One of the most questionable managements in the history of oil was observed in a country that maintains very important historical and cultural ties with Spain: Venezuela. The Caribbean country has the world’s largest proven oil reserves, but its crude oil production has not reached one million barrels in years. Added to the questionable management of crude oil are the sanctions imposed by the United States on the Venezuelan regime. While it is true that these sanctions were partially lifted with Russia’s invasion of Ukraine, few have dared to predict a revival of this industry, which has been in free fall since the end of the 1990s (the years of gold from Venezuela). However, a handful of players, including Spain, are helping to increase the country’s production, so that, sooner rather than later, crude oil production could reach one million barrels per day againa figure not seen since the start of 2019.
The latest data is once again encouraging (we have already seen a few months of growth). Venezuela produced an average of 989,000 barrels per day (bpd) of crude oil in October, an increase of 4.8% from 943,000 bpd in September, according to official figures collected in a published report this Tuesday by the Organization of the Petroleum Exporting Countries. (OPEC). The country with the largest proven crude oil reserves also recorded a 25.8% increase compared to October last year, when it produced 786,000 b/d. Although Venezuela has oil reserves of more than 300 billion barrels, the problems in extracting and marketing this crude oil over the past years and almost decades are evident. The lack of investment in the industry, the mismanagement of the revenues obtained and the sanctions have created this paradox: the country which has the most crude oil in the world produces much less than other countries which have 80% of proven reserves less crude oil.
Experts attribute this recent and unexpected increase to the resumption of activities of several transnational companies, notably the American company Chevron. At first, Trump sought to overthrow Venezuela with an aggressive measure, a total embargo on its oil industry. No companies could work in Venezuelan wells and key refining components, such as chemicals, could not be marketed. No country that traded with the United States could do so (legally) either. It’s a shot in the jugular for Caracas, whose crude oil, although abundant, is “ultra-heavy” therefore, it requires extensive processing requiring these chemicals.
With Biden came the thaw with two key measures. First, it granted a special license (License 41). This allowed directly selected companies to work in the country. The most notable was Chevron. With a bankrupt PDVSA and a devastated economy, these companies were the only ones able to increase the Caribbean country’s production capacity. Later, he temporarily lifted the sanctions, conditioning the measure on the guarantees of the last elections, guarantees considered not respected, and was therefore not renewed. However, the companies which were already operating under this license 41 were able to continue and, in fact, two new European companies were integrated (Repsol and Maurel & Prom).
In the declarations to elEconomista.esFrancisco Monaldi, director of the Latin America program at the Baker Institute for Public Policy at Rice University in Houston, comments that while he has doubts about the official figures and estimates that there may be only 900,000 barrels per day pumped at present, the growth is undeniable. “The key is Chevron, which has reached 225,000 barrels per day”. In this sense, he explains that although this was the main catalyst, there is now no more room for maneuver, since “the plan that the company set as a ceiling was 260,000 barrels, so it does not There’s not much more room on that front.”
Spain and Repsol oil
The other side of the coin is the sharp increase in Venezuelan oil imports observed in Spain. In recent months, Spain has imported between 80,000 and 100,000 barrels of Venezuelan crude oil, making the Caribbean country the fifth or fourth supplier along with Nigeria, according to data published by CORES. So far this year, Spain has already purchased more than two million tons of Venezuelan crude oil, a data that has not been seen (accumulated for the year) on this date since 2009, 15 years ago years.
Although correlation does not imply causation, by diving into CORES data you can see how Spain stopped buying Russian crude oil in April 2022coinciding with the start of Russia’s invasion of Ukraine. From that moment on, there was an increase in imports of Venezuelan crude oil, also from the United States. Before 2022, Spain had even gone entire years without purchasing a barrel of Venezuelan oil. This increased demand for Venezuelan crude oil is essential for the country’s industry to restore some of its production capacity.
This translates into imports for Spain, but Christopher Canler, professor at Carlemany University, emphasizes that positioning itself in Venezuela, particularly in its oil industry, makes great strategic sense. “We must not forget that Venezuela has the largest oil reserves on the planet, even larger than those of countries like Saudi Arabia.” Therefore, “the country’s growth potential is enormous, it could become the richest country on the planet. All countries (United States, China, Europe, etc.) know this and are trying not to lose positions while waiting for the opportunity to intervene in its development,” explains the expert.
However, a good part of the relationship between Venezuelan crude oil and Spain, in addition to the new push from Venezuela, comes from Repsol, which is experiencing a faster and more marked evolution in the country. The Spanish company has four projects in the regionthe first is “Campo Perla”, one of the largest offshore gas fields in all of Latin America. It also owns Quiriquire Gas, with a 60% interest in an area of 93 square kilometers in Monagas.
Very close by is Petriquiriquire, a company that controls 40% of and operates the oil fields of Monagas, but also those of Mene Grande and Barúa Matatán, in the states of Zulia and Trujillo. Petrocarabobo stands out, with an area of 383 square kilometers. All these fields allow the Spanish company to pump almost 65,000 barrels of oil per day, or 11% of its global activity.
Monaldi explains that these figures must be qualified and that in reality they have even greater implications behind them. According to his estimates,The Spanish company would produce between 30,000 and 40,000 barrels per day. “Apart from Chevron, this is the key, there are no new contracts, but they have two new areas in the Lake Maracaibo (Zulia) basin under the Petriquiriquire Project“. In this sense, they believe that the potential of the Spanish company can be the greatest catalyst for Venezuelan crude oil in the months and years to come. “Repsol could double its production over the next year or so. a year and a half.”
However, Monaldi warns that something curious is happening: Repsol is getting more barrels from Venezuela than it is extracting. “The Spanish company not only exports its production, but I believe it also sells barrels of PDVSA itself”. How is this possible? The expert explains that, although there is no major public information that clarifies this situation 100%, he assumes that this is due to “an agreement they obtained to recover the debt (in barrels of oil) for the Campo Perla project. In summary, “it is very likely that they will recover part of the canceled debt by exporting additional barrels, which is good news for Repsol.”
Will Trump’s rise to power kill the oil awakening?
However, returning to the rebound in Venezuelan oil, it could be seriously compromised in the coming months, when Trump takes control of the country in January. “Political outcomes (of the US elections) can affect global oil production if there are sanctions against producers like Iran or Venezuela. If tougher sanctions are taken, the oil supply from these countries will be less. “
At the moment, it is unclear what Trump will do regarding Venezuela. During the campaign, the Republican displayed his rejection of the Caribbean regime without showing his cards. Although he defined Maduro as “a dictator,” he focused his speech on how “crime is decreasing in his country thanks to immigration to the United States.” However, he did not specify whether the sanctions would return in all their splendor (without any license) or whether he would opt for a more pragmatic approach.
Monaldi explains that, without a doubt, a period of doubt opens where anything can happen. “People like Rubio and Waltz, who could be part of the new Trump administration, have openly expressed the need to impose more sanctions on Venezuela,” comments the expert. However, he believes that there is now a phase of “fog of war”, because “we do not know if Trump will be more pragmatic as he has already done on other fronts. What is normal is as the pressure increases. For the expert, all scenarios are on the table, from nothing to a “cancellation of licenses” that completely destroys Venezuelan production. In any case, Monaldi believes that “the new government will allow some time to pass before taking drastic measures.”
From Venezuela, they wanted to opt for a rapprochement. Maduro congratulated Trump on his victory and explained that “during his first government we did not do well, this is a new start so that we can bet on win-win and that things will go well both for the United States and for Venezuela.
