduro by reselling Venezuelan oil in other markets. The Russian company was forced to terminate its agreements with PDVSA. Since then, the nation’s crude exports fell to minimums from mid-2019.
#5Mayo/ Fuga de gas masiva en el poliducto 16´ de Quiamare, Mncipio Libertad, (Anzoátegui) lo que causó la parada de producción de LGN y afectará el sistema de gas Anaco-Puerto La Cruz-Caracas. @AsambleaVE @ElNacionalWeb @DiarioTalCual @elpi @RunRunesWeb @Unionradionet pic.twitter.com/kN0hUVTbHp
— Soy Gente del Petróleo (@soygdelpetroleo) May 6, 2020
A possible upturn
However, exports recovered in April, according to reports published by Reuters, indicating that Maduro’s regime has found new dealers and resellers. Some of these include Mexican companies Libre Abordo and Schlager Business Group, which will supply corn and water trucks in exchange for Venezuelan oil.
Both companies have insisted that these deals with Venezuela are strictly humanitarian and do not violate the U.S. sanctions. Nonetheless, U.S. Secretary of State Mike Pompeo stated last week that Washington and Mexico are investigating the matter. Authorities suspect these firms could be operating as front companies in order to avoid the sanctions.
Venezuelan crude is mainly being shipped to China and India, although they are mostly end users. According to these reports, Venezuela exported approximately 850,000 barrels per day in April, nearly 35,000 barrels more than in March.
Ongoing production drop
In spite of having found intermediaries to replace Rosneft, Venezuela’s crude stocks are still high, approximately 30 million barrels. U.S. sanctions have heavily restricted the number of PVDSA customers to just a few.
In April, Venezuela’s oil production stood at less than 600,000 barrels per day. This decline primarily stems from the stoppage of operations at its mixed companies and other contingencies in a company that cannot find a market for its crude. But it also stems from a lack of personnel. Workers are unable to get to the fields, due to the fuel shortage and lack of prevention protocols in response to COVID-19.
Forecasts agree that the scarce production and sales are managed through ineffective work. The little crude being extracted, mainly from the Orinoco Belt, has an average cost of over $15 per barrel. But prices are under $8.
Accidents increase the problems
The production losses increased after an oil spill that affected the Morichal Operative Center, in the state of Monagas. Furthermore, several wildfires have affected storage tanks and pumping stations at the Orinoco Belt.
#3Mayo/Cuatro días duró derrame de crudo de tanques de almacenamiento en Complejo Operacional Morichal de Pdvsa (sur de Monagas), debido a la falta de supervisión y mantenimiento. #VenezuelaSinGasolina #Democracia #LibertadDePrensa pic.twitter.com/DGRTQSDuQO
— Soy Gente del Petróleo (@soygdelpetroleo) May 4, 2020
The Executive Manager of Federación Unitaria de Trabajadores Petroleros de Venezuela (Oil workers’ union) Eudis Girot said that the incident damaged storage tanks as well as the facilities’ electrical system and pipelines. Girot stated that the incident began as workers were welding in an area where the weeds had not been removed.
For its part, the Gente del Petróleo Civil Association, formed by PDVSA former workers, assured that lack of maintenance was the real cause behind the accident. This type of incidents have increased over the past weeks.
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