Venezuela oil production on tentative upswing

Venezuela's crude production has recovered to around 500,000 b/d, mainly from the Orinoco heavy oil belt.

The volume compares to 360,000-390,000 b/d in the second half of 2020, and it is still shy of an average of 650,000 b/d pumped in March last year, according to Argus estimates.

Orinoco production is running close to 350,000 b/d from Venezuelan state-owned PdV's joint ventures with foreign minority partners, including PetroSinovensa with China's state-owned CNPC, PetroPiar with Chevron and PetroMonagas with Russian partners.

The oil belt produces extra heavy crude that must be diluted for transport and blended or upgraded into 16°API Merey for export. Output from the region tends to fluctuate as low-yield well flow rates are adjusted in response to diluent availability as well as storage and export openings.

PdV's mature eastern division is producing more than 100,000 b/d, mostly from PdV's Punta de Mata area, followed by Furrial. The eastern division is also producing about 2.7 Bcf/d of associated natural gas, most of which is flared because of deficient equipment to segregate and process it.

PdV's western division centered on Lake Maracaibo, where data is generally more opaque and operating conditions are especially precarious, is producing the balance.

Dark cash

The Venezuelan company's depressed refinery runs are only around 100,000 b/d, and crude exports, thwarted by US sanctions since early 2019, have been fluctuating around tanker availability, itself a function of improvised local efforts.

"People who are owed money by PdV are told to find a vessel, a broker, to export crude and from the sale they can get paid. Or else they are offered fuel oil or scrap metal. This is happening every day," a former senior PdV official says.

The production uptick will be difficult for the Opec country to sustain, multiple local industry sources routinely say, citing longstanding challenges such as labor flight, electricity shortages, equipment theft and a lack of specialized services. On the labor front, PdV has been paying bonuses to a small group of skilled workers and private oilfield service contractors.

"The cash bonuses have been a positive incentive but are being paid only to select repair crews and not all PdV oilfield workers," a senior oil union official tells Argus. "This unequal situation is creating more tensions within the oil industry's workforce."

PdV's average monthly wage paid in cash since a new collective contract was signed on 19 February is less than $3 in cash per worker, plus a further roughly $50 monthly in transportation and food subsidies. Venezuela's crippled economy is suffering from hyperinflation. PdV generates sparse revenue from oil sales, because of oil-backed debts mainly to China and steep discounts. Venezuela's US-backed political opposition says the government of President Nicolas Maduro is raising cash from illicit gold sales carried out through the UAE with Russian logistical help, and is demanding more sanctions.