Venezuela needs $58 billion to restore crude output to 1998 levels
Venezuelan state oil company PDVSA would need $58 billion in investment to revive its crude production to the levels of 1998 before ex-President Hugo Chavez came to power, equivalent to 3.4 million barrels per day (bpd), a document seen by Reuters shows.
In the February 2021 document entitled “Investment
Opportunities,” Petroleos de Venezuela’s planning and engineering division said
it was seeking capital investment from Venezuelan and foreign partners, mostly
to recover and upgrade oil production infrastructure “under new business
models”.
The main new partnership model PDVSA detailed in the
document was the use of production services agreements (ASPs).
Under these deals, contractors would finance 100% of
operations in the oilfields and in return would receive a portion of the
project’s free cash flow as payment. The Venezuelan state would remain the full
owner of the fields and the associated infrastructure.
The crisis-stricken South American nation produced just
578,000 bpd of crude in March, according to figures the country provided to
OPEC, well below the 2021 goal set in the document of 1.28 million bpd.
The proposal comes as President Nicolas Maduro is seeking to
mend ties with the private sector to attract investment to rebuild the OPEC
nation’s collapsing economy, in a reversal of tightening state control under
Chavez’s socialist model.
Venezuelan oil industry’s top three goals, according to the document,
are to “stabilize and recover crude and gas output,” “restore reliability,
safety and quality of operations,” and “fully supply the domestic market with
fuels.”
Washington imposed sanctions on PDVSA in a bid to oust
Maduro, whom it brands a dictator. Venezuela’s Socialist government has accused
the United States of seeking to control its oil resources.
A toughening of sanctions in 2019 under former U.S.
President Donald Trump complicated the company’s ability to attract investment,
given the risks that its partners could themselves be blacklisted.
In addition, even state-owned companies from countries that
are staunch Maduro allies, like Russia and China are wary of boosting cooperation
with PDVSA after years of corruption
In total, PDVSA identified a total of 152 “opportunities”
requiring $77.6 billion in investment including crude and gas production,
midstream operations such as transport and storage, and refining and
commercialization operations.
The lion’s share of the required investment, or over $69
billion, would go to crude and gas production infrastructure.
Of that, $58 billion is needed to return crude output from
joint ventures and PDVSA’s own oilfields to their 1998 levels, while another
$11.3 billion would go to onshore and offshore gas fields.
PDVSA also estimated that $7.65 billion is needed for
reviving pipelines, projects for gas injection to oilfields, terminals and
refineries that are idled or underperforming due to lack of maintenance.
Neither PDVSA nor Venezuela’s oil ministry replied to
requests for comment.
Venezuela is home to some of the largest crude reserves on
earth, but its oil industry is operating well below capacity after years of
underinvestment.
The country’s opposition has been developing its own plan to
restructure the industry and attract investment following a potential change in
government.
A technical committee working with the opposition last year
set less optimistic goals: the country would require around $98 billion to
boost output to 2.2 million bpd.
In addition to the production services agreements (ASPs),
the PDVSA document also advertised investment opportunities in its joint
ventures with private partners, though it did not specify what, if anything,
would change in the business model for those projects.
Venezuelan law requires PDVSA to have a majority stake in
all joint ventures.
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