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Oil Firms Discuss Return To Venezuela As Maduro Promises End Of Monopoly

Managers of foreign oil companies have been visiting Caracas recently to negotiate a possible return of international firms to Venezuela’s embattled oil industry after Nicolas Maduro began promising earlier this year he would end the monopoly of state oil firm PDVSA, Bloomberg reported on Friday, citing sources familiar with the talks.

Venezuela is opening up to foreign investment in its oil industry, Maduro said in January, in a bid to reverse a catastrophic drop in its output under the weight of U.S. sanctions. PDVSA already has overseas partners, but foreign investments in Venezuela’s oil industry are capped at 49 percent of any given project to protect state control of the sector.

Now, with the industry—and Venezuela’s whole economy—in tatters, this may have to change.  

Venezuela’s crude oil and refined product exports plummeted in 2020 to their lowest level in 77 years, as the U.S. continued to step up sanctions against Maduro’s regime and anyone found dealing with it. Last year, Venezuela’s oil exports plunged by 37.5 percent, reaching just 626,534 barrels per day (bpd), the lowest level since the early 1940s, according to data from Refinitiv Eikon and internal documents from PDVSA, cited by Reuters.

Earlier this month, Maduro said the Venezuelan National Assembly would consider reforms to the country’s oil law that would open the door to “new business models.”

Foreign companies have expressed interest in getting their hands on some of Venezuela’s massive oil reserves, the biggest crude reserves in the world. But most international oil firms, especially the biggest ones with exposure to the U.S. stock and banking markets, will wait for U.S. sanctions to potentially ease before trying to enter the Venezuelan oil sector again.

“There is some easy potential to increase production if sanctions enforcement declines,” Francisco Monaldi, an expert on Venezuela’s oil sector and a lecturer in energy economics at Rice University’s Baker Institute for Public Policy, told Bloomberg.

A massive rebound in Venezuela’s oil industry, however, would only occur—if ever—with tens of billions of U.S. dollars of additional investment.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on March 20 2021 said:
    Sitting on the world’s largest proven crude oil reserves, Venezuela will always be a focal point for global oil investment with major oil companies hoping to get a slice of its spectacular oil wealth.

    Despite the intrusive US sanctions and its dilapidated oil industry, Venezuela has been managing to export almost 1.0 million barrels a day (mbd). But with investment and employment of the latest production technology, Venezuela is capable of producing up to 4.0 mbd.

    However, for that to happen, two pivotal conditions must be satisfied. The first is the lifting of the US sanctions or at least easing them significantly to enable foreign oil companies with decades of operating in the country such as US oil giant Chevron to return to the country.

    The second condition is some rapprochement between the United States and Venezuela enabling foreign investment to return with confidence to the country.

    Venezuela badly needs assistance from foreign oil companies to renovate its oil industry and re-emerge as a top oil producer in the world.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • George Doolittle on March 20 2021 said:
    I think the Author means "tens of trillions in investment"(sunk capital) as oil has been superceded by natural gas going on a 2nd generation now.

    As such the United States has suddenly become on of the World's largest exporters of oil and by far the largest exporter on Earth of oil distillate fuels.

    Long $cog Cabot Oil and Gas
    Strong buy

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