Venezuela's sliding oil output may be tumbling at a rate faster than initially anticipated and production could soon reach a 27-year low.
As mentioned by Argus Media on 22 June 2016, representatives for the western and eastern divisions at state-run PDVSA in May estimated a 200,000 barrels per day (bpd) dip in production. However they recently revised their estimates to an output decline of 300,000 bpd. Therefore, daily production could fall below 1.9 million bpd for the first time since 1989, and around a 40 percent drop from 1998 prior to the beginning of the "Bolivarian Revolution" led by the late Venezuelan president Hugo Chávez.
Venezuela reported to the Organization of the Petroleum Exporting Countries crude production of 2.370 million bpd in May 2016, compared with 2.515 million bpd in the first quarter of this year. Argus estimates the current figure at the lower rate of around 2.1 million bpd.
PDVSA officials, the Venezuelan energy ministry and private sector oil executives believe the plummeting production arises due to a series of factors outside of PDSA's control, including the low price of crude as well as an overreliance on a deteriorated power grid. The energy ministry further blames a three-year drought that has depleted the vital Guri hydropower reservoir. Yet blackouts and electricity rationing continues to occur despite heavy rainfall filling the reservoir.
Related: Get Ready For $80 Oil
The steep decline in production is seen at most oil sites barring the extra-heavy Orinoco belt, where PDVSA has long targeted significant growth. But that area is vulnerable due to infrastructural breakdowns transporting product along with difficulties in importing light crude for blending.
Meanwhile, a new Barclays report cited by FuelFix on 21 June claimed Venezuelan oil output could nosedive by as much as 500,000 bpd to 1.7 million bpd. The British bank study noted the persistence of rolling blackouts that cut production by 120,000 bpd in May. Barclays further believes political and economic instability will sway China-which has invested billions of dollars in Venezuela-away from providing additional aid.
By Erwin Cifuentes for Oilprice.com
More Top Reads From Oilprice.com:
Erwin Cifuentes is a Contributing Editor for Southern Pulse Info where he focuses on politics, economics and security issues in Latin America and the Caribbean.… More