Venezuelan state energy company PDVSA projects oil production will remain near 23-year lows in 2017, an internal document shows, suggesting more hardship ahead for the crisis-wrought OPEC member country.
Cash-squeezed PDVSA, which accounts for nearly all of Venezuela’s export revenues and is the socialist government’s financial motor, saw production tumble by nearly 10 percent in 2016 due to an unraveling economy and low oil prices.
The company’s weak finances are causing operational disruptions, and are both affected by and contributing to Venezuela’s economic downturn. Three years of recession and soaring prices have pummeled Venezuelans, with many skipping meals and lootings of supermarkets commonplace. Some economists have estimated that gross domestic product contracted by 10 percent or more in 2016.
This year, PDVSA sees production at 2.501 million barrels per day (bpd), an increase of just 5,000 from the 2.496 million bpd for the first 11 months of 2016, according to a nine-year strategic plan presented in December.
That is broadly on par with output levels in 1993, as the struggle to pay providers has led some services companies to halt work and oil suppliers to delay or halt deliveries of fuel and crude.
The 261-page document seen by Reuters gives a rare window into PDVSA, a highly secretive company that seldom publishes detailed business plans. It shows PDVSA expects a shortfall in imported diluents needed for blending with its extra heavy crude output, along with aggressive refinery maintenance plans.
PDVSA did not respond to an email seeking comment on the internal report.
Crude shipments to political ally China, which has lent Venezuela more than $50 billion through a decade-long oil-for-loans program, are slated to increase 55 percent in 2017 from 2016 to reach 550,000 bpd, according to the presentation.
There was no explanation for the jump, but it could signal the end of a grace period that Caracas negotiated with Beijing, which had allowed it to cut shipments in 2016 to 355,000 bpd from 627,000 a year earlier.
Oil shipments to India, however, are expected to fall 15.5 percent to 360,000 bpd. Unlike China, India pays mostly in cash, so a reduction in exports would likely worsen Venezuela’s financial asphyxiation.
LOW IMPORTS, LONG MAINTENANCES
PDVSA also projects a sizeable deficit of light crude and naphtha, both of which are crucial to turn the extra heavy oil it produces in the Orinoco Belt – one of the world’s largest deposits – into lighter grades for exports.
Venezuela started regular imports of diluents in 2015 because its output of light and medium grades has tumbled, but PDVSA’s cash shortage has led to delays and insufficient purchases. Long lines of tankers waiting to discharge routinely form at its ports, according to Thomson Reuters data and industry sources.
PDVSA in 2017 plans to import 125,000 bpd of light crude but will still face a deficit of 217,000 bpd, according to the document. It will also face a shortage of 28,000 bpd of naphtha, a fuel similar to gasoline used to dilute Orinoco oil in order to increase its sale value.
PDVSA would partially offset its diluent deficit in the medium term with maintenance at domestic refineries so they can produce more naphtha. It also plans to restart a refinery in the Caribbean island of Aruba now operated by U.S. unit Citgo Petroleum.
But the company’s projects are often delayed, the Aruba refinery is unlikely to be up and running soon, and refineries at home are plagued with frequent outages and blackouts.
The 2017 refinery maintenance schedule described in the document shows PDVSA plans to shut down some crucial domestic units for 90 days – roughly twice the industry standard length for major maintenance.
This suggests that PDVSA is seeking to take advantage of a stagnant production to overhaul its refining network. Refineries in Venezuela and nearby Curacao in 2016 received 200,000 bpd less in crude deliveries than the year before, the document says.
[Source:- Reuters]
