Fragility of the oil industry limits its recovery

Asdrúbal Oliveros, economist and director of Ecoanalítica, stressed that the Venezuelan oil industry is experiencing “an unprecedented fragility and vulnerability in the country” that limits the recovery of the oil sector, despite registering an increase in daily production.

According to the economist, “Venezuelan production suffers a degradation of the productive capacity that causes significant inter-monthly falls in production to be registered.”

As will be recalled, production between 2014 and 2020 fell by 86 %, coupled with the rationing of diluents, the absence of active drills, the limitations in obtaining external financing that generate instability in production, and the stable recovery of local production.

The Organization of Petroleum Exporting Countries (OPEC) reported that Venezuela in March reported a production equivalent to 697,000 barrels per day, according to secondary sources. Observing an increase of 8,000 barrels per day, compared to the month of February 2022.

While the representatives of the Venezuelan government notified the agency that the production of March reached 728,000 barrels per day, registering a reduction in production of 60,000 barrels, compared to the month of February when it reported 788,000 barrels per day.

Difficulties in accessing foreign exchange

Another aspect that has an impact on the recovery of the Venezuelan oil sector and the country’s economy in general is the limitations that PDVSA has in accessing foreign currency, due to the fact that “about 60 % of the exported Venezuelan crude oil passes through the Russian financial system, which is in charge of to deliver dollars in cash to PDVSA.”

Oliveros said Russia is currently the most sanctioned nation in the world and a large part of its banking system is frozen or expelled from the global financial system, which “causes short-term complications for the Venezuelan government to access cash in dollars.”

He explained that in this context, Venezuela finds itself in a complex situation because it requires “1,062 million dollars to be able to guarantee the survival of its population. In addition to the increase in social spending and the 127.2 billion dollars from its creditors after more than 4 years of default.”

M. Rodríguez

Source: finanzasdigital.com