(Bloomberg) -- Petroleos de Venezuela SA, once Latin America’s largest oil producer and exporter, has been resorting to less orthodox methods to increase its oil output.
The company known as PDVSA started producing reconstituted crude oil, in which leftovers from the refining process are mixed with crude that comes out of the ground. Since some types of oil can’t be processed straight from the wellhead because they’re too thick or acidic, a diluent -- often naphtha or a lighter crude -- is blended in. In this case, cash-strapped PDVSA is adding something more like Hamburger Helper to make the final result more palatable to refiners.
“Venezuela is doing whatever they can to sell their oil,” Andy Lipow, president of Lipow Oil Associates, says in a phone interview from Houston. “Mixing crude oil with cuts from the refining process is another indicative of the poor state of refineries over there.”
Long-time partner Cuba was the first to get a taste of the new oil on offer. The first shipment arrived in October and others followed, totaling 1.68 million barrels, according to people familiar with the shipments and shipping reports compiled by Bloomberg. The reconstituted oil is replacing exports of Mesa 30, a well-established Venezuelan grade.
The Hamburger Helper comes in handy as it helps PDVSA to make more oil with less, and collect the corresponding revenues. Despite holding oil reserves larger than Saudi Arabia’s, production is heading to a 29-year low as the nation has been plagued by political upheaval, arrests of its top executives and U.S. sanctions that have diminished the appetite for Venezuelan oil.
Venezuela’s reconstituted oil is probably sold at deeper discounts compared with other grades as it’s hard to trust the quality, Lipow said. “This is just another chapter of how the entire oil industry over there is falling apart.”
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