Venezuela’s oil production dropped across all regions in the first quarter for the first time since 2008, according to energy consultant IPD Latin America.
The country’s output totaled 2.59 million barrels a day in the first three months of the year, down 188,000 barrels from an average of 2.78 million in 2015, IPD said in an e-mailed statement. “For the first time since Q3 2008 oil production from all districts fell, including that of the Orinoco Oil Belt, where production had been on the rise since Q1 2009,” IPD said.
Venezuela, which relies on crude shipments for 95 percent of export revenue, is facing the worst recession in decades amid the slump in crude prices. IPD attributed the production declines to factors including drilling challenges, natural gas compression issues and well maintenance difficulties due to restriction of field services and theft.
IPD has lowered its 2016 output forecast due to the drop in first-quarter output. The consultancy, which had expected 2016 annual production of 2.62 million barrels a day, is now forecasting an average annual rate of about 2.35 million, it said. Completing a well now takes as long as 60 days, compared with a previous average of around 15, according to IPD.
The consultant said there is “minimal correlation” between the country’s power crisis and the oil output reduction as the national oil company, Petroleos de Venezuela SA, generates about 90 percent of the electricity required for the country’s upstream operations.
“Downstream operations have the potential to be more affected than upstream by power crisis. El Palito and Paraguana power supply is most precarious. Primary and ancillary operations at the Jose industrial park depend on National Electric System, resulting in potential service interruptions,” IPD said.
Power outages have led to Venezuela offering more diluted crude oil, known as DCO, and fewer synthetic grades, Joe Gorder, CEO of refiner Valero, said today on the company’s first quarter earnings call. Gorder also said there had been no decrease in Venezuelan oil volumes imported into the U.S.
If oil returns to a $70 to $80 a barrel range in the second half of the year, Venezuela could still meet IPD’s original forecast, the consultant said.
Oil was trading around $44 a barrel Tuesday, down for a third day after touching a five-month high.
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