Venezuela Oil Production Plummets To 28 Year Low Amid Chaos, Corruption

Submitted by Herman Wang of Platts

Staggering debt, crumbling equipment and infrastructure, and mass worker resignations, have set back Venezuela's oil industry decades, with experts saying they see scant prospects of any turnaround.  Venezuelan crude output plummeted in December to 1.70 million b/d, according to the latest S&P Global Platts OPEC survey released Monday.

The output level represented a decline of 100,000 b/d from November and a low not seen for more than 15 years, when a major strike from December 2002 to February 2003 hobbled production. Not counting strike-affected months, Venezuela's production was last this low in August 1989, more than 28 years ago.

Sources in the country say new PDVSA President Manuel Quevedo, a brigadier general in the National Guard who was also named the country's oil minister in November, sacked several high-level company officials in a so-called corruption purge at the end of the year and these people have yet to be replaced.

PDVSA is also facing internal protests and widespread resignations of refinery personnel who fear a serious accident, since security protocols are not being followed, added the sources, who spoke on condition of anonymity. Several market watchers have put Venezuela top of their geopolitical risk lists, with the economic crisis and PDVSA woes seen likely to continue, if not accelerate, amid threats of further US sanctions.

"The Venezuelan economy could collapse at any moment," said Torbjorn Kjus, oil market analyst with Norway's DNB Bank. "We could envisage scenarios spanning from outright civil war to a state coup, to a general strike or even just one more year of strangulating slow death for the economy. Neither of these outcomes bodes well for Venezuelan oil production."

Service company Baker Hughes, which tracks rig counts internationally, reported this week that Venezuela had 50 rigs drilling in December, up from 39 in October, which had been the fewest since 2003 during the worker strike.

Einstein Millan, an independent Venezuela-based analyst who formerly worked for PDVSA, estimated that the company would need 100 to 110 active rigs to reverse its production decline, let alone achieve a presidential directive of increasing oil output by 1 million b/d. The rig pullback and accelerating field decline rates will cause Venezuelan oil production to fall by another 300,000 to 400,000 b/d in 2018, analysts with Washington-based Rapidan Energy forecast.

The scarcity of rigs is only part of Venezuela's problem. There is evidence of advanced stages of corrosion and deterioration in much of the country's operational infrastructure, including pipelines, gas compression plants, crude upgraders, storage facilities and refineries.

Analysts with Washington-based ClearView Energy Partners noted Monday in a report that PDVSA's capital expenditure dropped from $25 billion in 2014 to $11 billion in 2016, according to its financial statements.

"Given the country's cash shortage, we would not be surprised to see PDVSA capital expenditures fall further when the company reports 2017 data," the analysts wrote.

Venezuela's troubles have already opened the door for other oil producers, such as Iraq, Mexico and Canada, to take its market share.


For months already, Venezuela's refineries have been short of crude to run anywhere near full capacity, with S&P Global Platts Analytics estimating that December throughput was about 400,000 b/d "after multiple outages and lack of feedstocks."

The 955,000 b/d Paraguana Refining Center in northwest Venezuela was operating at 336,000 b/d, or 35.2% of capacity, last week, according to a technical report seen by S&P Global Platts. Several units have been offline due to damage that PDVSA has been unable to repair. A fire also hit a distillation unit on December 29.

The 140,000 b/d El Palito refinery remains shut for lack of crude to process, according to an operator, who spoke on condition of anonymity, and the 187,000 b/d Puerto La Cruz refinery is operating at low levels, also due to lack of crude, according to union officials, though no figures were available.

US naphtha sources have said that Venezuelan interest in purchasing reformer-grade naphtha - largely used to produce high-octane gasoline components - from Gulf Coast sources has waned in recent weeks, a sign of refinery troubles.

Millan said the refineries have seen several worker protests in the last few months, with more employees likely to quit in the weeks ahead.  "The level of internal tension is such that the risk of accidents due to inappropriate management of systems, equipment and installed infrastructure has escalated to really critical levels, which could lead to catastrophic scenarios," he wrote in a recent report.

The shortage of crude to process has forced PDVSA to increase its purchases of refined products in the international market to supply domestic consumption. At the end of 2017, the company began negotiating directly with traders to exchange gasoline, diesel, naphtha, butane and other products for crude deliveries in January, according to a source from PDVSA's Trade and Supply Department, speaking on condition of anonymity.

