news agency

Venezuela resurrects oil fields with backpacks of dollars

Amid the rusting remains of Venezuela’s once powerful oil industry, a motley crew of shady drillers has accomplished a feat few believed possible: doubling the country’s crude production in the span of a year.

State-owned Petróleos de Venezuela SA has been pumping around 908,000 barrels a day for the past week, according to people familiar with the matter. With crude near $ 75 a barrel, it is a financial lifeline for a nation hit by US sanctions and mired in a seven-year recession.

To reach that milestone, PDVSA has resorted to desperate measures. According to people with direct knowledge of the matter, it is handing out contracts to little-known local companies with the promise of scrap payments or, in some cases, backpacks full of US dollars, as sanctions limit Venezuela’s access to banks.

To reduce his own payroll, he is pressuring those contractors to hire PDVSA workers for short-term projects. PDVSA It did not respond to requests for comment about its production and how it is compensating contractors.

The recovery of production has put within reach of President Nicolás Maduro’s goal of reaching one million barrels a day. For a country with the largest oil reserves in the world, it is not much.

But rising production adds another unpredictable element to an oil market shaken by signs of a COVID-19 resurgence, and Venezuelan Oil Minister Tareck El Aissami, one of Maduro’s main allies, is increasing pressure to ensure that the president’s production target is met.

PDVSA has built new alliances that allow it to increase production”Said Antero Alvarado, managing partner of the consulting firm Gas Energy Latin America. The company with liquidity problems “it is also paying service companies. All this in the midst of high oil prices, sanctions and the gaze of traditional partners who cannot collect the debts from PDVSA”.

To the inexperienced eye, things have not changed much in Venezuela’s Orinoco Belt. The region remains a shadow of the once prosperous center that turned this South American country into a global energy giant. The vehicles that used to transport heavy drilling equipment to drilling areas have mostly disappeared.

Foreign-owned warehouses are desolate and deteriorating. Large dump trucks rumble down the bumpy roads, hauling scrap metal by the ton, pipelines dismantled for sale abroad.

But in the short term, the tactic of PDVSA to increase production seems to be working, albeit slowly. Venezuela’s production of 908,000 barrels a day is close to that of Oman, a minor oil exporter among its Middle Eastern peers. In the heyday of the 1990s, by comparison, Venezuela mined more than triple that.

Venezuelan crude shipments in November exceeded half a million barrels a day for the first time in a year. Although it is not clear where the oil will be shipped, millions of barrels of the country’s crude have surreptitiously landed in China using tactics that include ship-to-ship transfers, shell companies and muted satellite signals.

Many of the companies that drill for PDVSA They work irregularly due to their lack of financial capacity and the delay in cash payments from the state producer, according to people familiar with the matter. The company continues to be plagued by years of mismanagement, underinvestment from foreign partners, and the weight of US economic sanctions implemented under the Trump Administration.

Still, the contractors have stayed on the ground. It’s an improvement over the previous two years, when PDVSA offered to pay in crude or fuel despite the complications that sanctions created for those transactions. PDVSA is concentrating on oil fields that are in relatively good condition, many of which were built and financed by foreign partners who have since stopped work due to sanctions on the Maduro regime.

Oil Minister El Aissami is increasing pressure to ensure that Maduro’s production targets are met. El Aissami frequently visits PDVSA’s José industrial complex in eastern Venezuela, which processes crude into ready-for-export supply. After years of disrepair, the complex has received some recent cosmetic upgrades: resurfaced roads, renovated tanks, and removal of the brush that had been engulfing some of the facilities.

Some observers wonder if Venezuela can sustain rising oil production. The constant production of more than 750,000 barrels per day is “a challenge for PDVSA “, Alvarado said, with frequent fires and other mishaps threatening to cut supply.

The regular supply of Iranian condensate is also key. That light crude allows PDVSA transferring the mud-like oil that is pumped from the Orinoco Belt to blending plants near the coast, where it can be upgraded to a more commercial quality and shipped to markets.

Since July, three freighters with 4.6 million barrels of Iranian condensate have arrived in Venezuela. PDVSA It has not said whether more ships will arrive, but according to Iran’s semi-official Tasnim news agency, Tehran has called for greater cooperation between the two countries on petrochemicals and refining.

While Venezuela focuses on oil fields that are in fairly good shape, dozens of other fields remain closed. PDVSA can still cannibalize them, dismantling pipes, motors and other equipment that it can sell to finance its operations. As long as that happens, the country’s resurgence as an oil superpower will remain a distant dream.

If PDVSA can get enough shipments of Iranian condensate, “there is a high probability that oil production can continue to increase“, said David Voght, managing director of the consulting firm IPD Latin America. “However, the company could end up being a victim of its own success when growing production meets certain infrastructure and operational limitations, which could affect the quality of crude and, consequently, exportability.”.

.

You may also like

Hot News

TRENDING NEWS

Subscribe

follow us