Venezuela’s PDVSA Cuts Back on Oil Production
Venezuela’s state-owned oil company, PDVSA, has started to reduce its crude oil output. This move comes in light of a U.S. oil blockade that has left exports at zero and has strained storage capacities, putting additional pressure on the transitional government that is grappling with U.S. threats of potential military action.
Caracas finds itself in a political turmoil following the detention of President Nicolas Maduro and his wife by U.S. forces over the weekend. The main source of income for the country—oil exports—has effectively stopped due to U.S. sanctions limiting tanker activity and the recent seizure of two oil shipments.
There was, however, an exception for a Chevron cargo headed to the U.S., which continued to be shipped as it had authorization to do so from Washington. Yet even those shipments have reportedly ceased as of Thursday, according to recent shipping data.
PDVSA is now shutting down various oil fields and well clusters as onshore oil inventories swell, worsened by a shortage of diluent needed to process Venezuela’s heavy crude for export.
During the announcement of Maduro’s detention, U.S. President Trump stated that an “oil embargo” on Venezuela is firmly in place.
To cope with the rising inventory, PDVSA is asking joint ventures, such as China National Petroleum Corp.’s Petrolera Sinovensa and Chevron’s Petropia, to cut back on their production levels, as sources indicate. Petromonagas, once a joint operation with the Russian state-owned Rosalvezhneft, is now solely managed by PDVSA.
With no immediate comments from PDVSA or CNPC, Chevron has mentioned that it maintains compliance with legal guidelines but didn’t elaborate further.
Workers at Sinovensa were preparing to take offline up to ten well clusters, responding to PDVSA’s directives due to excess accumulation of extra-heavy crude alongside a diluent shortage. Interestingly, these wells could potentially be reactivated soon, according to one official.
Typically, a portion of Sinovensa’s production goes to China as a repayment for debt. Nonetheless, two Chinese supertankers that were en route to load oil halted their approach in late December, as indicated by shipping data.
Meanwhile, employees at Petromona Gas had begun to scale back production late last week, awaiting the resumption of diluent supplies through pipelines.
As for Chevron, it hasn’t lowered production yet, mainly because it still has storage options available at Petropia and hasn’t ceased tanker loading. However, ships have not departed Venezuelan waters since Thursday, and limited storage at Petrovoskan could eventually force reductions, according to sources.
Although PDVSA wasn’t the target of the recent U.S. military actions, it still faces significant operational challenges, compounded by U.S. blockades and recent cyberattacks that have hindered full functionality.
Reducing oil production might trigger a ripple effect across other sectors, including refining and domestic fuel supplies, and this spells bad news for the transitional government, which heavily relies on revenue for stability and power retention.
Venezuela’s oil minister, Delcy Rodríguez, who is also acting as the interim president, claimed last month that oil production and exports would continue despite U.S. demands.
However, with ongoing U.S. pressures, PDVSA has been stacking up oil on ships since late December, causing delays in shipments from the main port of Jose. Company experts believe that if tanker loading does not resume, further cuts in production are simply unavoidable.
According to TankerTrackers.com, there were no tankers at the Jose port available for loading either for export or domestic use on Sunday.
In the latter half of 2022, the company had significantly increased its imports of naphtha and diesel to dilute extra-heavy crude production but encountered issues in December receiving necessary cargo from Russia due to the U.S. economic blockade.
While Venezuela reportedly produced around 1.1 million barrels of crude daily in November and exported approximately 950,000 barrels, those numbers dropped to about 500,000 barrels daily last month amid the ongoing U.S. measures.
