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What’s Next for Copper Markets?

What’s Next for Copper Markets?

Copper prices have experienced significant…

Explosion Rocks Venezuela Oil Plant

An explosion rocked a natural gas-filling plant in the Venezuelan state of Miranda, forcing the evacuation of 6,500 local residents, Telesur reports, adding the Venezuelan government has called the event an act of sabotage.

The explosion caused no fatalities with only one worker at the plant reported injured.

According to a report in the leftist daily Morning Star, “The attacks were branded ‘terrorism’ by the Venezuelan government and coincided with an Washington-backed coup attempt led by hapless president of the defunct National Assembly Juan Guaido.”

This is the latest in a string of accidents that highlight the precarious energy situation in sanction-bound Venezuela. Earlier this year, several blackouts crippled the country, with the government calling them a sabotage as well. The latest blackout, in July, Caracas blamed on an electromagnetic attack.

The blackouts hit Venezuela’s oil industry particularly hard, leading to a suspension of operations at crude upgraders and its main oil export terminal.

Now, it’s Venezuela’s oil rigs that are under threat, this time from the U.S. sanctions. When Washington slapped oil-focused sanctions on Venezuela, it granted waivers to the U.S. companies with operations in the country. These include Chevron, Schlumberger, Halliburton, and bankrupt Weatherford.

The waivers were earlier this year extended on request by the companies, which have already suffered considerable writedowns on their Venezuelan business because of the sanctions. Since 2018, these have reached US$1.4 billion. The extension, however, was only for three months and will expire in October. The companies had requested a six-month extension.

Once the waivers expire, U.S. companies will have to fold up and go home, which will reduce the number of active drilling rigs in the Orinoco Belt by half. This would hit Venezuela’s oil production hard: rigs are necessary to drill new wells constantly just to maintain current production levels.

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Meanwhile, Caracas has announced plans to boost the current level by 65,000 bpd from a PDVSA joint venture with China’s CNPC. Chinese, as well as Russian, companies seem to be Venezuela’s only chance at maintaining production after the U.S. oilfield service providers and Chevron leave.

By Irina Slav for Oilprice.com

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  • Lee James on August 26 2019 said:
    I know next to nothing about the mechanics of oil production in Venezuela. But I'd say there's a pretty good chance that China and Russia will be interested in taking the place of U.S. oil companies.

    -Not sure Mr. Trump looks ahead to see how his sanctions will play out, and who all is impacted.

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