Venezuela sits atop the largest proven oil reserves in the world, clocking in at a whopping 300 billion barrels. But years of domestic economic mismanagement, corrupt international banking, and strict international sanctions have brought the Venezuelan economy--and oil industry--to its knees. Earlier this summer, the country’s once-mighty oil sector became the ultimate metaphor for Venezuela’s economic and industrial deterioration as one lone oil rig tapped the world’s largest oil patch. Indeed, over the course of this year Venezuela’s oil production has declined to levels not seen since the 1940s, far before the oil-rich South American nation joined the Organization of Petroleum Exporting Countries (OPEC). “The downturn in production has culminated in a nationwide fuel crisis, with local refineries unable to churn out enough gasoline and diesel to meet demand, even as a national quarantine depresses consumption,” WorldOil reported earlier this summer. “At the same time, gasoline imports have been curtailed by U.S. sanctions against Rosneft PJSC and shipping agencies that once swapped fuel for crude with Maduro’s cash-strapped government.”
Now, however, it looks like things could finally start to turn around for the Venezuelan oil industry and president-cum-dictator Nicolas Maduro’s bankrupt regime. According to “tracking data and internal documents” from Venezuela’s state-owned and operated oil and gas company Petróleos de Venezuela, S.A. (PDVSA), a minimum of 18 oil tankers are set to ship oil exports out of Venezuela in the coming weeks. “So far in November, nine tankers have loaded almost 6 million barrels of Venezuelan crude and fuel for exports,” Energy World reported last week, referencing internal PDVSA documents as their source. While this could be a sign that Venezuela is ramping up to once again begin exporting oil in earnest, these reports should likely be taken with a grain of salt considering the source of the information as well as the circumstances--sanctions on Venezuela are as severe as ever.
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The U.S.-led sanctions have been part of an attempt to push Maduro into ceding power. “But Maduro remains in power, and the potential rebound in oil shipments comes as PDVSA is adapting to a tightening of U.S. sanctions by copying shipping tactics from Iran to hide vessels loading in Venezuela, and engaging in trade deals with customers in Russia that resell the oil to Asian buyers,” Energy World reported last week.
According to the report, common tactics employed by nations trying to skirt oil sanctions in recent months and years include a complex web of transfers between ships to confuse and disguise the origin of contraband cargo, simply switching off vessels’ location transponders to arrive in Venezuela in a more clandestine fashion, and switching around ships’ names, flags, operators, owners, and other indicators of the ship’s provenance. The “slew of tankers” currently en route to Venezuela to bring oil back with them will likely use all or some of these strategies as Maduro searches for new avenues to bring liquid assets back into his country.
While Venezuela has been able to find some loopholes and workarounds here and there to bring in a small stream of cash under sanctions (reportedly with some help from China, Russia, Thailand, and Cameroon, to name a few), ultimately these illicit vessels are far too few and far between to make any real difference for the suffering Venezuelan economy, much less restore Maduro or his country to their former glory. The trickles of oil coming out of Venezuela are a drop in the proverbial bucket needed to make any real or lasting change for the domestic economy. In the meantime, the citizens of the most oil-rich country in the world will continue to sit in miles-long lines for gasoline and face shortages of food, medicine, and other essentials as one of the century’s greatest humanitarian crises continues to unfold.
By Haley Zaremba for Oilprice.com
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