Venezuela’s problem-stricken oil industry suffered a new blow as the country reported a fresh drop in production to OPEC on Thursday, April 11. With a drop of 77,000 bpd (barrels per day) in March, this brings the decline in production since January to 260,000 bpd, a sharp fall for any producer.
When compared with the 2016 production average of 2.373 million bpd, the average March production of 1.509 million bpd looks particularly low. It is even well under its prescribed OPEC quota of 1.972 million bpd, which, according to Platts OPEC survey data, makes it the most compliant participant in the OPEC-led production deal at 248%.
According to sources speaking to S&P Global Platts, PDVSA, the state-owned oil company, has had difficulties acquiring diluents and other chemicals it needs, maintaining operational refineries, and dealing with a weakening infrastructure. Some refineries are expected to close as they lack crude to process.
There is little good news in sight for the country either, which depends on oil revenue for 95% of its export revenue. Some analysts predict production will drop to 1.1 million bpd by the end of this year and possibly even below a million bpd by the end of next year. What’s more, these estimates may drop further with any new US sanctions, depending on how they are targeted.
Venezuela nationalised its oil industry, along with other sectors, under the rule of late President Hugo Chavez. This sparked a wave of international arbitration cases from asset holders, including from ExxonMobil, the maker of hydraulic oils like Mobil DTE 25.
