who controls its energy and what Maduro’s arrest means
The oil tanker “Minerva Astra” remains anchored in Maracaibo, Venezuela, as a protester flying a Venezuelan flag approaches the ship on December 17, 2002.
Andrew Alvarez | Afp | Getty Images
Nicolás Maduro’s arrest has brought renewed attention to one of the world’s most politically fraught oil industries, forcing investors to reassess who controls Venezuela’s crude resources and whether they can be meaningfully revitalized after decades of decline.
For now, the answer may seem simple. “The state-owned oil company Petróleos de Venezuela (PDVSA) controls the majority of oil production and reserves,” said Andy Lipow, president of Lipow Oil Associates.
American energy company Strip operates in the country Lipow said that through its own production and joint venture with PDVSA, Russian and Chinese firms also participated through partnerships, but “the majority control is still with PDVSA.”
Chevron will be in the best position if Trump succeeds in seeing a more pro-US and pro-investment government take shape in Venezuela [to control Venezuelan oil] given that they are already well positioned there.
Saul Kavonic
MST Finance
Venezuelan Nationalized the oil industry in the 1970sIt led to the creation of PDVSA. Data provided by Lipow Oil Associates showed that oil production peaked in 1997 at about 3.5 million barrels per day, but has since fallen to an estimated 950,000 barrels per day, with about 550,000 barrels per day exported.
Saul Kavonic, head of energy research at MST Financial, said Chevron would be “best positioned” to expand its role if a more pro-US and pro-investment government takes shape in Venezuela. European companies like it repsol And Width He said they could also benefit from this, given their current position in Venezuela.
What does it mean for global oil?
Industry experts have warned that any regime change could disrupt the commercial chain that keeps Venezuelan barrels flowing.
“Because it is unclear who is in charge in Venezuela right now, we could see exports completely stop because buyers don’t know who to send the money to,” Lipow said. The latest round of US sanctions The shadow fleet of tankers has severely affected exports, forcing Venezuela to cut production.
The shadow fleet refers to tankers that operate outside traditional shipping, insurance and regulatory systems to transport crude oil from sanctioned countries. These ships are often used to transport oil from countries such as Venezuela, Russia and Iran, where the United States faces restrictions on energy exports.
Lipow expects Chevron to continue exporting 150,000 barrels a day, limiting any immediate impact on supply. Still, broader uncertainty could add a short-term risk premium of about $3 per barrel, he said.
This increase would come against a market that many analysts think is adequately supplied, at least for now. “The oil market is trending toward oversupply right now,” said Bob McNally of Rapidan Energy Group, calling the immediate impact “almost no problem.”
Venezuela’s long-term importance lies in the type of oil it produces. The country’s heavy, sour crude can be technically challenging to extract, but is rewarded by sophisticated refineries, especially in the United States, McNally said. “American refineries… I love slurping up that dirty oil from Venezuela and Canada,” said McNally.
“The real question is, can the oil industry come back to Venezuela and reverse two decades of dilapidation and neglect and get it back on its feet?”
Lipow said that if a new government led by opposition leader Maria Corina Machado is formed very quickly, sanctions could be eased and oil exports could initially increase as stored oil is used to generate revenue. However, he added that a short-term increase could put pressure on prices.
Oil prices in the last year
Yet any idea of a sustainable recovery faces formidable physical limitations. “The Venezuelan oil industry is in such disrepair that even if the government changes, it is unlikely to see a material increase in oil production for years to come, as significant investments would be required to rehabilitate the existing infrastructure,” he said.
Similarly, RBC’s Helima Croft warned that Venezuela’s road to recovery is long, citing its “decades of decline under the Chavez and Maduro regimes.” He said oil executives have argued that turning the industry around would cost at least $10 billion a year and that a “stable security environment” is an absolute prerequisite.
“In a chaotic change of power scenario like in Libya or Iraq, all bets are off,” he said.
— CNBC’s Chery Kang and Martin Soong contributed to this report.
