A flotilla of US oil tankers is poised to begin lifting stranded Venezuelan oil, as analysts warned the country’s production will “collapse” unless Washington halts its naval blockade.
Chevron, the most prominent US company operating in Venezuela, is in talks with the country’s state oil company PDVSA and US authorities about shipping some of the stranded crude to US refineries to relieve pressure on the nation’s creaking oil infrastructure, a person familiar with the matter said.
Almost a dozen tankers the US supermajor chartered are sailing towards Venezuela or are already at its ports and could begin lifting some oil within days, according to commodity data group Kpler.
Chevron’s moves come as US President Donald Trump’s embargo has halted Venezuela’s exports, leaving oil transported from the Orinoco Belt, one of the world’s biggest crude fields, stranded in decrepit storage facilities that are at or near capacity. If the country is forced to halt more production, it will face long delays in restarting it, analysts warned.
“Venezuela has such a Herculean task before it to bring their oil sector back,” said Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy. “Having to shut in production is going to make that much harder.”
The risks to Venezuela’s oil output highlight how Trump could struggle to rapidly deliver the windfall to the US oil sector that he touted following the US’s brazen raid at the weekend to depose strongman Nicolás Maduro.
Eimear Bonner, Chevron’s chief financial officer, and other senior US oil executives are expected to meet Chris Wright, US energy secretary, on the sidelines of an energy conference in Miami on Wednesday for talks about the White House’s Venezuelan strategy.
Trump on Tuesday said he plans on “meeting with oil companies”. A person familiar with the matter said the talks would include Chevron as well as other US oil majors. The White House did not immediately respond to a request for comment.
Venezuela’s oil production could fall by a third in the next four weeks to as low as 600,000 barrels a day if it is not possible to move oil out of storage, said people familiar with the nation’s energy sector.
Venezuela’s crude exports — much of which are sent to China — have fallen more than 30 per cent since Trump imposed a “total and complete shutdown” of sanctioned tankers transporting oil from Venezuela in mid-December.
The industry’s access to naphtha, a so-called diluent that thins out Venezuela’s molasses-like heavy oil, allowing it to be transported through pipes, has also been constrained. Russia is Venezuela’s primary supplier of naphtha, although it has previously sourced it from the US.
With export routes closed, the country is rapidly running out of storage facilities for its oil, said a PDVSA engineer.
“Most of the heavy crude oilfields will have to reduce their production,” this person said, adding that only the country’s light and medium-grade oilfields and those being run by Chevron will continue to pump at full capacity.
Chevron has been able to continue exporting crude, including to US refineries, through special licences from Washington.
Schreiner Parker, head of emerging markets at consultancy Rystad Energy warned there could be “a short-term production collapse”, with offshore floating storage in tankers also at risk of filling up.
“There’s only so much floating storage, and a big question about where Venezuela will access diluent.”
According Kpler data, production that was about 900,000 b/d has fallen 8 per cent since the blockade started and could drop as low as 600,000 b/d by February. Cuts have been made to production at joint ventures with China National Petroleum Corporation.
At least 16.7mn barrels are in floating storage in Venezuelan waters, while global floating storage of the nation’s oil has surged 89 per cent since December 10 to 23.6mn barrels.
James West, head of energy and power at Melius Research, said: “There’s a delicate balance between shutting in production and letting it flow, but they’re probably choking the wells right now because they can’t get tankers in.”
While Chevron’s shipments were initially allowed to move around the blockade, its activity has since slowed.
US secretary of state Marco Rubio has signalled the US will continue blockading Venezuela’s oil exports until Washington’s conditions are met by the government that has been run by Delcy Rodríguez, acting president, since Maduro’s capture on Saturday.
Analysts warned that unless Trump lifted the blockade the embargo could backfire on the president by pushing up crude prices.
Extending the embargo would “seem to run counter to what [Trump] would want,” said Matt Smith, lead Americas oil analyst at Kpler.
“The longer it goes on, the more dislocation it causes for global markets,” he said. “[Trump] is fixated on prices at the pump.”
Carlos Bellorin, an analyst at oil data company Welligence, said he thought that at some point, the US would enforce the blockade more selectively, perhaps allowing ships to travel to and from the US.
But even if the blockade were to be lifted, it will be difficult and expensive to recover production.
The country’s “rusty” oil infrastructure has been hit in recent decades by under-investment, mismanagement and a brain drain of skilled workers, said Marc Bianchi, a senior energy analyst at TD Cowen.
“Their oilfield industry has atrophied,” he said. “I would assume everything is lacking.”
Credit: Source link
