Americas News
Venezuela Insists Oil Production Will Increase Dramatically, Analysts Insist It Will Drop Worse than Originally Thought
As more details emerge about Venezuela's bid to boost oil production and meet new Organization of the Petroleum Exporting Countries (OPEC) quotas, Eulogio Del Pino, the country's oil minister, told a local radio station that oil prices will rise by $10 this summer.
He based his prediction on recent reports of increased demand and gradually diminishing stockpiles: "Two million barrels more in demand and a million barrels less supply will translate to a recovery of prices that we estimate to be some ten dollars."
He went on to say that "We have no doubt that within three to six months, we are going to be raising production between 150,000 and 200,000 barrels per day.
"We will get up to levels very close to our potential, in the order of 2.9 million bpd" (OPEC data shows that Venezuela's output dropped to 2.37 million barrels per day (bpd) in May).
PDVSA, the country's national oil company, will reportedly carry out production improvements at its refineries and petrochemical sector in order to fulfill the new quota, details of which OPEC has not disclosed; del Pino said it has already launched an effort that includes co-operation with joint ventures and new contracting arrangements with service companies.
Despite Venezuela contributing to the global glut that not only resulted in market chaos but pushed that country to the brink of economic collapse, del Pino has stated "We are not tied to any dogma of reducing production" and claims his country was sought by OPEC for having the "leading strategies" to balance out the price of oil.
Analysts are not impressed by the Bolivarian republic's can-do attitude, especially considering the problems with the infrastructure of its industry and oil services companies retreating due to unpaid bills: "The downside risks for Venezuela's oil production seem to be increasing," Barclays said last week, adding that its output could decline to end the year at around 2.1 million bpd.
Erwin Cifuentes, a contributing editor for Southern Pulse Info, is even more severe in his outlook: he writes, "daily production could fall below 1.9 million bpd for the first time since 1989, and around a 40 percent drop from 1998."
One sign that Venezuela is desperate to regain its status on the international front is a report that Franciso Perez Santana, Head of Mission at the Venezuelan Embassy in Barbados, is trying to persuade Barbados to purchase oil under the PetroCaribe agreement set up by former Venezuelan president Hugo Chavez in 2005.
Despite the deal being rejected because it was not in the island's best interest, Santana told Barbados Today, "Do you know that with PetroCaribe, you can pay for oil over 25 years with a two-year break before the first payment?"
Santana, whose nation is suffering from massive civil unrest, skyrocketing crime, and lack of basic services, added, "In Jamaica with PetroCaribe, there is a social program to build houses and others to help people with their health: it is not just to buy or sell oil or to set up an oil refinery to produce petroleum products, it is also for the people's development."
Instead of predicting Venezuela's resurgence of production, most economists are focused on the impending collapse of its economy, with observers such as Nick Cunningham pointing out that all it would take at this point is the complete shut down of the Guri dam, which produces three-quarters of the nation's electricity, for "a full-blown humanitarian crisis" to erupt.
