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Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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International Oil Companies Are Giving Up On Venezuela


Despite huge oil reserves waiting to be tapped, the ongoing sanctions on Venezuelan oil and the current state of politics and the economy are driving international oil majors away from the Venezuelan energy market.

International companies are starting to give up on Venezuela, which has the world’s largest proven oil reserves standing at 304 billion barrels, as U.S. sanctions and the political state of the country present too much risk to ongoing investment. 

This summer, both TotalEnergies and Equinor divested their interests in Venezuelan state-owned Petrocedeno, leaving PDVSA with all of the equity, in a move that suggests they are giving up on their stake in the Latin American oil giant after decades of investment. 

Petrocedeno operates in the Orinoco Belt of Venezuela, producing extra-heavy crude, which it transports to be upgraded and blended to become a lighter crude, suitable to export. 

TotalEnergies blamed the inability for operations in the Orinoco Belt to meet the company’s new environmental criteria for its withdrawal, as Total pledges to invest only in low-carbon oil projects going forward. 

Equinor also avoided blaming U.S. sanctions or the state of Venezuelan politics for its withdrawal, instead citing its focus on international core areas and prioritised geographies where Equinor can leverage its competitive advantages as the reason.  

But if oil majors stop their investments, due to the current state of the national economy Venezuela will no longer be able to sustain its oil and gas industry, seeing billions of barrels of oil left in the ground. A decrease in the country’s oil production, which dropped from around 2.03 million bpd of oil in 2017 to just 480,000 bpd in 2020, saw Venezuela contend with fuel shortages and a damaged economy. 

Svetlana Doh, an upstream oil and gas analyst at GlobalData, explains of the fuel shortage situation and response, “Petrocedeno upgrader is planned to be re-designed to produce naphta as a feedstock for refineries. This essentially means that refineries in the country are in such a desperate need for renovation or even simple upkeep, that now upgraders have to perform a refining step for them.” 

In addition, “The conversion of the upgraders could be very challenging, as it would require new equipment, while cash-strapped PDVSA can barely find the funds to conduct an elementary maintenance of its refineries. The continuous drop of crude oil production in Venezuela, which is a major pillar of the country’s economy, combined with sanctions imposed by the U.S. Government, the Covid-19 pandemic, corruption in the government, and lack of investment have led the country to collapse,” Doh stated.

Even before the change in Venezuela’s oil industry landscape took place this summer, production figures plummeted due to a shortage of dilutants required to blend the extra-heavy crude, making it suitable for export. In August, output in Orinoco dropped by a quarter to below 300,000 bpd. The shortage occurred because of the decision to use medium and light crudes to manage the country’s motor fuel scarcity instead of prioritizing diluting its heavier crude. If the country has to continue this strategy to stay afloat, it could have a dramatic impact on its output and export figures for the rest of 2021.

State-owned Petroleos de Venezuela (PDVSA) changed tact last month when it imported 620,000 barrels of the dilutant condensate to support its oil refining industry. PDVSA is also considering the use of synthetic crudes to keep output levels up as Venezuela’s import options are limited due to U.S. sanctions on the country’s oil and gas industry.

One of Venezuela’s few hopes is emerging oil power China. Expected to keep international oil demand high over the next decade as European and American counterparts shift away from fossil fuels towards alternative forms of energy, China is aggressively pursuing new oil ventures. 

As Venezuela’s oil industry hits its worst challenges ever, with U.S. sanctions restricting the country’s energy exports and imports, and international oil majors withdrawing, China has spotted its opportunity to increase its presence in Latin America, filling the void that the U.S. left behind. 

As China looks set to surpass the U.S. to become the world’s largest refiner and importer of crude oil this year, the country appears willing to ignore U.S. sanctions on both Venezuela and Iran to fuel its oil demand. And in April and May this year, China Concord Petroleum Co (CCPC) charted vessels to transport more than a fifth of Venezuelan oil exports in a clear disregard for sanctions.


However, the Venezuela-China energy relationship has not been easy, with new taxes imposed by China on heavy sour crude earlier this year threatening Venezuela’s export ties with the country. The new taxes were expected to make profit margins on Venezuelan crude too low to justify investment. Yet, with the recent change in the country’s oil industry, it looks like China may not give up quite yet. 

As international oil majors withdraw from Venezuela, leaving the national oil industry underfunded, during a time in which it is already facing major fuel and dilutant shortages, will China swoop in to save the day, expanding its emerging oil market to Latin America?

By Felicity Bradstock for Oilprice.com

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