PDVSA has also been selling natural gasoline ("C5") on the US East Coast, with Vitol taking 165,000 barrels aboard the Norient Solar at New York December 27 and PetroChina taking 164,000 barrels aboard the Elka Eleftheria two days later at Newark, New Jersey, market sources said.

C5 is often used to dilute heavy crude, and the sales suggest PDVSA lacks crude to dilute for its refineries.

"They need dollars for sure," a US refined products source said last week of the C5 deals.


Venezuela's problems have been compounded by US sanctions, including restrictions on trading new debt and equity, which hamstring PDVSA's efforts to restructure its crushing debt load. PDVSA is close to $90 billion in debt and has come close to defaulting on several recent payments.

The US administration of President Donald Trump imposed the sanctions after Venezuelan President Nicolas Maduro convened a controversial Constitutional Assembly last summer amid a deadly crackdown on opposition protesters.

Trump officials have said the administration reserves the right to issue further penalties, including potential bans on sales of US oil products to Venezuela or restrictions on Venezuelan crude exports, if it sees continued political repression and corruption.

Maduro last week announced that Venezuela would in the coming days issue 100 million "petros," a bitcoin-like cryptocurrency backed by the country's oil resources, to help bypass the sanctions restrictions on its debt.

Each petro is to be worth the value of one barrel of oil, though experts have doubted that investors will be eager to adopt it. Leading Venezuela through its oil crisis is Quevedo, 50, who despite having no apparent experience in the industry, has been directed to restructure PDVSA and increase Venezuela's oil production by 1 million b/d. Details of this plan are scant.

Sources have told S&P Global Platts that one model being studied involves PDVSA giving up partial interests in a refinery or projects involving extra heavy crude or national gas in exchange for financing or loans that would be repaid with crude or refined products.

But except for a few Russian and Chinese companies, the preferred partners and allies of the Venezuelan government, it is difficult to identify companies disposed to invest without guarantees that their assets and profits will not be confiscated when and if crude prices rebound and the government suddenly decides it does not need to share the wealth.

Quevedo, whose Twitter account largely retweets nationalistic fervor from Maduro and other government officials and offices, had little to say to journalists at the last OPEC meeting November 30 in Vienna. He is scheduled to attend a January 21 meeting in Oman of the OPEC/non-OPEC monitoring committee, of which Venezuela is a member.

Venezuela's declining production has made it the most compliant -- if unwillingly so -- member of the 24-country OPEC/non-OPEC coalition that has implemented output cuts to help prop up prices.

Venezuelan crude shipments to the US, its largest export destination, fell 1.7 million barrels from November to December, according to US Census data. Its average production of 1.897 million b/d for 2017 was below its quota under the deal of 1.972 million b/d, making it 179% compliant, according to S&P Global Platts OPEC survey data.


Moe Howard Easyp Wed, 01/10/2018 - 07:13 Permalink

Well, you'll work harder
With a gun in your back
For a bowl of rice a day
Slave for soldiers
Till you starve
Then your head is skewered on a stake

Now you can go where the people are one
Now you can go where they get things done
What you need, my son...
What you need, my son...

Its a holiday in Venezuela
Where people are dressed in black
A holiday in Venezuela
Where you'll kiss ass or crack

In reply to by Easyp

BritBob Wed, 01/10/2018 - 04:58 Permalink

Meanwhile in the South Atlantic,

By a ruling of the UN, Argentina will extend its maritime platform (Politica Argentina) ; New map of the maritime platform reaffirms the sovereignty of Malvinas with UN endorsement (ElCronista); Argentina enlarges its territory 35%, with a UN endorsement ...(La Capital).To add to this euphoric atmosphere the Argentine Foreign Minister stated, ''This is a historic opportunity for Argentina. We have taken a great step in the demarcation of the outer limit of our continental shelf; the most extensive boundary of Argentina and our border with humanity,'' Foreign Minister Susana Malcorra told La Nacion, which tomorrow will publicly announce the details of this resolution. (Susana Malcorra, quoted by Dinatale M, La Nacion, Argentina, 27 March 2016).


But what did they say...And what does international law say about ownership of natural resources?

