Venezuela’s oil production fell by more than 500,000 barrels per day in March

Venezuela's oil production

Venezuela’s oil production seems to be in a free fall. According to what the South American nation told the OPEC, it produced 960,000 barrels per day in March, down by 500,000 bpd from the previous month.

The government of Nicolas Maduro attributed this recent decline to the effect of the U.S. sanctions against it and the power outages that have affected the country for the last 33 days.

On the other hand, the most recent OPEC report reveals that the country’s production stands at 732,000 barrels. The figures published by the organization are based on “secondary sources”. The opacity with which the Maduro regime handles the country’s economic and social data forces international organisms to seek alternative routes to get this information.

Hence, Venezuela’s oil production reaches new long-term lows. This is the lowest level recorded in three decades, with the exception of the 2002 and 2003 declines, during the general strike, which oil workers joined. Consequently, the state-owned oil company’s production stood at less than 100,000 barrels per day for several months, according to government data.

OPEC effect

This new production drop has had an effect on the Organization of Petroleum Exporting Countries, as it contributed to the cartel’s production cut to stabilize oil prices.

The group’s production went down by 534,000 barrels per day in March, according to the OPEC monthly report.

By the end of 2018, the organization and some of its allies, led by Russia, agreed to curb production by 1.8 million bpd in an attempt to boost prices. This alliance is known as OPEC+.

The agreed cut, added to Venezuela’s shrinking production and a series of involuntary reductions in Iran have helped drive a 32 percent rally this year.

With this scenario, Venezuela went from being an OPEC’s top-three producer (back when it produced 3 million bpd) to being the tenth; only ahead of Ecuador, Congo, Gabon, and Guinea.

As for the average extraction level in 2017 (1.9 million bpd), it fell by 60 percent.

These figures could be part of a debate within the OPEC on whether to maintain the production cuts after June. A Russian official indicated this week that Moscow was planning to increase production, although the OPEC has said that the production curb should be maintained.

Producers will meet in June to discuss whether or not to extend the pact.

PDVSA undergoing operational and financial problems

In addition to the production drop, Petroleos de Venezuela (PDVSA) is undergoing multiple problems, including numerous investigations related to corruption and selective default. All of this has been dragging the country’s financial and economic crisis for months. The situation seems contradictory, considering that the nation has some of the world’s largest proven reserves.

The crisis has deepened with the recent U.S. sanctions against the Maduro administration. These measures limit crude purchases to PDVSA. This way, the chavista government no longer has access to that revenue, which constitutes one of the main sources of foreign currency to the State coffers.

This decision came shortly after the president of Venezuela’s National Assembly Juan Guaidó, assumed the national executive powers as president interim on January 23. The move was based on the country’s Constitution, under which Maduro’s reelection on May 2018 was illegitimate, given that it was held outside of the legal framework and had limited participation from opposition parties.

Venezuela’s oil production could further decline

This situation is further aggravated by the effect of the energy crisis that first hit the country on March 7 with a general power outage. Therefore, oil production could drop by more than 500,000 barrels per day in a matter of weeks if the Simon Bolivar electrical complex is not reactivated; as former PDVSA directive and the president of Venezuela’s Oil Workers Federation (Futpv) Wills Rangel said days ago.

The Union leader stated that the production at the Orinoco Oil Belt currently stands at 300,000 barrels per day due to extended power outages. Moreover, he said producers are waiting for the electricity rationing plan announced by Maduro to coordinate production at the wells.

If this situation continues, Venezuela’s oil production could continue in a freefall.

For more information, check Energía16

Load More Related Articles
Load More By Energía 16
Load More In Latin America

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

Saudi Aramco listing has already attracted €17.6 billion

Saudi Aramco’s Initial Public Offering (IPO) has attracted approximately 73,000 million ri…