Earlier this year, there were high expectations surrounding the US lifting of sanctions on Venezuela in the face of oil shortages and rising prices following the Russian invasion of Ukraine, which allowed black gold to once again flow out of the South American oil giant. But this hasn’t gotten off the ground yet. While the oil trade was taken into account, Venezuela’s statement to the world is clear: it is ready to pump and export massive amounts of crude oil whenever it gets the chance.
No matter how many times the US government rejects Venezuelan pleas to end sanctions and fill the void left by sanctions on Russian energy, the South American oil major will be attempting to curb crude oil exports. don’t give up encouragement. President Madero declared this week that Venezuela is ready to resume its oil production and exports to the rest of the world when the opportunity presents itself. At an event during OPEC Secretary General’s visit to Caracas Maduro said “Venezuela is ready and willing to fulfill its role and provide the oil and gas market that the global economy needs in a stable and secure manner.
The country’s dictator feared that Venezuela’s oil industry was far from recovering after years of low production and underinvestment. Output is currently around 700,000 bpd, compared to 2.3 million bpd two decades ago. This comes from US sanctions imposed on the trade in Venezuelan crude oil, which previously accounted for about 96 percent of the country’s revenue.
In May, President Biden made some concessions to the sanctions, allowing Venezuela to export oil to Europe for debt. Italian company Eni and Spanish oil giant Repsol were allowed to ship Venezuelan crude oil to Europe in a year oil-for-debt swap, help fill the gap in the region. This was not the change Venezuela had hoped for, but it did provide more optimism for more concessions in the coming months.
But in August Maduro decided to… suspend oil-for-debt shipments to Europe, stating that he wanted refined fuels from Eni and Repsol in exchange for crude oil instead of the current deal. Venezuela has struggled to find refined fuels in recent months as many of its refineries are in poor condition. It’s already traded crude oil for condensate with Iran to meet its needs and circumvent US sanctions against the two countries. If Venezuela can import more refined oils, it can better support the recovery of the oil industry, with several operations requiring diluents to proceed. So far, Europe has not agreed to this request, leaving another gap in the supply.
But how much oil potential does Venezuela really have? The South American oil giant has the world’s largest crude oil reserves, measured at about 18.2 percent of the world’s barrels of oil in 2016. And while current production is low due to sanctions, Maduro believes the country is rapidly increasing its production. several hundred thousand. barrels of oil per day. However, a meaningful long-term increase in production would require large foreign investment in exploration and oil infrastructure.
broken equipment, abandoned oil fields, and a lack of talent are just some of the challenges energy experts highlight as the barriers to achieving long-term manufacturing success. This, coupled with political uncertainty, has prevented many oil companies from investing in the region, despite the abundance of reserves. Currently, US oil giant Chevron, Italy’s ENI and Spain’s Repsol remain active in the country, while others, such as ExxonMobil, have pulled out of sanctions against the sector.
The question of the ‘lesser of two evils’ has emerged in recent months. Many questions whether sanctions against Venezuela should be relaxed to ease the burden on Europe and North America felt as a result of the loss of Russian oil supplies. However, Venezuela’s close political ties to Cuba, China and Russia have led many to be more critical of this option. This back and forth has put the ease of sanctions on hold for several months. Still, some now question whether sanctions against Venezuelan oil ever worked.
From the outset, there was no clear analysis of the expected outcome of the sanctions. Former Western Hemisphere Secretary of State for Affairs Kimberly Breier suggested the sanctions were enacted with little evaluation of the fallout or potential impact on Venezuelan citizens. She said“There was absolutely no evidence” that the oil sanction would lead to Maduro’s removal and yet “Bolton raised the expectation that this would somehow magically happen”.
This has led to a massive economic downturn in the country, a severe fuel shortage and poor living conditions for Venezuelans. However, it has not stopped the country from selling its oil as it continues to foster trade relations with Iran and China. So with the question of whether sanctions were functional to begin with, a global shortage of supplies, and Madero’s willingness to resume the country’s oil operations as soon as allowed, the tide for Venezuela could soon turn.
By Felicity Bradstock for Oilprice.com
More top readings from Oilprice.com: