By Nate Valyo, International Business Editor
In the month of December, Venezuela’s crude oil output fell 12 per cent from the previous months. In 2017 alone, production fell 29 per cent from the previous year, one of the steepest declines in any nation’s history. In comparison, the crude oil production in Iraq fell 23 per cent after the U.S. invasion of the country in 2003. Even when set side by side with the fall of oil production during the collapse of the Soviet Union in the late eighties, Venezuela’s production decline stands to be significantly larger.
The government-run Petróleos de Venezuela SA, widely known as the PdVSA, is the dominant oil production firm in Venezuela, the nation where crude oil and petroleum make up 95 per cent of its export earnings. Recently, seventy of the company’s top managers have been jailed for corruption charges, leading to major management changes. In addition, Venezuelan National Guard generals, who have no experience in the industry, have taken over the firm. PdVSA’s new top executive, General Manuel Quevedo claimed that oil output will rise to 2.5 million barrels a day by the end of 2018.
Experts and oil analysts, however, claim that oil production will continue to falter. Venezuelan energy expert, Francisco Monaldi at Rice University predicts that production will fall to 1.3 million barrels per day. PdVSA ended 2017 by producing at merely 1.6 million barrels per day. Likewise, a New York-based brokerage, Torino Capital forecasts the country’s oil exports to bring in only $26.5 billion for the nation in 2018. Just six years ago, Venezuela had earned $93 billion annually from the oil exports.
PdVSA oilmen once held the highest wages in the country, generous company benefits, and had access to the nation’s elite schools for their children. Now, entire oilrigs are being shut down due to malnourishment, dehydration, and unsubstantial wages for the workers. Thousands of workers could not afford Christmas gifts for their children this year. “I see the look in [my children’s] eyes when they stare at the empty Christmas tree, I feel such a pain here,” said one oil worker, striking his chest.
Within the last four years, the inflation rate in Venezuela has risen to 2,600 per cent, and the overall economy has deteriorated by around 40 per cent, according to the National Assembly of Venezuela. Additional problems include malnourishment, the rampant spread of disease, and civil unrest.
Worse still, crime has soared in Venezuela in the form of protests, looting, and rioting: in recent weeks alone, at least four civilians have fallen victim to outbursts of looting. Near the oilrigs, piracy has recently emerged as well, with multiple attacks on oil tankers being reported each week. In 2017, local residents and oilmen reported six deaths due to protest violence in the country.
Venezuela’s declining production could cause oil prices to rise internationally, allowing the top crude oil producing nations like Iraq, Mexico and Canada to seize the opportunity of obtaining shares in the market. The oil production collapse has already been beneficial for these nations as they can now raise their outputs without breaking any international production cut agreements.
Additionally, Venezuela is struggling to pay off the interest and principal from its $60 billion debt, which has instigated a fear that creditors will claim oil production assets as a form of compensation. “If Venezuela’s oil shipments become a target, that would be the worst possible scenario for the country’s oil industry,” the Norwegian oil analyst at Rystad Energy, Artyom Tchen cautioned.
A version of this article appeared in the Tuesday, January 30th print edition.
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