Venezuela Announces Oil Production Boost to Satisfy New OPEC Quota

Venezuelan president Nicolas Maduro says his country will increase oil production

Venezuelan president Nicolas Maduro says his country will increase oil production as a result of new quotas set by the Organization of the Petroleum Exporting Countries (OPEC) – but neither he nor the cartel would divulge details about the quotas or how the troubled Bolivian republic will meet them.

Although OPEC's push to increase production and marginalize U.S. shale producers resulted in the collapse of oil prices which in turn has propelled the Venezuelan economy to the brink of complete ruin, Maduro stated, "We must lower the costs of production to help investments and Venezuela will increase its oil production, while upgrading the technology and equipment to be used."

Eulogio del Pino, minister of oil and mining, said, "We are not tied to any dogma of reducing production. We are seeking new plans that will take us to balanced pricing, which justifies the sustainability of investments."

Del Pino added that OPEC singled out Venezuela as having the leading strategies to balance out the price of oil barrels, and that some of the world's largest oil companies were keen to hear its ideas to balance prices.

PDVSA, the country's national oil company, will reportedly carry out the production improvements at its refineries and petrochemical sector.

Venezuela's oil and gas sector has been in decline for years, and the situation has recently intensified due to the country's rolling power blackouts (causing a 4.8 percent decline in production for May to 2.37 million barrels per day) and the decision to divert natural gas, which economists say will increase the decline even more.

Capping off these woes is the country's drought: should it persist, energy and environmental specialist Nick Cunningham suggests that one outcome could be the complete shut down of the Guri dam, which produces three-quarters of the nation's electricity.

If that were to happen, "The situation could erupt into a full-blown humanitarian crisis," says Cunningham, adding, "that, in turn, could result in a death spiral for the economy [and] Venezuela's oil and gas sector, already on hard times, will deteriorate even further."

While some of Venezuela's troubles are beyond its control, David Smilde, a senior fellow with the Washington Office on Latin America, blames the bulk of the problems on President Maduro adhering to former president Hugo Chavez's socialist blueprint instead of embracing free-market reforms.