Venezuela’s oil and gas sector is truly nearing its collapse, with the Covid-19 pandemic accelerating its destruction despite world-scale resources, Kallanish Energy reports.
The South American nation holds the world’s largest conventional oil reserves at 302.8 billion barrels, and also one of the biggest natural gas reserves at 5.67 trillion cubic meters. The petroleum sector accounts for over 90% of export revenue.
Chronic underinvestment, mismanagement, and a political agenda have been hurting the Venezuelan hydrocarbon industry for years. Pain was aggravated last year when the U.S. imposed sanctions on Venezuela’s oil trade – its main source of revenue.
GlobalData O&G analyst Adrian Lara said in a note on Sunday that it’s fair to assume that for most international companies still operating in Venezuela, the best scenario would be to wait for a change in government.
However, the political situation in the country seems to be going nowhere in the near future, “and even with a change of regime, the oil and gas sector will require many years to recover,” he warned.
Venezuelan crude oil production has reached its bottom in May when only one rig was operating and producing around 570,000 barrels per day (Bpd). This reflects the result of lower global oil demand due to the pandemic and the tightening of sanctions, which reduced Venezuela’s export capability to its worse level to date, the analyst said.
“Lower exports have led to an increase in the storage capacity utilization of the country, which has a peak operating capacity estimated at less than 40 million barrels,” Lara said. “In consequence, the Orinoco Belt has experienced additional production cuts. Production in this area is currently estimated at 161,000 Bpd – already three times lower than in 2019.”
The outlook for natural gas isn’t healthier, despite the promising projects announced to develop its vast offshore reserves. During the last five years, the Venezuelan government struck deals with Russia’s and Trinidad and Tobago’s counterparts putting some major projects back on track.
However, after the worsening of the political and economic climate in the country, Lara said these projects are currently on hold. It’s unclear when they would potentially resume.
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