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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 Dilapidated Oil Industry Is An Environmental Catastrophe

  • PDVSA has stopped releasing data about oil spills since 2016.
  • The volume of oil spills in the crisis-torn Latin American country is expanding.
  • The OEP claimed 86 oil spills occurred in Venezuela during 2022.

The collapse of Venezuela’s once prolific oil industry has triggered an economic and humanitarian crisis that accelerated in 2019 after U.S. President Donald Trump implemented strict sanctions cutting the Maduro regime off from international energy markets. It isn’t only Venezuela’s economy and people which have suffered from a foundering hydrocarbon sector and corroding energy infrastructure, tremendous damage has occurred to the environment. Oil spills, leaking pipelines and storage facilities, noxious discharges from ramshackle intermittently operating refineries and toxic tar like slicks are commonplace in Venezuela. The OPEC member’s collapsing petroleum industry, along with precious metals and other mining, is a key culprit of the significant environmental damage occurring in the near-failed state. Since national oil company PDVSA ceased releasing incident data in 2016 it is extremely difficult to reliably track the number of oil spills, the volume of oil released into the environment and the damage that occurs. This is particularly worrying when it is considered that Venezuela is ranked as the eleventh most biodiverse country globally. While the lack of official data makes it difficult to track the volume of environmental incidents concerning Venezuela’s oil industry there are non-government organizations tracking oil spills and other environmentally damaging incidents. Two organizations which provide regular reports and updates regarding the substantial environmental degradation occurring because of the petrostate’s oil industry are the Venezuelan Observatory of Environmental Human Rights (OVDHA – Spanish initials) and the Venezuelan Observatory of Political Ecology (OEP – Spanish initials).

Related: Oil Prices Steady As Chinese Demand Counters Huge Crude Build

The OVDHA published a report (Spanish) in March 2022 which shows 199 oil spills in Venezuela for the period of 2016 to 2021. In that document, the observatory noted a worrying trend; the volume of oil spills in the crisis-torn Latin American country is expanding. The data collated by the OVDHA showed only 12 incidents during the first two years of the period covered and then a whopping 68 events, or more than five times that number, during 2021 alone. Oil spills continued during 2022 with the observatory counting 35 incidents during the second half of 2022, although the OVDHA believes the actual number of spills to be far higher. An example is that for 2010 to 2016 NASA, from various news, humanitarian organizations and environmental groups, counted 40,000 to 50,000 oil spills across Venezuela.

In a December 2022 OVDHA article (Spanish), Eduardo Klein, coordinator of the Center for Marine Biodiversity of the Simón Bolívar University, states, “There is hardly a single day where you do not see a spill, not counting Lake Maracaibo where every day there is”. Klein further that on the Paraguaná Peninsula in Falcon State, the location for many of Venezuela’s refineries, spills are persistent saying, “those pipelines are continuously dumping and over the years, the frequency has increased considerably." Those statements indicate oil spills are far more common than the number reported by the OVDHA with them being nearly daily occurrences while Lake Maracaibo, at the epicenter of Venezuela’s oil industry suffers multiple spills nearly every day. 

During September 2021, NASA released a satellite photo of Lake Maracaibo, considered by some commentators to be the largest natural lake in South America, showed excessive pollution, primarily from leaking crude oil that had formed large slicks. This is no surprise when it is considered that the body of water is situated in the middle of one of the world’s largest hydrocarbon producing regions and has been at the center of Venezuela’s oil industry since the first well was drilled in 1914. That oil discovery, in as little as three decades, transformed Venezuela from an impoverished near-feudal agrarian state into the world’s third largest oil producer and exporter. The ensuing oil boom catapulted Venezuela onto a path of rapid modernization, which saw it become Latin America’s wealthiest country and a leading regional democracy. 

The Maracaibo Basin contains 15% of Venezuela’s copious oil reserves, which at 304 billion barrels are the largest globally, and is responsible for around two-thirds of the OPEC member’s hydrocarbon production. As a result, the lake contains thousands of drilling platforms, miles of pipelines which in many cases are unmapped and scores of storage facilities as well as other industry infrastructure. Most facilities are more than half a century old and heavily corroded because of their age and an endemic lack of crucial maintenance. The OVDHA estimates up to 1,000 barrels of crude (Spanish) are being discharged into Lake Maracaibo every day due to ongoing low-level leaks from heavily corroded petroleum pipelines, storage tanks and other decaying infrastructure. Local communities, as well as scientists who study the lake, claim oil slicks are regular occurrences and are commonly found coating the shoreline. The situation is so grim fishermen frequently complain of petroleum fouling nets and catches while heavy rains cause oily slicks to from the ground to flood streets, parks and homes in nearby communities.

Of considerable concern, is considerable evidence that the frequency of oil spills and other environmentally damaging incidents concerning Venezuela’s oil industry is accelerating. The OEP, in a January 2023 report, claimed 86 oil spills occurred in Venezuela during 2022, which the observatory claimed was higher than the at least 73 spills it detected a year earlier. Most of those spills occurred in Falcon and Zulia states where a considerable portion of Venezuela’s oil refineries, pipelines, storage tanks and wells are located. In fact, Zulia has long been a hotspot for environmentally damaging incidents because it is where Lake Maracaibo and its surrounding sedimentary basis are situated. All evidence points to the size and frequency of oil spills in Venezuela continuing to multiply as industry infrastructure disintegrates further and Caracas pushes PDVSA to expand output regardless of the dire condition of various facilities.

Venezuela at the hands of its once mighty oil industry, which 70 years ago funded the country's economic miracle and rapid modernization, is suffering from an apocalyptic environmental catastrophe. The inability and unwillingness of a cash-strapped PDVSA, as well as the government in Caracas to clean-up spills, is magnifying the damage which in many areas is now irreversible. Crude oil is fouling waterways, contributing to deforestation, poisoning farmland and killing wildlife at an ever-greater rate. The environmental destruction will keep expanding as industry infrastructure deteriorates further and the authoritarian Maduro regime sets ever higher, and unachievable production targets. Nothing will change until PDVSA can access the tremendous capital required to rebuild ramshackle malfunction hydrocarbon infrastructure that regularly malfunctions and, in many cases, is damaged beyond repair. That is contingent upon Washington relaxing sanctions to such a degree that foreign energy majors are willing to invest in Venezuela.

By Matthew Smith for Oilprice.com

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  • DoRight Deikins on January 11 2023 said:
    «Nothing will change until PDVSA can access the tremendous capital required to rebuild ramshackle malfunction hydrocarbon infrastructure that regularly malfunctions and, in many cases, is damaged beyond repair.»

    I guess I appreciate your optimistic outlook that tremendous capital resources would be used to repair the deplorable hydrocarbon infrastructure of Venezuela. But my guess is that the majority of that money would be used to repair the dilapidated pockets of the current regime and confirm the governmental stranglehold for their party.

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