By
Pietro D
Pitts
Hart Energy

A potential deal between Washington and Caracas to ease sanctions on Venezuela could see the South American country boost production by 200,000 bbl/d over the near-term, according to Rystad Energy senior oil market analyst Sofia Guidi Di Sante.

“In the short term – six months after sanctions are lifted – production could only ramp up by a maximum of 200,000 [bbl/d]; a relative drop in the ocean on the global stage,” Di Sante said in an Oct. 17 research report.

Di Sante said Venezuelan oil output could increase from 2024 if sanctions were lifted, but added that “the potential expansion is hindered by the prolonged lack of investments in the industry.”

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Details of a potential deal being hashed out on the Caribbean-island of Barbados were initially reported on Oct. 16 by The Washington Post and Reuters. A U.S. agreement to ease sanctions on Venezuela would hinge on a return of a fair and competitive presidential election in 2024, Di Sante said, referring to the news reports.

Discussions in Barbados on Oct. 17 concluded with more election related announcements, such as establishing that Venezuelan elections will take place in the second half of 2024. But no details regarding Washington easing its oil sector sanctions on Venezuela were revealed, according to initial reports broadcast on Venezuelan state television.

“An increase in global oil production would be much needed after a turbulent 2023 for supplies, which saw the reshuffling of trade flows following Russia’s invasion of Ukraine, voluntary production cuts from Saudi Arabia of 1 [MMbbl/d] until December this year, and the recent outbreak of the Israel-Hamas conflict,” Di Sante said. “Assuming sanctions on Venezuela are lifted, however, it is unlikely that a production boost from the country would be able to bring significant relief to oil markets in the short term.”

The deal could also open an avenue for the Venezuelan President Nicolas Maduro’s government to re-engage with international financial institutions and recover some $3 billion frozen assets in accounts in Europe. Di Sante said the U.S. “would lift some oil sanctions via authorizations that would allow foreign energy companies to take Venezuelan crude for debt repayment.”

Chevron Venezuela JVs

U.S. major Chevron Corp. is the only U.S. company operating in Venezuela and the only international oil company with near-term potential to ramp up production.

Washington gave Chevron the go-ahead in late 2022 to boost production. The California-based company has yet to return production to around 200,000 bbl/d, the capacity its joint ventures in Venezuela were producing at some time before U.S. sanctions were imposed in 2019.

Chevron produced around 125,000 bbl/d in second-quarter 2023, according to Ecoanalítica, which was about 16% of Venezuela’s total production at that time. Chevron only expected production to reach around 175,000 bbl/d as it reactivates its fields and faces other hurdles related to shipping oil from Venezuela’s Lake Maracaibo.

In order to hit Di Sante’s production figures other companies in Venezuela such as Spain’s Repsol SA and Italy’s Eni SpA, among others, including state-owned PDVSA, would also need to step up operations. 

Venezuela’s oil production averaged 733,000 bbl/d in September 2023, according to secondary source data from OPEC’s Monthly Oil Market Report. Venezuela’s current production is up from a low of around 500,000 bbl/d in 2020 but still far from its 1997 peak of about 3.2 MMbbl/d.

Venezuelan oil exports

Through August 2023, Venezuela’s overall exports have reached an average of 560,000 bbl/d, Rystad’s Di Sante said in the Rystad report, which represents a 250,000 bbl/d increase since 2021.

However, the latest figures are still shy of the historical pre-embargo export levels above 1.5 MMbbl/d, she said.

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“A further increase in exports will, however, depend on an extension of diplomatic relations in the region on top of the continued availability of crude,” Di Sante said.

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