Venezuela oil output continues to grow in June
Venezuela’s crude oil production continued to increase in June, according to the latest OPEC report released on Wednesday. Output has been on a trend of slow yet sustained growth for two years.
The July OPEC report said that output rose by 12,000 b/d to 922,000 b/d according to PDVSA, and by 21,000 b/d to 851,000 b/d according to secondary sources. The organisation prefers to use the latter figures for its own calculations.
On 28 June, SP Global quoted a preliminary report by PDVSA which said that crude output had risen by 10,000 b/d to 908,000 b/d that month.
Reuters gathers export data, and found that they were steady at 762,000 b/d in June. The significance is that OFAC General License 44A—to wind down operations from GL 44—ended on May 31st, though it did not seem to cut exports or production.
Based on the OPEC report, the discount of Venezuela’s Merey crude did widen with the WTI global benchmark, from $8.18 to $9.80. Before GL 44, it was above $13. Such numbers do not reflect the real price, but it is useful to notice changes in the gap.
The oil sector and the bond market seem to be approaching this month’s presidential vote with confidence, despite the chances that Venezuela could face instability or renewed sanctions.
Venezuela crude oil output
Joint ventures driving growth
A handful of Western oil corporations seem to be driving most of the growth. As GL 44 expired, some were handed “specific licenses” usually with two-year periods to buy Venezuelan oil or to operate inside the country. The longer authorisations offer greater certainty for firms looking to invest.
At least three companies have a specific license to operate in Venezuelan oil fields: Chevron, Repsol, and Maurel et Prom—there could be others since arrangements are “non-public” and each corporation decides if they want to make an announcement.
Others have slightly different arrangements, given that these specific licenses are not public. Global Oil is authorised to buy bitumen—extra heavy oil—while other companies, like Eni, are allowed to carry out oil-for-debt swaps.
Chevron is operating in two joint ventures, Petropiar in the Orinoco Oil Belt, where it has a 30% stake, and Petroboscan in Lake Maracaibo, with 40%. PDVSA alone owns the remaining stake in both.
According to the report seen by SP Global, Chevron’s JVs produced 182,100 b/d—92,000 b/d in Petropiar and 90,100 b/d in Petroboscan. In September, their output was 135,000 b/d, when they announced a new drilling campaign to add 65,000 b/d by the end of 2024, a target which is almost accomplished by the middle of the year.
According to their own press releases, Repsol is working to add 20,000 b/d of crude this year while Maurel et Prom has announced plans for an extra 33,000 to 48,000 b/d.
Further companies from Europe, North and South America, and India have submitted bids for OFAC licenses to buy Venezuelan hydrocarbons or operate fields, and many have already signed contracts with PDVSA, while they await permission from Washington DC.
Of the 908,000 b/d output, 54,000 b/d are imported diluents and 47,000 b/d are locally-produced condensates. These are important to extract and refine Venezuela’s trademark heavy oil.
The US and Spain have become the South American country’s top providers of crudes after replacing Iran last year. SP Global’s shipping data shows that in May the US exported 51,000 b/d of naphtha to Venezuela, while in June Spain sent 23,000 b/d.
The trend for the year
We are now starting to see the results of the new environment: specific licenses from the US, and PDVSA’s new contractual framework. It would not be difficult to expect continuity until the end of the year. While elections are due this 28 July, the inauguration would be in January, and the Biden administration first faces a contested vote in November.
Output is not boosting upwards, which it could do if unbridled from internal and external constraints, given the vast, easily accessible reserves. The 3.2 million b/d peak of 1997 is also far. There is nonetheless steady growth, laying a stronger foundation if there are more moves to unlock the sector.
Production figures are still below target—1.02 million b/d in June, in order to reach 1.24 million b/d by December. Notwithstanding, the mythical line of 1 million b/d is now closer than ever since February 2019.
