The Independent Uganda: You get the Truth we Pay the Price
– World’s biggest reserves –
Venezuela sits atop the world’s biggest proven oil reserves.
Currently it accounts for eight percent of US imported crude, making it the third-biggest supplier, after Canada and Saudi Arabia. A third of PDVSA’s output of 1.9 million barrels per day goes to America.
But the quality of its black stuff — sludge high in sulfur — is inferior to the lighter crude pumped by Saudi Arabia, and far more expensive to extract or refine.
“Much of it needs to be diluted with lighter oil just to be able to transport it. If you want to visualize it, think of tar on a roof on a hot summer day,” said James Williams, an oil analyst at WTRG in the US.
The break-even market price for Venezuelan oil “is well over $125 per barrel,” Williams said.
That poses a challenge, given global oil prices slumped dramatically three years ago and never recovered. They are now half of what they were in mid-2014.
According to PDVSA’s latest annual report, the average 2016 price of a barrel of Venezuelan crude was $35.15.
The oil company earned $48 billion last year from 2.27 million barrels a day (mbpd) produced — sharply down from $72 billion in 2015, when it pumped 2.65 mbpd.
– Unsustainable demands –
Nearly two decades of spendthrift Socialist governance by Maduro and, before him, the late Hugo Chavez, spread PDVSA’s revenues thin, as did their scheme of selling oil to Cuba and other Caribbean states at preferential prices to ensure political support.
What has been exposed are unsustainable demands on output and a severe lack of investment in PDVSA’s pipelines and oil fields.
Rigid price controls and nationalizations have scared off foreign investment. Rampant political patronage at PDVSA has forced many qualified Venezuelan oil engineers and managers to emigrate.
Recent efforts by OPEC, of which Venezuela is a member, to bolster prices through a production quota accord will not help Caracas, according to analysts who say only a change of government would work.
