Private sector set to play bigger role in the industry

Venezuela’s oil output remained at historic lows at the close of 2020 even with higher output last month.

In its latest monthly report, the world’s oil cartel, the Organization of the Petroleum Exporting Countries (OPEC) reported that Venezuela produced 431,000 barrels of oil per day (bpd) in December. This was an increase of 17,000 bpd compared to the previous month, November.

However, Venezuela’s state oil company, PDVSA gave a slightly higher production number than OPEC reported in its monthly production statistics. PDVSA, which is a member of OPEC, reported production level of 441,000 bpd, up from 431,000 bpd in November.

Oil industry plagued by corruption

Oil, which is Venezuela’s most important industry, has been plagued by corruption, mismanagement and a brain drain that has hindered production levels, resulting in a sharp decline fuelled by American sanctions against the Nicolas Maduro administration. OPEC data shows that daily production has consistently fallen in recent years, going from an average of 1.9 million bpd in 2017 to just 500,000 bpd in 2020.

The American government, particularly the US Treasury Department, has targeted the Venezuelan oil industry repeatedly since levying financial sanctions in August 2017. Among the sanctions imposed on the South American country is an oil embargo, secondary sanctions against Russian energy giant, Rosneft as well as taking aim at shipping companies and vessels.

Late last year, the Trump administration moved to put a stop to swap deals by threatening multinational corporations such as Spain’s Repsol and India’s Reliance Industries into winding down their operations in Venezuela. Halliburton oil recently announced that it was laying off its entire Venezuela staff, as a result of U.S. sanctions imposed on the country.

However, the company says it remains committed to maintaining a presence in Venezuela but will do so through equipment and facilities only. In contrast, oil giant Chevron and other US-based service providers had their sanction waivers extended until June 2021. 

The Biden administration, which takes office today (January 20), has yet to take a position on Venezuela since the November elections. But a White House official reported that there would be no major changes in US policy towards Venezuela and that the new American administration will continue backing self-proclaimed Interim President Juan Guaido.

Private sector to play key role in oil production recovery

Yesterday, during his annual state of the union address, Maduro, the Venezuelan president, declared that his government’s goal is to recover production to 1.5 million bpd over the coming months, while reiterating the call for foreign investment. He hinted that the local private sector would play a major role in the country’s oil production recovery.