Argentina's Continental Shelf Claims and The UN CLCA Commission (1 page):-

Sid Davis Wed, 01/10/2018 - 05:04 Permalink

Socialist workers paradise, coming to a nation near you soon.

This is what you get when you adopt the societal values devised by the psychopath, Karl Marx.

wesson Wed, 01/10/2018 - 05:22 Permalink

Venezuela declining production is a direct cause of the USA economic blockade of the country, hampering the necessary maintenance of the infrastructure, and prevent Venezuela from realise a good part of the value added by refining.


So their production shortage is not a result of socialism or whatever, but consequence of USA policies.


Yet Venezuela hasn't collapsed, and will not collapse in a foreseable future, as both China and Russia support them.


Needless to say also that Venezuela managed to repay 74 billion of their external debt the last year only, in perfect due time.


In the meantime, their oil backed cryptocurrency is steadily progressing.

To Hell In A H… TBT or not TBT Wed, 01/10/2018 - 07:03 Permalink

Where did you hear that from? Fox News? Regurgitation is the best you fools can do. In 1995 10% of the USSA public had a passport. Today that figure is a paltry 41%, compared to 76% in the UK. The USSA figure is even more depressing given the number of immigrants you have, who travel abroad to visit relatives. 

The point I'm making is that you Yanks have all the opinion's but your worldly experience as a nation is fucking shit. You guys do not travel the world and know little of it from your Wyoming small town armchair, yet have the opinion on how other countries work and function.

You heebs talk of other nations and their economic models, without acknowledging the irony the USSA is the biggest thief and parasite nation in the last 100 years. The dollar as world reserve currency. The Petrodollar scam. Commodities priced in dollars. The IMF and World Bank are based where? Your understanding of economics is seriously limited. You still talk in terms of outside investment for Venezuelan oil. You just don't get it.

In reply to by TBT or not TBT

TBT or not TBT To Hell In A H… Wed, 01/10/2018 - 07:14 Permalink

Indeed we just don't get Venezuelan oil, or not like we used to.  See, production declined, for lack of investment.  It seems there was a demagogue, voted in by the majority, looting the national oil industry to buy votes and to stash some of that for friends and family too.  Democracy!   Stealing from the productive and prudent since Athens tried it the first time.        

In reply to by To Hell In A H…

Moe Howard To Hell In A H… Wed, 01/10/2018 - 07:24 Permalink


Let me see, if you live in a pissant country the size of a postage stamp you may need a passport to go to get milk.

I can drive for days and never cross a border.

Many places outside the USA that Americans go to do not require a passport.

You seem to be an arrogant fuck who has little real world experience.

BTW, I have had a current passport for literally decades.

I am sure I have traveled more places and lived in more countries than you.

Seems you are the dickhead that doesn't get it.

In reply to by To Hell In A H…

fingulas Moe Howard Wed, 01/10/2018 - 09:21 Permalink

Also, up until recently a military Id substituted as a passport in dozens of countries.   Mexico and Canada could be entered without the use of a passport.

So we could basically travel more than half the western hemisphere without one...might have had something to do with the lack of need for one.

I could also grab a visa just by arriving in most countries I cared to visit.  So a U.S. passport was a handy thing to have but in no way a necessity.



In reply to by Moe Howard

Advoc8tr Moe Howard Wed, 01/10/2018 - 10:36 Permalink

There is not a country in the world that does not require a passport to enter ... you are talking about a VISA.  Furthermore you ain't leaving the USA on any international transport without showing your own government your passport first.  I think you just proved his point.

In reply to by Moe Howard

wesson steve golf Wed, 01/10/2018 - 10:40 Permalink

Because for some extent US sanctions do operate.


Wait until they end up replacing their infrastructure with Russian or Chinese solution and you'll see the production figure going up again.


On the other hand, their production is mandatory also for US, especially to refine lubrificants for which their heavy petroleum is very suitable. So if it's getting nowhere near a regime change, US will be eventually forced to release the pressure and allow the Venezuelian gov. to purchase replacement parts they need.

In reply to by steve golf

szponiasty Wed, 01/10/2018 - 05:26 Permalink

Meanwhile, mainstream media and alt-media blame socialism, even that all problems started EXACTLY THE SAME way, at EXACTLY THE SAME TIME, as Maidan in Ukraine. And the downfall of the country is not "socialism", but economic pressure, and sanctions imposed on Venesuela, by USA, since failed maidan-like coup in 2014.

