Venezuela is one of the founding members of OPEC and used to export around three million barrels per day — a volume that Kuwait is aiming to achieve and produce soon. However, Venezuela today is producing less than 1.4 million barrels per day and is on the brink of collapse.
More than 50 percent of the country’s earnings are from oil. During the period from 2001 to 2015, the country was generating more than $250 billion annually. However, it is today under the threat of its oil shipments being taken over in the international waters. Its oil facilities of storage and terminal in the Dutch islands are subject to legal takeover by international courts.
In the early 1980s, Venezuela’s national oil company “PDVS” was the first ever OPEC member to invest overseas, buy several oil companies in the USA and invest in service fuel stations in Texas and surrounding states.
Today, the company is facing legal court actions whereby it has to pay compensations worth more than $50 billion or face the takeover of its oil installations.
Inflation has reached the highest level ever by almost 25,000 percent. The country is lacking everything including water, electricity, food and medicines. Its oil industry is on its knees and lacking spare parts and required materials, equipment and chemicals to explore and produce, and stop the decline in its oil production. Meanwhile, it has the biggest oil reserve in the world — close to 300 million barrels.
Without any further increase or an end to the decline in oil production, the oil markets could panic and be concerned about the insufficient oil production to meet the oil demands. This of course is coupled with the implementation of the upcoming oil sanctions on Iran. This may push the oil prices higher, which is against the desire of the current American administration to bring down the oil prices in order to satisfy their campaign’s objectives of keeping the gasoline prices below $3 per gallon.
It is very hard to witness the revival of Venezuelan oil production to extend beyond 1.4 million barrels, as its oil industry lacks almost everything, even lacks water, electricity and spare parts, and has its own oil specialists. Majority of the experienced are leaving the country for neighboring countries particularly the USA where their experiences are wanted.
Corruption, which is prevalent in every field, started about 30 years ago when there were improvements in the oil prices, and it peaked in the late 2014. Within a few years, the country was faced with the worse financial results that will be difficult to overcome in a short period.
The current situation of Venezuela could be replicated in any of the exporting oil-rich companies if they don’t learn a lesson from the experience of the OPEC founder and member — Venezuela. It is indeed a lesson to be learned and taught.
By Kamel Al-Harami
Independent Oil Analyst