Experts Have Announced A Reduction In Oil Production In Venezuela To Almost Zero
Oil production in Venezuela, which has the world's largest reserves, is approaching zero, experts at the consulting company IHS Markit have calculated.
Back in 2017, production in Venezuela was 2 million b/d. A year ago, it fell to 650 thousand b/d. Now, according to IHS Markit, Venezuela produces from 100 to 200 thousand b/d, and the fall continues.
"Now we can assume that soon production in the country may become zero or approach this level," experts write, noting that never in the history of the oil industry has the volume of oil production in a country - a major oil producer-fallen so low and for so long.
Venezuela is the third-largest oil-producing country among OPEC's thirteen members, and the drop in production is the result of decades of decline. Recently, the situation for Venezuela has been aggravated by the collapse of oil prices due to the COVID-19 pandemic, US sanctions, and limited oil storage capacity, the authors of the publication note.
Although the case of Venezuela is historical, experts believe that it will have little impact on global oil markets due to more serious changes in supply and demand against the background of the coronavirus and its consequences. "There is sufficient production capacity in the world to meet the recovery in global oil demand that has been observed since May," said Jim BURKHARDT, Vice President and head of oil markets at IHS Markit.
Experts believe that Venezuela can restore oil production in the future, given its huge oil reserves. However, the state of infrastructure, declining global demand for oil, and US sanctions reduce the likelihood of such an outcome.
"The decline of Venezuela's oil industry was due to poor management, not because of a lack of oil resources. By providing security and conditions for investment in infrastructure rehabilitation, the country could be returned to the ranks of major oil producers. However, any recovery will take considerable time, given the degree of dilapidation of the country's entire energy infrastructure. It seems that oil production close to zero will become the new norm for Venezuela in the foreseeable future," said Ha Nguyen, Director of global oil supplies at IHS Markit.
Meanwhile, according to OPEC, in may, Venezuela produced 570 thousand b/d, in June - 336 thousand b/d, in July - 339 thousand b/d. According to the IEA, in July, Venezuela, on the contrary, increased production by 50 thousand b/d - up to 350 thousand b/d.