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Venezuela’s PDVSA has begun mixing its extra heavy crude with locally produced light oil as imported diluents from the United States are now hard to come by, Reuters reports, citing local sources.
Normally, PDVSA mixes the heavy crude with U.S. naphtha, which is perhaps the most common heavy crude diluent to make it transportable by pipeline or loadable on tankers, at a rate of 100,000 bpd of naphtha to 400,000 bpd of heavy crude from the Orinoco Belt. However, the latest sanctions that Washington slapped on Caracas include a ban for U.S. refiners to export diluents to the South American country.
PDVSA exploits the vast reserves of oil in the Orinoco Belt via several joint ventures, including companies such as France’s Total, Norwegian Equinor, and even a U.S. supermajor, Chevron. Normally, according to Reuters, the joint venture partners would market their production separately, but now, the unnamed source says, the mixed crude is being delivered to PDVSA for exports as a way around U.S. sanctions.
Earlier this month, amid the fast-deteriorating political situation in Venezuela, a Wood Mac analyst warned that the country’s production could fall below 1 million barrels daily.
“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,” Anne-Louise Hittle said.
Wood Mackenzie analysts believe the situation will require certain flexibility from local oilfield services providers as foreign companies exit the country. If they can 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.
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.