lack of investment payment delays hamper venezuela oil output
Last Updated : GMT 11:59:16
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Last Updated : GMT 11:59:16
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Lack of investment, payment delays hamper Venezuela oil output

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Egypt Today, egypt today Lack of investment, payment delays hamper Venezuela oil output

view of a recreational area maintained by Venezuelan state oil company PDVSA in Caracas
Caracas - Arab Today

Venezuela, which holds the world’s largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, according to data seen by Reuters and interviews with company sources and workers.
The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country’s vast oil fields.
In the 12 months to June, Venezuela’s crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group’s official figures.
Venezuela’s oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline — around 8 percent — so far this year compared with 2015.
However, he said the “circumstantial fall” had been “contained.” The Oil Ministry later said the country’s output rebounded in July to 2.54 million bpd, without giving comparative figures. The data have not yet been reported to OPEC.
PDVSA’s statistics have been a matter of debate for years.
Internal trade and supply data seen by Reuters show that PDVSA’s crude exports, which account for 94 percent of the country’s hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures.
PDVSA did not respond to a request for comment on its sales to customers.
Several PDVSA workers and local union members, in interviews with Reuters, said that an increase in equipment theft, maintenance delays, low salaries, and what they called a sense of “abandonment” of some oilfields are continuing to hit production.
“I have never seen so much inefficiency in my 28 years in the oil industry,” said a worker of a drilling firm hired by Petroboscan, a project with participation of US Chevron that is one of more than 40 joint ventures by PDVSA and foreign firms.
Del Pino told local media last month that power outages and limited upgrading capacity to convert Venezuela’s extra heavy oil into exportable crude has hampered production. It has forced PDVSA to import some 95,000 bpd of heavy naphtha and light crude to dilute its oil, Reuters trade flows data says.
These problems, occurring while oil services providers reduce operations in Venezuela, have analysts forecasting that production will not recover in the second half of the year, falling instead to its lowest level since a strike that brought output down to an average of 2.56 million bpd in 2003.
Venezuela’s active rig count, a good indication of future production, fell to 49 in July according to Baker Hughes, the lowest since the end of 2011.
US-based oil servicing giant Schlumberger noted a “significant reduction of operations” in Venezuela in its most recent earning release and Halliburton said it is operating on fewer active rigs in Latin America, including Venezuela. PDVSA has said there are ongoing talks to solve payment issues with many companies, including those.
Energy consulting firm IPD Latin America in May predicted that Venezuela’s crude output will average 2.35 million bpd in 2016, a 400,000-barrel-per-day decline from last year. Medley Global Advisers, meanwhile, expects an average decline of 250,000 to 300,000 bpd, said analyst Luisa Palacios, who believes any rebound will not last.
“They achieve a temporary relief, but the declining trend continues,” she said.

INACTIVE RIGS, LOST EQUIPMENT

The cutbacks in oil services have particularly afflicted Venezuela’s second-largest producing region, Norte de Monagas, where companies have been halting operations and laying workers off, according to union representatives.
“There are many inactive rigs here in Monagas,” said Luis Hernandez, a local union representative. 
“Some 60 workers are laid off for every halted rig. Some companies say PDVSA owes them money, there are also halted rigs due to lack of spare parts.”
Being a technically challenging area, Norte de Monagas’s output has declined faster than the country average in recent years, particularly affecting PDVSA’s output of medium and light crudes used to dilute its extra heavy oil and creating a growing need for imports at a time when dollars are scarce.
“Monagas’ confined reservoirs need a specific pressure to properly work. If natural gas is not injected correctly, the output falls,” explained a former executive of PDVSA’s exploration and production department, who did not want to be identified.
After Venezuela in 2009 nationalized oil services firms, including Venezuelan assets owned by Williams Companies, PDVSA has faced problems maintaining output levels at areas that need secondary recovery techniques such as water, gas and vapor injections into reservoirs.
Basic maintenance goes undone at many fields, workers say.
“It’s painful to see how the equipment is lost deep in the weeds, including flow stations and jack pumps,” the worker from the drilling company said.
The fall in output volume, coupled with the drop in global oil prices, has forced the government of President Nicolas Maduro to choose between paying external debt or supplying the dollars needed to sustain imports of basic goods.
“PDVSA, who has no money leftover at all, now needs even more investment in exploration and production than in the previous decade to see its output to revive. At this price level, that is not going to happen,” the former PDVSA executive said.

Source: Arab News

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lack of investment payment delays hamper venezuela oil output lack of investment payment delays hamper venezuela oil output



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