Venezuela’s crude oil production could fall below 1 million bpd after the United States imposed new sanctions on its already struggling state oil company PDVSA, Wood Mackenzie analyst Ann-Louise Hittle warned.
“We believe production will likely fall to around 900,000 b/d under pressure from sanctions and a lack of materials for workovers, but we expect waivers will ease the full impact of the sanctions until they expire,” Hittle said.
Wood Mackenzie analysts believe the situation will require certain flexibility from local oilfield services providers as foreign companies exit the country. If these can cope with the task to maintain current production, the problem could partly be solved. However, it’s anyone’s guess what the level of expertise at these local companies is, not to mention their financial and equipment resources.
At the moment, Venezuela produces around 1.1 million bpd of crude, which is the lowest in several decades, leading to a slump in exports to a multi-decade low as well. Earlier this month, however, Bloomberg reported a fledgling U.S. company set up last year could help Venezuela turn around its falling oil production. Erepla Services LLC will provide the drilling rigs and crews necessary to increase crude oil production at the Tia Juana, Rosa Mediano, and Ayacucho 5 fields over a period of 25 years. In exchange, the U.S. company will buy all the oil produced at these fields and resell it, giving Venezuela’s PDVSA 50.1 percent of the proceeds and keeping 49.9 percent.
That’s the first sign of a shift in Caracas, first reported on by Reuters last September. The agency said at the time it had seen a draft contract between PDVSA and private companies for the handing over of oil field operatorship in a bid to reverse the production decline. The companies that signed the contract would undertake to boost the field’s production using their own money and equipment. For this, PDVSA would pay them a fee for the oil they extract.
By Irina Slav for Oilprice.com
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