Venezuela reduces oil target and abandons Maduro’s ambitions

Venezuela’s state oil company cut its production target by a third as years of corruption, brain drain and inadequate investment crippled the country’s energy infrastructure.

PDVSA cut its daily production target to one million barrels from a 1.5 million barrel target announced in January, according to a company document seen by Bloomberg News and a person with direct knowledge of the plans. In the Orinoco river basin, which produces most of the country’s crude, PDVSA lowered its goal to 650,000 barrels from nearly a million previously.

Affected by years of chronic mismanagement, nationalization efforts that scared off many foreign drillers, and harsh sanctions that cut off PDVSA, Venezuela’s socialist government has been forced to review production targets three times since President Nicolás Maduro established a ambitious goal of two million barrels in January 2020.

Maduro said during an interview with Bloomberg in June that Venezuela was beginning to recover oil production and that they had big goals for this year.

Maduro’s comments were echoed by Oil Minister Tareck El Aissami, who said foreign investment would flow into the nation and long lines at gas stations across the country would disappear.

Amid rising post-pandemic energy demand and tightening global oil supplies, benchmark Brent crude futures are up nearly 60% this year and are on track to achieve the strongest annual rally since 2009. Venezuela Much of that bonanza is being lost because its industry is paralyzed.

Petróleos de Venezuela SA, as the company is formally known, is now focused on “recovering and stabilizing production” from 2022 to 2025, according to the document.

The plan has two key objectives: to ensure a constant flow of oil for supply to national refineries, and to convert the rest of the crude into commercial grades suitable for export, according to the document. Much of the country’s oil is so thick that it must be diluted with additives such as naphtha before it can be shipped abroad.

Even the lower expectation of one million barrels per day may be overstated, given that the company’s production stood at 527,000 barrels in September, according to the Organization of the Petroleum Exporting Countries. At its peak in the 1990s, the South American country, home to the world’s largest reserves, was pumping 3.5 million barrels a day, second only to Saudi Arabia among OPEC members.

Production has also been constrained by naphtha shortages amid sanctions that hampered PDVSA’s options to obtain foreign supplies. As a result, the company has been diverting grades of light crude from eastern Venezuela to facilities that can blend it with heavy oil from the Orinoco region.

Nationally, crude production bottomed out at about 310,000 barrels per day in August 2020, wiping out export earnings and has not returned to pre-sanctions levels.