decrease in Venezuelan oil production due to PDVSA partnering with new entities
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Venezuela's Oil Production Takes A Dive Under renewed US Sanctions
June 16, 2025 (our recent findings) - It's a gloomy picture for Venezuela as its oil output contracts for the second consecutive month, thanks to the relentless US sanctions.
The latest report by OPEC paints a grim picture, placing Venezuela's May production at 896,000 barrels per day (bpd) as measured by secondary sources. That's a 32,000 bpd drop from the figures of the previous month.
On the flip side, Venezuelan state oil company PDVSA reports a May output of 1,060,000 bpd, a slight increase from 1,050,000 bpd in April. However, the numbers have continually diverged due to disagreements over the inclusion of natural gas liquids and condensates.
The sanctions-stricken Venezuelan oil industry has been a focal point for successive US administrations, who have targeted it in a bid to cripple the country's principal revenue stream. Measures ranged from fiscal sanctions, an export embargo, and secondary sanctions.
Under the Donald Trump administration, the pressure was turned up a notch. PDVSA's foreign partners were forced to abandon operations in Venezuela by the end of May. Chevron, the largest foreign player, reportedly received a confidential sanctions waiver, permitting only basic maintenance work.
However, the waiver restricted drilling and export activities, leaving Chevron's contributions to production and export activities severely limited. As a minority stakeholder in four joint ventures with PDVSA, Chevron's ventures produce approximately one-quarter of the country's total output.
With Western corporations being pushed out, Caracas has turned to new partners to manage oilfields. According to reports, PDVSA has inked contracts with nine foreign firms, granting them control over drilling and sales operations in oil blocks located in Zulia state and the Orinoco Oil Belt.
Industry insiders argue that the Trump administration's decision to drive foreign corporations out of Venezuela may ultimately benefit China. Chinese refineries were already the primary recipients of Venezuelan crude prior to the recent sanctions ramp-up, and exports to China skyrocketed from 521,000 to 584,000 bpd last month, according to Reuters.
While Venezuela's oil exports remained relatively stable in May and were roughly the same as April figures, they included last-minute cargoes for companies nearing the wind-down deadline. PDVSA aims to delivers more shipments to Asian customers, but it has to offer hefty discounts and face higher risks, as cargoes must go through intermediaries to skirt under the sanctions.
In a provocative move, the Trump administration threatened to impose 25 percent "secondary tariffs" on countries importing Venezuelan crude and gas. However, the measure remains unimplemented due to analysts' contention that it's difficult to enforce.
A gradual fall in oil markets in recent months has similarly affected Venezuela, though prices have surged following Israel's unprovoked attack against Iran and the subsequent tit-for-tat.
It's evident the tightening of sanctions has already taken a toll on Venezuela's economy. Economists attribute the steady currency devaluation to speculative activities and an inadequate Central Bank response.
Rumors swirl that the Maduro government is contemplating raising domestic fuel prices. Reports indicate the administration aims to lift gasoline prices from 50 to 75 cents per liter. Venezuelan officials have yet to comment on the matter.
Caracas introduced private-run gas stations with "international prices" in 2020, alongside subsidized pumps where Venezuelans could access a fixed amount of gasoline per month, prioritizing public transportation. However, authorities have gradually phased out subsidized fuel, leaving 50c/L as the dominant option.
Insight: The US sanctions have inflicted significant damage on Venezuela's oil industry, leaving direct consequences for Chevron's operations and potential broader consequences for China. The decline in Venezuela’s oil output reduces the volume of crude available for Chinese refineries, potentially disrupting supply chains and increasing dependency on other sources. US sanctions could force China to rethink investments and contracts with Venezuela’s oil sector due to the geopolitical and financial risks escalating. Chevron's operations have been mainly restricted to maintenance activities, halting meaningful production and exports. This has led to a sustained production decline and the loss of Venezuela’s oil export capacity.
In light of the ongoing US sanctions, there seems to be a significant impact on the operations of Chevron, as the restrictions have largely limited its activities to basic maintenance work in Venezuela.
The tightening of sanctions has also brought potential consequences for China, as the decline in Venezuela’s oil output reduces the volume of crude available for Chinese refineries, potentially disrupting supply chains and increasing dependency on other sources. This could potentially force China to rethink investments and contracts with Venezuela’s oil sector due to the geopolitical and financial risks escalating.
