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Venezuela—not the Middle East—is the wild card when it comes to the near future of the oil industry, BP’s chief executive Bob Dudley told CNBC on the sidelines of the Abu Dhabi Petroleum Exhibition & Conference.
"I think Venezuela is just defying economic gravity and I think that's a real wild card," Dudley said, referring to the combination of falling oil production, severe recession, political instability, and sanctions that the South American nation has endured in the last four years.
Venezuela has the largest crude oil reserves in the world, according to BP estimates, but it has found it increasingly difficult to exploit these, especially amid falling international prices and resource mismanagement by state-owned PDVSA.
Added to this is growing international concern that the government of Nicolas Maduro is stifling democracy in a brutal manner, which most recently led to the European Union this week slamming Caracas with a ban on the sale of arms to Venezuela.
The EU’s Council of Foreign Ministers also warned it was considering the imposition of sanctions against certain individuals but was unwilling to rock the boat at this particular moment. Venezuela has just begun the process of restructuring a debt pile of US$60 billion and the EU is cautious about not tipping the crisis-stricken country further into the pits of chaos.
BP used to be active in Venezuela until 2013, through its stake in Anglo-Russian TNK-BP’s crude upgrader in the Orinoco belt, where Venezuela’s reserves are concentrated. In 2013, however, BP sold out its TNK-BP sale to partner Rosneft.
Dudley’s opinion that the Venezuelan situation could have more serious implications—whose nature is unclear—for the oil industry than the latest escalation in the Middle East does rest on logic; more specifically, on the logic that a familiar evil is a lesser evil.
Middle Eastern powers have been fighting in various ways for decades. The global oil market has gotten used to viewing the region as a powder keg, while the problem with Venezuela is a new one by comparison, and a more unpredictable one.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.