The collapse in oil prices and the tightening U.S. sanctions against Venezuela have accelerated the decline of the oil industry in the country sitting on the largest crude oil reserves in the world.
As of May, Venezuela’s rig count plunged to just two, data from Baker Hughes shows, as production slipped by 16 percent to 645,700 barrels per day (bpd), Bloomberg reported on Thursday, citing documents containing production data it has seen.
Of the two active rigs in Venezuela last month, one was working at an oilfield and another one was drilling for gas, according to Bloomberg. Those rigs are working in the Orinoco oil belt, where Venezuela’s state oil firm PDVSA operates oilfields in joint ventures with foreign firms, sources familiar with the matter told Bloomberg.
Venezuela’s oil industry was collapsing even before the oil price crash and the pandemic, due to the increasingly stricter sanctions in the U.S. maximum pressure campaign against Nicolas Maduro’s regime and its sources of revenues. Oil income is pretty much the only hard currency that Maduro gets, so the U.S. is looking to stifle as much of Venezuela’s oil trade as possible.
In addition, PDVSA is severely cash-strapped and hasn’t invested in repair and maintenance of oil facilities and refineries in years.
The price crash and the COVID-19 pandemic further exacerbated the crisis in Venezuela’s oil sector and PDVSA started shutting oilfields because of fewer international customers for Venezuelan oil, Bloomberg reports.
In March, Venezuela had 25 operational oil and gas rigs, according to the Baker Hughes international rig count data.
Venezuela has seen some reprieve recently in its fuel shortage problem, after Iranian tankers shipped gasoline and refining components to the Latin American country in an open defiance of the U.S. sanctions.
Maduro’s regime tried to alleviate the fuel shortage in the country home to the world’s biggest oil reserves, but a new scheme of subsidized gasoline failed to put an end to the long lines in which Venezuelans queued to fill their cars with fuel.