While the Biden administration’s easing of sanctions on Venezuela could increase in the country’s crude oil production by the end of the year, the poor state of its oil infrastructure means the gains will likely be less than 200,000 b/d over the next year and any additional increases will take longer and require significant new investment, the U.S. Energy Information Administration said Monday.
The administration’s Oct. 18 move lifted most sanctions on Venezuela’s energy sector for six months and could lead to the resumption of U.S. imports of heavy, sour crude. Several refineries in the U.S. are configured to process the sour crude, which has seen rising prices following production cuts by OPEC and its allies that disproportionally impacted heavy crude supplies.
Venezuela has been under U.S. sanctions since early 2019 following a disputed presidential election, which stopped imports of oil from the country. Those imports had been declining in recent decades, as Venezuela’s oil industry declined.
Venezuelan crude production, which had been about 3.2 million b/d in 2000, fell to 735,000 b/d in September 2023, according to EIA. Similarly, U.S. imports from Venezuela fell from 1.3 million b/d in 2001 to about 510,000 b/d in 2018.
In November, the administration granted waivers allowing Chevron Corp. to resume exporting crude from its joint venture in Venezuela. Those exports started in January and totaled about 153,000 b/d in July, EIA said.
Chevron’s exports go to Gulf Coast refineries. Any additional U.S. imports of Venezuelan oil will also likely head to the Gulf. Citgo Petroleum Corp., which is owned by Venezuela’s national oil company, operates three refineries in the U.S.–Lemont, Ill.; Lake Charles, La.; and Corpus Christi, Texas. The refineries have a combined capacity of more than 800,000 b/d and are designed to process heavy oil, EIA said.
One way lifting of sanctions will lead to an increase in production is by increasing Venezuela’s supply of diluent. Shortages of the material, necessary to process heavy oil, has reduced Venezuelan output, EIA said.
Chevron should also be able to ramp up its output in Venezuela to an average 200,000 b/d by the end of 2024, the agency said. Similar ventures operated by ENI, Repsol, and Maurel & Prom could add 50,000 to their output in the short term.
Together, EIA said all the ventures could increase Venezuelan output to about 900,000 b/d by the end of next year.
After that, increases will be more difficult to come by, the agency said.
“Years of underinvestment and mismanagement of Venezuela’s energy sector will likely limit crude oil production growth to less than 200,000 b/d by the end of 2024, requiring more time and investment for additional growth,” EIA said.
This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.
–Reporting by Steve Cronin, [email protected]; Editing by Michael Kelly, [email protected]
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