Venezuela and the pariah dictatorial regime of Nicolas Maduro are once again back in the international spotlight. President Joe Biden’s decision to ban Russian energy imports in the wake of President Vladimir Putin’s invasion of Ukraine saw the Whitehouse seek other sources of crude oil as global energy prices spiraled even higher. That saw the Whitehouse send an official mission to Caracas with the goal of initiating a dialogue with President Nicolas Maduro’s dictatorial regime. This was the first-ever such event since Washington severed ties with Venezuela, including closing the U.S. embassy in Caracas in early-2021. While Biden denied he would ease sanctions against Venezuela to boost U.S oil supplies, the visit triggered a substantial political backlash both domestically and in South America.
Washington’s strict sanctions, particularly those introduced by then President Donald Trump in 2019, have had an outsized impact on Venezuela’s crumbling oil industry and energy infrastructure. They are also a significant contributor to the environmental crisis unfolding in Venezuela, which is the world’s 11th most biodiverse country. National oil company PDVSA has for two decades struggled to retain sufficient skilled labor and raise the necessary capital required to maintain, overhaul and replace aging and corroded energy infrastructure. Experienced industry managers, engineers, geologists and technicians started fleeing Venezuela in the early 2000s as Chavez progressively purged PDVSA of what his regime viewed as unreliable managers and employees. The crisis impacting PDVSA’s operations, assets, and infrastructure progressively worsened because of ever-stricter U.S. sanctions, which started in 2015 with President Barack Obama declaring Venezuela a security threat. The deterioration of Venezuela’s energy infrastructure accelerated further as crude oil prices slumped toward the end of 2014 seeing the international Brent benchmark plunge to under $30 per barrel in February 2016. Weak oil prices were exacerbated by the tighter sanctions, aimed at toppling Maduro by cutting Venezuela off from global energy markets, imposed by Trump, and then the arrival of the COVID-19 pandemic which caused crude oil prices to plummet once again. As a result, Venezuela’s oil output has plunged to less than a third of what it was in 1998 the year that Chavez won the presidential election. Despite claims that Venezuela’s national oil company is pumping one million (Spanish) barrels per day, the latest data provided by PDVSA to OPEC shows the production of 788,000 barrels daily for February 2022. That number falls to 680,000 barrels per day, which is 14% lower, if secondary output data is considered. Related: Baghdad’s Bold Move To Take Over Kurdistan’s Oil Sector Is A Blow To Russia
Source: OPEC Monthly Oil Market Report March 2022, U.S. EIA and PDVSA.
While the deterioration of Venezuela’s oil production because of rapidly disintegrating industry infrastructure and a lack of condensate is well documented, the growing environmental damage occurring in Venezuela because of oil industry operations is not widely documented or acknowledged.
PDVSA ceased publishing operational data during 2016, which included no longer reporting oil spills, pipeline outages and other environmental incidents. That sparked considerable conjecture about the accuracy of the production data provided to OPEC, with it believed that PDVSA is overstating its crude oil output and the transparency of the national oil company’s operations. Reports from independent thinktanks indicate that there has been a sharp increase in the volume of oil spills and other environmentally damaging incidents since 2016. Between 2016 and 2021 it is estimated that there were around 200 oil spills, with the Venezuelan Observatory of Political Ecology (OEP – Spanish initials) claiming there (Spanish) were 73 such events between January 2021 and November 2021 alone. Most spills during 2021 occurred in the Falcon and Zulia states, 39 and 19 respectively, which are where PDVSA’s key facilities and operations are located.
Venezuela Oil Spills January 2021 to November 2021
Source: Venezuelan OEP.
Meanwhile, the Venezuelan Observatory of Environmental Human Rights (OVDHA – Spanish initials) announced it had (Spanish) identified 199 oil spills between 2016 and 2021. The OVDHA identified 68 spills alone during 2021, which is a startling six times greater than the 12 reported for 2016. According to the OVDHA 90% of those spills occurred in six states, Anzoátegui, Monagas, Zulia, Sucre, Falcón y Carabobo, where Venezuela’s petroleum industry is located. That is an incredibly high number for a country that only pumped on average somewhere between 552,500 and 635,250 barrels per day during 2021. To put that number into context, only six tanker oil spills globally were recorded during 2021 and the world’s largest oil producer the U.S. is believed to only have suffered three major spills that year. The OEP also reported it had identified eight explosions and fires at PDVSA facilities in 2021 which emitted large volumes of noxious gases and chemicals into the atmosphere.
Those numbers underscore a worrying trend in Venezuela that the volume of oil spills and other environmentally damaging petroleum industry incidents are spiraling out of control. Images taken by NASA show that Lake Maracaibo, which is the largest such body of water in South America and has been at the center of Venezuela’s oil industry for over a century, is covered in crude oil slicks as are its shores. The primary sources of that crude oil are aging heavily corroded submerged oil pipelines, many of which analysts believe are not even mapped, above surface storage tanks and drilling platforms. The petroleum contamination and environmental damage is believed to be so extensive that the investment of more than $2 million per month in a clean-up effort two decades ago was inadequate and saw no major improvement to the lake’s ecology. Petroleum spills in the Bay of Venezuela as well as along the country’s Caribbean coastline are quite common with fisherman and residents regularly complaining of oil slicks on beaches and coastal waters.
The spike in spills and other environmentally damaging incidents can be blamed on Venezuela’s dilapidated oil infrastructure which continues to crumble because PDVSA lacks adequate capital to invest in maintaining, repairing and overhauling corroded storage facilities, pipelines and refineries. There is also evidence of a culture at PDVSA and in Maduro’s regime of pump as much crude oil and refining as much fuel as possible regardless of the environmental risks, particularly those posed by heavily corroded facilities. The Chinese and Russian energy companies pumping crude oil in Venezuela typically do not operate to the same environmental standards as major Western oil companies like Chevron, Equinor or TotalEnergies. Since Equinor and TotalEnergies exited Venezuela during the second half of 2021 global supermajor Chevron is the last major Western energy company with operational assets in Venezuela. The integrated energy supermajor has five onshore and offshore producing operations in the crisis-riven country, four of which are in partnership with PDVSA and three pumping heavy or extra-heavy crude oil. While the energy supermajor is currently prevented by U.S. Treasury restrictions from producing crude oil Chevron is ideally positioned to provide the necessary capital, technology and skilled labor required to resurrect Venezuela’s ailing oil industry.
Urgently needed investment in infrastructure overhauls, maintenance, and improvements, which will lead to a lower incidence of oil spills and other environmental damaging events, can only occur if Washington eases its current strict sanctions on Venezuela. As repeatedly demonstrated U.S. sanctions, particularly those introduced by the Trump administration, have failed to spark regime change and unseat Maduro. This indicates that their utility has declined, and they are no longer capable of achieving Washington’s desired policy outcome regarding Venezuela. In fact, they are potentially doing greater harm than good by not only magnifying the humanitarian and environmental crises engulfing Venezuela but strengthening Maduro’s grip on power. It will be major Western energy companies like Chevron which will need to make the massive investment required to rebuild crumbling energy infrastructure, boost crude oil production and conduct environmental clean-ups. If the Biden administration does not act fast to provide relief, the enduring legacy of Maduro’s authoritarian regime, the oil industry, and Washington’s sanctions will be an environmental catastrophe that will scar Venezuela for years if not decades to come.
By Matthew Smith for Oilprice.com
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