To Hell In A H… Wed, 01/10/2018 - 05:40 Permalink

So we have a Jewish analyst quoted in the article how Venezuela's oil refining and oil drilling is going to the shitter. He's also reporting of mass resignations in a country where it is reported the economy is going to shit, there is no food and a lack of jobs all around?(a stunning piece of logic displayed by the resigning workers in a country unionized up to its gills) 

At least the article states Venezuela, despite being as democratic as any nation, is on the end of USSA sanctions, which is the first time a ZH article as attributed some blame and mitigation to the demise of the Venezuelan oil industry. It's nothing to do with democracy, as seen with USSA relations with Saudi Arabia and other despots. This is a longterm play to control Venezuelan oil. 

Again I decry to the fucking heavens, praying for most of the ZH retards to see the obvious and change tack and gybe. Venezuela is under attack by the same enitity that has scalped Greece, the same enitity that fucked over and scalped Ukraine, left the most prosperous country in (Africa) Libya a complete mess  and a gateway for Africans into Europe, you know what they did to Syria including creating ISIS, it is the same forces behind the European refugee crisis, it is the same forces behind the Sudan catastrophy, it is the same forces behind the Congo civil war that has taken over 5 million lives, it is the same entity that has got Trump tweeting about Iran fostering internal decent from the outset. 

Go on retards, blame socialism and ignore the real cause. Admit it guys, how long have I been blaming the demise of Venezuela on the money-changers with their economic sanctions? From the very beginning. There is one thing even my detractors have to admit. I am very consistent with my views and 9/10 proven correct.




TBT or not TBT To Hell In A H… Wed, 01/10/2018 - 06:45 Permalink

Democracies are generally tyrannical.   Majorities thieve and repress minorities.    That's why a great deal of what government can do to, and for, the people must be limited to upholding their natural individual rights, IN SPITE of what majorities may vote demagogues to do to various minorities.    Venezuela was too democratic and thieved from the prudent and productive.    

In reply to by To Hell In A H…

gwar5 Wed, 01/10/2018 - 05:58 Permalink

Higher prices and more $$ for the USA as the new energy hegemon. Deal with it Maduro before your people hang you upside down.

nmewn Wed, 01/10/2018 - 07:01 Permalink

Man, Bandy X Lee could diagnose her little heart out until she retired on this know...if she had an actual place to practice, like an office with a couch.

Oil workers are striking & walking off the job because de eeebul zionist Americans won't sell them a screwdriver to fix de rusted out, broken down, death trap oil rigs?

You see, its NOT because Maduro in his infinite socialist dogmatic wisdom appointed a friggin brigadier general as his oil minister, which runs PDVSA, the STATE owned oil company.

Yep, Bandy would have a field day here all right, deciphering the idiocy...if she weren't a dogmatic socialist as well ;-)

youngman Wed, 01/10/2018 - 07:19 Permalink

If you think Venezuelas troubles are because of the USA....stupid....their crap does not work because the Chavez and Maduro gang stole the money to fix it...and if they did order a part from you....they would not pay for that a couple of times and guess more parts shipped..and now they have a Military General in charge....with no Petro do you think that is going to is the key problem..and its run out of other peoples money...they took all the private firms over....Exito a Colombian verson of WalMart used to be there..but Maduro said they were charging to much and took them they are vacant...good job reducing the prices to nothing...meaning nothing is available...starve until you figure out what you voted for was a mistake

Arrest Hillary Wed, 01/10/2018 - 07:53 Permalink

Flood the market with cheap shit crude .... prices are rising .... Venezuela is not going to run out of cheap shit crude .... that minor moon impact crater Maracaibo was a deep hole .... and a magnet for flora bearing silt .... olives going to the pressure presser .... ahead of it's time .... geologically speaking .... milk it, you socialist pigs .... can't you do anything right ?

surf@jm Wed, 01/10/2018 - 08:46 Permalink

Lets see.....

The people of Venezuela voted for marxism, and then their marxist leaders jumped in bed with the marxists of Cuba, basically looting and destroying the country......

How many democrats in this country are marxist Cuba lovers?......