How Venezuela Almost Doubled Its Oil Production This Year | Oil and Gas News
This year, Venezuela has nearly doubled its oil production compared to decades ago, as its state-owned company struck deals allowing it to pump and process more extra-heavy crude into exportable qualities.
The surprising reversal began when state-owned company Petroleos de Venezuela, known as PDVSA, enlisted the help of small drilling companies by renewing its old debts and then secured a steady supply of a key diluent in from Iran. Both increased production to 824,000 barrels per day (bpd) in November, well above the first three quarters of the year and 90% above the monthly average of the previous year.
It was not known if she could continue to increase production. Years of unpaid bills, mismanagement and, most recently, US sanctions have reduced its access to specialized drilling equipment and foreign investment. The sanctions have also limited its clients to companies with no business history.
PDVSA’s latest gains – including reaching one million barrels of daily production for the first time in nearly three years, which Oil Minister Tareck El Aissami described in a Christmas Day post as a “great victory” – n ‘have still not reached the production target of the current management in 2021. 1.28 million barrels per day.
Workers in producing areas said the reopening of oil fields was continuing and more flow stations are expected to restart. However, oil experts said PDVSA has done everything in its power and further gains may be limited by a lack of additional rigs and functional upgraders for its tar-type crude.
“Base production in 2021 was well below the production capacity of PDVSA,” said Francisco Monaldi, director of the Latin American energy program at the Baker Institute at Rice University in Houston. “We are reaching that capacity now. To see an increase in production in 2022, investments in new wells and modernization of infrastructure are necessary, ”he added.
Helped by allies
The main turning point came from an exchange agreement between state-owned companies PDVSA and the National Iranian Oil Company (NIOC) which began in September. It has proven to be crucial in generating exportable qualities from the extra heavy crude produced in Venezuela’s primary region, the Orinoco Belt.
Hard currency earnings from domestic fuel sales and increased oil exports to Asia have also enabled PDVSA to write off some debts with service companies and settle outstanding debts with a promise of future work. and permits that have enabled some national companies to operate reconditioning platforms.
A few service companies have also accepted in-kind payments, mostly petroleum by-products and residual fuel sold later in the country and abroad, according to people familiar with the matter.
As of mid-December, there were a total of 47 active reconditioning and maintenance platforms in the Orinoco Belt and another 29 in other regions, according to an internal PDVSA document seen by the news agency. Reuters. That same report showed 19 others who were inactive. No active drilling rig, needed to boost production capacity, has been reported.
PDVSA did not respond to a request for comment. The US Treasury Department, which enforces the sanctions against PDVSA, did not immediately respond to a request for comment.
Recover lost ground
Venezuela reported annual crude production of 569,000 b / d last year and its exports averaged 627,000 b / d as PDVSA depleted its oil stocks. Official figures did not exclude imported diluents or water present in stored crude.
But analysts and independent experts agreed that output rebounded. Consulting firm IPD Latin America has estimated that Venezuela’s crude output will average 640,000-660,000 bpd this year, excluding condensate and natural gas liquids.
In eastern Venezuela, two crude projects that partially restored production – Petro San Felix and Petrodelta – were seeking funding to continue ramping up production, said Antero Alvarado, managing partner at consultancy Gas Energy.
Coiled pipe service companies have helped quickly reopen wells in the area, two sources said.
“PDVSA has written off the debt to suppliers,” Alvarado added. The company has also repaired three of its 750-horsepower rigs imported from China, with the aim of activating them next year, he said.
In the western region of the country, where equipment theft is rife, at least two separate projects – in mature oil fields Tia Juana and Cabimas – plan to nearly double production in 2022, people familiar with the companies said. .
“Production is restarting here. The reconditioning platforms did not rest, ”said a worker from Lake Maracaibo, in northwestern Venezuela. He said some inoperative debit stations are expected to restart in 2022.
Delays in debt payments are expected to remain a major problem. Agreements with oil service companies to get back to work are fragile and could collapse if PDVSA does not keep its promises.
“Debt keeps growing because companies only receive a fraction of what they generate in monthly services at PDVSA,” said an executive of an entrepreneur who asked not to be identified for fear of retaliation .
An employee at another company said his company has been working intermittently this year due to payment issues.
In the Orinoco region, where diluents are essential to maintain production, pushing production beyond current levels will require at least one further oil upgrader, on either the Petromonagas or Petro San Felix projects, to take full advantage of the diluent supplies, experts said.
PDVSA’s infrastructure to unload and store diluents has also stretched. Since routine shipments from Iran started arriving, there have been delays in exporting crude, according to internal company documents. PDVSA also had to employ essential tankers to store the diluents.