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Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

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Venezuela’s Oil Industry Is Fueling An Environmental Disaster

  • Venezuela is experiencing an environmental catastrophe due to the ruthless exploitation of its oil resources by the Maduro regime, leading to an alarming increase in oil spills and toxic emissions.
  • The most affected areas include the states of Zulia and Falcon, with Lake Maracaibo, one of South America's most biodiverse marine ecosystems, suffering irreversible damage due to oil leaks from heavily corroded oil infrastructure.
  • The Maduro regime's persistent drive to boost oil production, despite the degrading state of the industry's facilities, threatens to inflict further environmental harm on one of the world's most biodiverse countries.
Venezuela

A frequently overlooked aspect of Venezuela’s immense economic and humanitarian crisis is the tremendous environmental damage occurring as a result of autocratic president Nicolas Maduro ruthlessly exploiting the petrostate’s vast oil resources. Strict U.S. sanctions, which cut Caracas off from global financial and energy markets, along with sharply weaker oil prices and plummeting oil production, forced Maduro to secure alternate sources of income as Venezuela’s finances crumbled. Due to a chronic lack of capital national oil company Petróleos de Venezuela, known as PDVSA, remains incapable of conducting crucial maintenance and refits of existing petroleum infrastructure. That accelerated the collapse of Venezuela’s economic backbone, its petroleum industry and contributed to an ever-greater number of environmental incidents, with Caracas determined to pump as much petroleum as possible regardless of the consequences.

Historically, even before PDVSA ceased reporting operational data in 2016, the volume of spills and related incidents, such as the emission of toxic gasses in Venezuela, was uncomfortably high. NASA’s Earth Observatory, in September 2021, asserted that data from PDVSA, news agencies, scientific reports and environmental groups indicated there were 40,000 to 50,000 oil spills between 2010 and 2016. Oil spills and leaks from derelict petroleum infrastructure as well as due to operational discharges, are plaguing Venezuela causing considerable environmental damage. Since 2016, the situation has deteriorated significantly, with oil spills in Venezuela in recent years soaring to record highs.

According to a report by The Observatory of Political Ecology of Venezuela, there were 86 oil spills during 2022 compared to 77 a year earlier. The lack of reporting by the national oil company PDVSA along with the opaqueness of the authoritarian Maduro regime, hides the true volume of spills. This makes it extremely difficult to assess the scale of the damage occurring because of Venezuela’s petroleum industry. A lack of data forces the observatory to rely on satellite images and other sources of information, making it near-impossible to accurately record and report all spills.

Meanwhile, for the five years from 2016, The Venezuelan Observatory of Environmental Human Rights counted 199 oil spills (Spanish) or an average of around 40 per year. During the second half of 2022, from July to December, the environmental think tank recorded 35 oil spills on Venezuelan territory. Those numbers further underscore that the volume of spills as well as other environmentally damaging incidents caused by oil industry operations, are spiraling out of control. There are allegations that the autocratic Maduro regime and PDVSA are covering up environmentally damaging events, and other bad press, including the emission of toxic gases and petroleum spills.

The Observatory of Political Ecology of Venezuela claims that during 2022 most of Venezuela’s oil spills recorded occurred in the states of Zulia and Falcon, which are at the heart of the OPEC member’s heavily corroded oil industry. Those states contain a significant portion of Venezuela’s oilfields as well as industry infrastructure such as derricks, storage tanks, pipelines and refineries. The observatory counted 31 oil spills in Zulia during 2022, the highest number in any of Venezuela’s states. It is Lake Maracaibo, South America’s largest lake and one of the world’s oldest, located in Zulia which is receiving the brunt of emissions and spills from Venezuela’s heavily corroded petroleum industry. 

Oil was first discovered near Lake Maracaibo in 1914, with commercial production commencing in 1922. That early oil rush saw poorly planned and maintained petroleum facilities installed around and on the lake for roughly a century or even more. Ramshackle and heavily corroded pipelines, oil derricks, subsurface storage facilities and other oil infrastructure crisscrosses the lake as well as its shores. A considerable portion of these are up to a century old, with many of those having not been charted nor maintained. That aging and decrepit infrastructure is continuously spewing oil into Lake Maracaibo. The pollution is so severe that local communities claim Lake Maracaibo persistently smells like an oil refinery, with noxious gases rising from water permanently covered in a noxious black stain. Then there are the waterbody’s shores which are constantly covered in a thick residual black oil slime. The damage which has occurred to what is arguably one of South America’s most important and biodiverse marine ecosystems appears irreversible.

