In Oil & Companies News 11/08/2016
Venezuelan oil production has declined again, to slightly over 2 million barrels a day, its lowest output levels in about forty years, complicating the political and economic crisis even further, according to analysts.
Venezuela possesses the world’s largest known oil reserves: 297 billion oil barrels. The late Venezuela President Hugo Chavez liked to say “oil for the next 300 years.” Still, production declined by almost 20% in less than two years. What happened?
DISTANT EARLY WARNING
A month ago, a dispatch from the Associated Press quoted members of the U.S. intelligence community saying that, after key oilfield service providers such as Schlumberger and Halliburton were quitting the country for non-payment, Venezuela’s oil production would decline to below 2 million b/d for the first time since the 1976 nationalization of the oil industry by Carlos Andres Perez.
Venezuela in July produced just 2,095,000 thousand barrels a day, the lowest in several decades, OPEC said Tuesday in its Monthly Oil Market Report (MOMR) August 2016 report.
And, even more worryingly, Venezuela did not report its figures. OPEC provides two types of oil production figures: one based on country submissions, which Venezuela did not submit for July and a second calculated by their auditors, using shipping reports, company reports, wire services, unions, local newspapers and analysts.
When Hugo Chavez took over in 1999, Venezuela was producing around 3.2 million barrels a day. However, a decline in production began, triggered by the mass firing of the national oil company Petroleos de Venezuela, S.A. (PDVSA) skilled work force and replacement by government loyalists, nationalization and expropriation of some key Exploration & Production operations, and failure to keep investments up.
Record oil prices for the 2004-2014 period meant that Venezuela could hide the destruction of its industry.
According to a recent report by Canada’s free-market think tank The Fraser Institute, what the government does with oil is extremely important for everyday Venezuelans. “In Venezuela, more than 50% of the government’s revenue derives from oil production; thus, the government is the de facto owner of the oil wealth, resulting in the citizens’ dependence on the government for sustenance,” authors Robbie Butler, John Considine, Hugo J. Faria, Hugo M. Montesinos-Yufa, Dean Stansel, and Meg Tuszynski wrote in this week’s “Changes in Economic Freedom in Venezuela, Ireland and The United States”.
Production started declining under PDVSA head Rafael Ramirez, with critics citing a lack of oversight as another reason: Ramirez was the first man in the history of Venezuelan oil to simultaneously hold the posts of Energy Minister and President of state oil firm PDVSA. “He is regulator and oilman” was the common complain during those days.
The decline in production for Venezuela goes against the grain, according to OPEC’s latest report. “In July, OPEC production increased by 46 tb/d to average 33.11 mb/d, according to secondary sources”, the organization stated.
Worse, according to Saudi Arabia’s submitted July production figures, the oil rich Arab nation — which has smaller oil reserves than Venezuela — saw its production rise 123,000 bpd to 10,673,000 bpd.
Source: Latin American Herald Tribune
