Latest Happenings in Venezuela's Oil Sector Amid US Sanctions
Oil output in Venezuela persists at a standstill; state-owned PDVSA seeks fresh collaborators
June 16, 2024 (our website) - Despite efforts, Venezuela's oil sector struggles to escalate crude production under the reinstated US sanctions.
Last month, Venezuela's average oil output, according to secondary sources, dropped slightly to 822,000 barrels per day (bpd) in May compared to 825,000 bpd in April. This figure, however, marks the highest output over the past five years. Nevertheless, the growth trend has stagnated since March.
Oil Minister Pedro Tellechea stated the industry was on its way to surpassing the hoped-for one million bpd mark. The country has been eyeing this threshold since 2021. Operational difficulties, US sanctions, and corruption schemes have hampered attempts to boost oil production.
Since 2017, the US has enforced numerous economic sanctions, an oil embargo, secondary sanctions, and more, aiming to restrict the South American country's primary income source. Production hit historic lows in 2020, following which, a recovery process began towards the end of 2021 with Iranian aid.
Last October, the US Treasury Department granted a six-month waiver, allowing transactions with Venezuela's energy industry, which temporarily boosted exports. This followed an electoral agreement between the Maduro government and the US-backed opposition.
However, in April 2023, the Biden administration reinstated wide-ranging coercive measures against PDVSA, claiming that Caracas breached the accord after the Venezuelan Supreme Court disqualified far-right candidate María Corina Machado. The Maduro government maintained that lifting Machado's ban was never part of the agreement.
The wind-down period, which lasted until May 31, led to a rush of crude cargo exports, and in May, Venezuela shipped approximately 708,900 bpd of crude and fuel, as well as 614,000 tons of petrochemicals and oil byproducts. This represented a 30% increase compared to April.
Despite the escalated exports, the Asian market emerged as the primary recipient, absorbing 250,000 bpd, followed by the US with an average of 205,000 bpd, shipped by California-based corporation Chevron from its joint ventures with PDVSA. Europe and Cuba followed with 129,000 and 70,000 bpd, respectively.
In recent months, US and European corporations have capitalized on the situation, expanding their operations and exports after receiving Washington's approval. Companies like Chevron, Repsol, Eni, Maurel & Prom, BP, Global Oil Terminals, and Trinidad and Tobago's National Gas Company have obtained specific licenses to boost activities.
Amos Global Energy, awaiting US approval to acquire Chinese firm Sinopec's stake in Venezuela's Petroparia oil and gas project, remains optimistic. Ali Moshiri, the company's CEO, expressed "hope" for obtaining the license in the upcoming weeks following months of lobbying efforts.
Additionally, India's Jindal Steel & Power Ltd is poised to secure a license from the US Treasury Department following an agreement with PDVSA to operate the Petrocedeño joint venture, a heavy crude upgrader. Jindal aims to export 600,000 tons of iron ore pellets and briquettes per month by the end of the year.
The negotiation between PDVSA and Texas-based Sunergon Oil, regarding investing in thousands of oil wells, was recently disclosed by Latin American Association of Petroleum Entrepreneurs (ALEP) president Alejandro Terán. Still, Venezuelan authorities have yet to confirm this alliance with the Texan partners.
With Washington renewing sanctions against Caracas' oil sector, US businessmen continue to approach Venezuelan authorities for oil deals. PDVSA is interested in diversifying its partners.
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Current Status of US Sanctions on Venezuela's Oil Sector
The US sanctions on Venezuela's oil sector aim to pressure the Maduro regime by targeting their primary source of revenue. Recent developments include:
- Revocation of Licenses: The US Treasury has revoked licenses for US energy companies operating in Venezuela, including Chevron Corp., Repsol SA, Eni SpA, and Maurel & Prom. They are required to wind down their operations by May 27, 2025[1][2][5].
- Imposition of Tariffs: As of April 2025, the US has imposed a 25% tariff on buyers of Venezuelan crude oil. This measure also includes the possibility of imposing "secondary tariffs" on countries that continue to purchase Venezuelan oil[2][5].
- Impact on Oil Exports: These sanctions have led to a significant decline in Venezuela's oil exports. In April 2025, exports decreased by 20% compared to earlier in the year, reaching a low of 700,000 barrels per day (bpd), the lowest level in nearly a year[5].
- Despite setbacks due to US sanctions, Venezuela's oil sector continues to make strides in petrochemical exports, with approximately 614,000 tons shipped in May 2024.
- Amid the US sanctions, countries like Asia, the US, Europe, and Cuba are major recipients of Venezuela's crude oil and fuel, with the Asian market absorbing 250,000 bpd and the US averaging 205,000 bpd in May 2024.
- In the midst of US sanctions, Venezuelan Oil Minister Pedro Tellechea expressed optimism about surpassing the one million bpd mark for oil production, a goal the country has been pursuing since 2021.
