Venezuela has almost doubled its oil production this year from decades last year. This is because state-owned companies have signed contracts to allow more heavy crude oil to be pumped and processed into exportable grades.
The astonishing reversal began when the state-owned Petroleos de Venezuela, known as PDVSA, gained support from a small drilling company by carrying over old debt and later gained a stable supply of major diluents from Iran. I did. The two companies increased their production to 824,000 barrels (bpd) per day in November. This is well above the first three quarters of the year and 90% above the previous year’s monthly average.
It is unclear if it can continue to increase production. Years of unpaid invoices, mismanagement, and more recently US sanctions https://www.reuters.com/article/venezuela-sanctions/us-sanctions-raise-costs-for-venezuela-firms- business-leader-says-idUSL1N2KG2Q8 Reduced access to special drilling equipment and foreign investment. Sanctions have limited customers to companies with no track record of transactions.
PDVSA’s latest profits include reaching 1 million barrels per day for the first time in almost three years, and oil minister Tarek El Isami said in a Christmas day message a “big win”, but now The management’s 2021 target of production has not yet been reached. 1.28 million barrels / day
Workers in the production area say oil fields are continuing to reopen and more flow stations are expected to reopen. However, oil experts say PDVSA is doing everything it can and further profits may be limited by the lack of additional rigs and functioning upgradeers for crude oil like tar. I did.
“Base production in 2021 was well below PDVSA’s capacity,” said Francisco Monardi, director of the Latin American Energy Program at Rice University’s Baker Institute (Houston). “We are now reaching that capacity. To increase production in 2022, we need to invest in new wells and upgrade our infrastructure,” he added.
Helped by allies
The main turning point came from the swap transaction between the state-owned company PDVSA and the Iranian Oil Company (NIOC), which began in September. This proved important for producing exportable grades from ultra-heavy crude oil produced in Orinoco Belt, the highest region of Venezuela.
Hard currency revenues from domestic fuel sales and increased oil exports to Asia also allowed PDVSA to amortize some of its debt with service companies https://www.reuters.com/markets/us / exclusive-venezuela-government-paying-providers-dollars -sources-2021-12-03 And overdue debt, promising future jobs and permission to allow some domestic companies to operate refurbished rigs. Settle.
Some service companies have also accepted in-kind payments, primarily petroleum by-products and residual fuel, sold domestically and internationally, according to people familiar with the matter.
By mid-December, a total of 47 refurbishment and maintenance rigs were active in Orinocobelt, and 29 more rigs were active in other regions, according to PDVSA internal documents confirmed by Reuters. The same report showed the other 19 people who were inactive. The active drilling rig required to build capacity has not been reported.
PDVSA did not respond to the request for comment. The US Treasury, which imposes sanctions on PDVSA, did not immediately respond to requests for comment.
Follow the lost ground
Venezuela reported annual crude oil production of 569,000 bpd last year, with exports averaging 627,000 bpd as PDVSA depleted flash inventories. Official figures do not exclude water present in imported diluents or stored crude oil.
However, independent analysts and experts agree that production has recovered. Consultant firm IPD Latin America predicts that Venezuela’s crude oil production will average between 640,000 and 660,000 barrels per day this year, excluding condensate and natural gas liquids.
In eastern Venezuela, two crude oil projects that have partially recovered production (Petro San Felix and Petrodelta) are seeking funding to continue to increase production, said consultancy Gas Energy’s managing partner. One Antero Alvarado says.
The coiled tubing service company helped quickly reopen wells in the area, two sources said.
“PDVSA has amortized its debt to the provider,” Alvarado added. He also said the company had repaired three of the 750 horsepower rigs imported from China with the aim of revitalizing next year.
In the western region of the country where equipment robbery is rampant, venture-savvy people say at least two separate projects (mature oil fields Tia Juana and Cabimas) are planning to nearly double production in 2022. Told.
Workers on Lake Maracaibo in northwestern Venezuela said, “Production is resumed here. Refurbishment rigs are not resting.” He said some inoperable flow stations are expected to reopen in 2022.
The hurdle remains
Debt repayment delays are expected to remain an important issue. The agreement with the oilfield service company to resume work is fragile and can collapse if PDVSA fails to keep its promise.
“The debt continues to grow as companies pay only a fraction of the amount generated by their monthly service to PDVSA,” said a contractor who asked not to reveal his identity because of fear and retaliation. The executive said.
Workers at another company said his company was working intermittently this year due to payment issues.
In the Orinoco region, where diluents are essential to maintain production flow, the Petromona Gas or Petrosan Felix project will push production beyond current levels to maximize the supply of diluents. Experts say that at least another oil upgrade company will be needed.
The PDVSA infrastructure for discharging and storing diluent is also thin. Crude oil exports have been delayed since regular cargo from Iran began to arrive, according to internal documents. PDVSA also had to employ the long-awaited tanker to store the diluent.
(Reports by Marianna Parraga, Desiy Buitrago, Mircely Guanipa, additional reports by Tim Gardner, edited by Gary McWilliams and Matthew Lewis)
https://www.oedigital.com/news/493120-how-venezuela-pulled-its-oil-production-out-of-a-tailspin How Venezuela Draws Oil Production