PDVSA Crude Output Plunges on Venezuela Power Cuts
(Bloomberg) -- Oil production in Venezuela has collapsed due to power blackouts throughout the country with state-owned Petroleos de Venezuela and its joint venture partners struggling to operate wells and other facilities due to the electrical problems which began four days ago, according to a senior Oil Ministry official.
Oil wells were halted and production stopped in some parts of the country as the industry depends on the national electricity grid, said the official, who asked not to be named since he’s not authorized to speak publicly on the matter. The person didn’t provide details on the scope or duration of the stoppage but described the cuts as severe.
Consultant Energy Aspects Ltd told clients in a note that Venezuelan oil production had fallen temporarily to as low as 500,000 barrels a day, more than 50 percent below 1.1 million barrels a day that the nation pumped in January. "Operations halted at main facilities, reducing output of main synthetic grades and blended Merey to almost zero," the consultant said.
The impact will be reflected in official production reports for March and company president and Oil Minister Manuel Quevedo should provide details on the situation this week, the person said. The ministry and company declined to comment on the state of the industry. PDVSA said on Sunday that gasoline supplies were guaranteed across the country.
Venezuela’s oil industry has already been decimated in recent years by declining production, a lack of investment and an exodus of trained and experienced managers and workers. In addition, sanctions recently closed Venezuela off from the U.S. market both for crude exports and imports of refined goods needed to blend with its heavy grade oil. Venezuela was exempted from the last round of OPEC-mandated output cuts due to the steep decline in production.
"The deterioration has accelerated," Fatih Birol, executive director of the International Energy Agency, said in an interview on the sidelines of the CERAWeek by IHS Markit conference in Houston. Even before the current power blackouts, the IEA was expecting Venezuelan output to decline a further 500,000 barrels a day over time, he said. "I don’t see a reversal of the production trend in the current context."
Output in the west of the country where lighter grades are pulled from wells has been hit hardest while some areas of the Orinoco Belt have been able to keep pumping, according to two people with direct knowledge of the situation.
The Orinoco Belt, which represents over 50 percent of total production, is connected to high voltage power lines coming from the hydroelectric dam known as El Guri where the bulk of Venezuela’s electricity is generated. PDVSA runs joint ventures with Equinor ASA, Chevron Corp, Total SA, Rosneft and Repsol SA, among others in the area.
Chevron and Equinor referred requests for comment to majority joint venture partner PDVSA while Total, Rosneft and Repsol didn’t immediately reply to a request for comment.
Oil stocks at upgraders, which are used to convert heavy tar-like crude into lighter blends for export, have reached their limits in the past weeks and downstream production was already being cut back at some oil wells to prevent backlog, one of the people said.
"We continue working to guarantee the efficient supply to the whole country, our inventories continue to be stable, we deny any shortage information," PDVSA said on Twitter Monday.
Other than that, the government has remained silent both with details of the power failures and with any impact on the oil industry. Beyond blaming the opposition and U.S. for alleged sabotage of the Guri dam and distribution lines, President Nicolas Maduro’s administration has only said that school and work would be suspended Monday.
The opposition, led by National Assembly President Juan Guaido, says the nationwide blackout is the result of poor maintenance and investment in the power grid over the past few decades of socialist rule.
There’s no exact information of which of the 23 states may have regained power and weak cellphone signals have made communication extremely difficult throughout the South American country.
"There’s a vicious circle," Birol said. "Since the oil isn’t exported, there’s not revenue, since there’s not revenue you cannot invest in infrastructure."
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