World oil markets braced as Venezuela production hits 7-decade low
Venezuelan crude oil production sank to a 68-year low in February amid fears the country's economic collapse could soon rattle global markets.
Figures published by oil exporters group OPEC on Wednesday show that Venezuelan output plunged 183,000b/d in February to 1.586Mb/d based on direct communication.
The South American nation, which has the world's largest proven oil reserves, has seen production dip by more than 1Mb/d since 2015. Its 2017 average of 2.072b/d was the country's lowest annual figure for almost three decades.
February production was even leaner from OPEC's secondary sources, falling to 1.548Mb/d.
Not since 1950 has Venezuela pumped less crude, according to Baker Institute Latin American energy policy fellow Francisco Monaldi, who warned of likely repercussions both locally and abroad.
"The energy sector's downfall will have important implications for world oil markets and global geopolitics, given the key role that Russia and China could increasingly play in the Venezuelan energy sector," Monaldi said in a new report published by the Atlantic Council.
He added: "A further decline in Venezuela's production would eliminate world surplus demand more quickly than expected, putting upward pressure on oil prices. Eventually, that would likely lead to more production by other OPEC countries with spare capacity, and by the United States. However, heavy-oil price discounts would shrink, as there would be a shortage of this type of oil."
Monaldi said that dwindling crude output would also likely deepen the South American country's economic depression and humanitarian crisis, even if oil prices continue to rebound.
Venezuela's energy sector has been throttled by endemic corruption, insufficient investments, payment delays and an exodus of skilled workers.
President Nicolás Maduro (pictured) blames the decline in output on "acts of sabotage" by political opponents and US sanctions that have limited financing for state oil company PDVSA.
'BLEAK' OUTLOOK
The combined effect of falling hydrocarbon output and lower international crude prices has drastically reduced the government's main revenue source and left it unable to service its debt, which stands at about US$150bn, according to the Institute of International Finance.
Around a third of that debt is held by PDVSA, which S&P Global Ratings placed in selective default in November after it failed to make interest payments.
Locked out of financial markets due to sanctions, the government has been forced to print more money, fuelling hyperinflation and aggravating shortages of basic food and medicines.
Monaldi expects oil production to fall further in the coming months as Venezuela prepares for presidential elections that have been widely rejected by the international community.
"Venezuela's 2018 outlook for oil production is bleak," he said. "PDVSA will continue to face severe cash-flow problems even in the best price scenario. Production is likely to decline by 250,000 to 350,000 b/d by December, and by much more in the case of a full-blown default or additional sanctions."
Subscribe to the leading business intelligence platform in Latin America with different tools for Providers, Contractors, Operators, Government, Legal, Financial and Insurance industries.
News in: Petrochemicals (Venezuela)
The 10 Latin American countries expected to grow fastest in 2020
The IMF has made a downward revision to its GDP forecast for the region for 2019, but expects growth to accelerate next year, driven by strengtheni...
The Best of BNamericas Week
Fresh oil rounds, the increasing deterioration of the Argentine economy and growing fears over a conflict between Colombia and Venezuela. It has be...
Subscribe to Latin America’s most trusted business intelligence platform.
Other projects in: Petrochemicals
Get critical information about thousands of Petrochemicals projects in Latin America: what stages they're in, capex, related companies, contacts and more.
- Project: Expansion and Modernization of the Ethane Chain of Derivatives I at the Morelos Petrochemical Complex
- Current stage:
- Updated:
3 years ago
- Project: Petrochemical Suape
- Current stage:
- Updated:
2 years ago
- Project: Santa Fe Sodium Methylate Plant
- Current stage:
- Updated:
7 years ago
- Project: Polyethylene Verde (In Operation)
- Current stage:
- Updated:
7 years ago
- Project: Butadiene Plant
- Current stage:
- Updated:
7 years ago
- Project: Alagoas PVC Plant
- Current stage:
- Updated:
2 years ago
- Project: Etileno XXI Petrochemical Complex
- Current stage:
- Updated:
3 years ago
- Project: Cellulosic ethanol plant
- Current stage:
- Updated:
2 years ago
- Project: Ivinhema Ethanol and Sugar Processing Plant
- Current stage:
- Updated:
2 years ago
Other companies in: Petrochemicals
Get critical information about thousands of Petrochemicals companies in Latin America: their projects, contacts, shareholders, related news and more.
- Company: Petrocoque S.A.  (Petrocoque)
-
The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
- Company: Mosaic Fertilizantes do Brasil Ltda.  (Mosaic Brasil)
-
The description included in this profile was taken directly from an official source and has not been modified or edited by the BNamericas’ researchers. However, it may have been...
- Company: Air Liquide Chile S.A.  (Air Liquide Chile)
-
The description included in this profile was taken directly from an official source and has not been modified or edited by BNamericas’ content team. However, it may have been au...
- Company: Noracid S.A.  (Noracid)
- Company: Renovae SRL  (Renovae)
-
The description included in this profile was taken directly from an official source and has not been modified or edited by the BNamericas’ researchers. However, it may have been...
- Company: Unión CubaPetróleo  (CUPET)
-
Unión Cuba-Petróleo (Cupet) is a Cuban state-owned company involved in production, refining and distribution of petroleum products. The firm was founded in 1992 after the merger...
- Company: Mecánicos Asociados S.A.S - MASA STORK  (Mecánicos Asociados)
-
MASA and STORK, with more than 35 years of experience in the hydrocarbon, petrochemical, power, industrial and mining sectors worldwide are dedicated to manage the integrity of ...
- Company: Casaval S.A.  (Casaval)
-
Casaval SA is an equipment supplier and distributor of accessories for the Colombian industry regarding the conduction of fluids and essential products in the assembly and maint...
- Company: Styrolution Mexicana S.A. de C.V.  (Styrolution Mexicana)
-
The description included in this profile was taken directly from an official source and has not been modified or edited by the BNamericas’ researchers. However, it may have been...
- Company: Solenis México