While Lake Maracaibo is experiencing the brunt of the environmental damage occurring at the hands of oil industry operations in Venezuela, it is not the only region sharply impacted. Falcon state, which is home to the world’s second-largest refinery, the 940,000 barrel per day Paraguaná Refinery Complex, suffered 29 oil spills in 2022. Leaking pipelines and storage tanks at the facility are responsible for most of the petroleum spills which occur in Falcon State. The facility has also suffered frequent outages due to heavily corroded facilities, explosions and fires. Spills and other toxic emissions from the Paraguaná complex are occurring at an alarming rate causing considerable damage to the surrounding coast and marine environment. 

In a 2021 report, the Venezuelan Academy of Physical, Mathematical and Natural Sciences stated: “Along the coast, hydrocarbon spills and the discharge of waste by the oil industry happen with greater frequency every day," Of considerable concern is that refined products like gasoline are more toxic and damaging to the environment than crude oil. There are frequent low-level spills from the Paraguaná complex, with oil regularly spewing into the nearby Caribbean Sea and onto the nearby coastline. 

The troubled 146,000 barrels per day El Palito refinery in Carabobo state also has a long history of discharging crude oil and refined products into the surrounding area. One of Venezuela’s worst recorded oil spills in recent years, which seriously impacted the ecologically sensitive Morrocoy National Park occurred, occurred in late-2020 when nearly 27,000 barrels of oil were spilled from the El Palito refinery swamping nearby beaches. This came on the back of a series of restarts of El Palito, which saw the facility emit noxious gases and spill oil into the surrounding environment. Since then, El Palito was refitted by the state-owned Iranian National Company of Petroleum Refining and Distribution in an approximately $110 million deal struck between Caracas and Teheran. The refinery finally recommenced operations in June 2023. 

Iran is a key backer of the autocratic Maduro regime, providing considerable technical support and skilled engineers to refit refineries as well as other critical infrastructure. Teheran is also an important supplier of condensate, which is crucial for blending with the extra-heavy crude oil produced in Venezuela so that it can be processed and exported. That reliable supply of condensate has allowed PDVSA to ramp up operations and, consequently crude oil production as well as exports. The heightened tempo of industry activities, while allowing Venezuela’s oil output to grow to 819,000 barrels per day, according to Caracas, is responsible for the growing number of petroleum spills and other environmentally damaging incidents.

Oil leaks are not the only major environmental issue caused by Venezuela’s heavily corroded petroleum industry. Toxic emissions from oil industry operations are also a major problem. The OPEC member’s intermittently running ramshackle refineries emit a host of toxic gases, including greenhouse gases, whenever they operate. There is also the noxious smoke and other fumes emitted by frequent fires and explosions at Venezuela’s dilapidated refining facilities. The most recent reported fire occurred at the Cardón refinery in January 2023. The facility, which has a capacity of 305,000 barrels per day but typically operates intermittently, processing 60,000 barrels per day, experienced its second fire this year in January 2023. Those incidents followed a major blaze in December 2022 blaze which was reputedly the third fire to occur that year. 

Venezuela is suffering immense environmental damage at the hand of the country’s once-mighty petroleum industry. The merciless pursuit of oil production growth, regardless of the ramshackle state of industry facilities, is driving the volume of spills and other environmentally damaging incidents ever higher. Scientists believe that the damage suffered by Lake Maracaibo is so severe that much of it is now irreversible, with many of the waterbody’s marine ecosystems destroyed. The rising severity and volume of spills, coupled with a lack of clean-up efforts, will continue wreaking havoc on the environment. Maduro’s most enduring legacy for Venezuela will be an environmental disaster that is having a calamitous impact on the world’s 11th most biodiverse country, which will take billions of dollars and decades to remediate.

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By Matthew Smith for Oilprice.com

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  • Al Goobi on July 14 2023 said:
    Its horrible. But also a consequence of low oilprice together with bad regulations. Venezuela under its communist government has really no choice.

    Its not that they would want to destroy its environment, whehooo we need our environment to go to shitters!

    No. They are dirt poor because of that regime, and to survive, workers work for a couple of sodas, do a lousy job taking care of spills and such and extract what they can extract and sell cheaply to the US in exchange for the debt relief, keeping oilprices even lower. Yeah the environment will suffer sadly. Oilprices need to go higher, so that oil will be more precsious and not so easily consumed, also more is needed to be done with that additional inflow of money towards protecting the environment. But without the extra fcf that will never happen.

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