Our Global Americans* International Advisory Council member Fransisco Monaldi comments about the current oil production situation in Venezuela in light of the new Chevron deal. An interesting read for us in light of the impossible task it seems to find an operator for Curaçao’s refinery.
Just seven years ago, Venezuela was pumping some 2.5 million barrels of oil a day, much of it zipping across the Caribbean to U.S. refineries. The current output is less than 700,000, nearly all of it passing through murky sanctions-busting channels to China.
Restoring those missing 1.8 million barrels sounds alluring in today’s climate. The Biden administration has inched in that direction lately, clearing Chevron for some exports that were blocked by Donald Trump’s maximum pressure policy.
Unfortunately, restoring Venezuela’s petro might quickly is also a fantasy. Chevron (ticker: CVX) may eke an extra 150,000 barrels a day over the next two years out of joint ventures with state oil company Petróleos de Venezuela, says Francisco Monaldi. “After that, you need investment.”
Lots of investment. A Venezuelan opposition study reckoned it would take at least $70 billion and six years to return output to two million barrels daily.
Trump’s 2019 sanctions were just the final act of a tragedy that Nicolás Maduro’s regime inflicted on itself through massive looting and neglect of its oil cash cow. “Hundreds of billions were stolen over the years from PDVSA,” says Ryan Berg, director of the Americas program at the Center for Strategic and International Studies. Venezuela’s $60 billion debt default in 2017 choked off fresh financial oxygen.
Unlike the Middle East’s desert gushers, Venezuelan crude is dispersed among small wells that run dry at a rate of 15% to 20% a year, Monaldi explains. At this point, there is little oil readily left to pump. PDVSA’s once-crack engineering cadre dispersed globally after salaries fell to nearly nothing.
Then there is the political side of things. Biden’s Chevron carrot was implicitly linked to revived talks between Maduro and his mostly-exiled opposition. The ultimate goal is a legitimate presidential election in 2024; Venezuelan watchers will believe that when they see it. “I’ve seen almost a dozen of these negotiations,” Berg says. “Maduro has pulled the same crap every time.”
*Alex Rosaria is a member of the U.S.-based Think Tank, Global Americans.