Lack of investment and delays in payments in Venezuela hampers oil production

Baku. 15 August. REPORT.AZ/ Venezuela, which holds the world's largest crude reserves, is on track to suffer its steepest annual oil output drop in 14 years as it suffers the effects of an economic crisis and years of under investment and mismanagement, Report informs citing the Reuters.

The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country's vast oil fields.

In the 12 months to June, Venezuela's crude output fell 9 percent to 2.36 million barrels per day (bpd), while the Organization of Petroleum Exploration Countries (OPEC) has boosted its output by 4 percent, according to the group's official figures.

Venezuela's oil minister and PDVSA president, Eulogio Del Pino, last month confirmed a 220,000-barrel-per-day production decline -- around 8 percent -- so far this year compared with 2015.

However, he said the "circumstantial fall" had been "contained." The Oil Ministry later said, the country's output rebounded in July to 2.54 million bpd, without giving comparative figures. The data have not yet been reported to OPEC.

PDVSA's statistics have been a matter of debate for years.

Internal trade and supply data seen by Reuters show that PDVSA's crude exports, which account for 94 percent of the country's hard currency income, fell to 1.19 million bpd in July, excluding independent sales made by its joint ventures.

PDVSA did not respond to a request for comment on its sales to customers.

Several PDVSA workers and local union members, in interviews with Reuters, said that an increase in equipment theft, maintenance delays, low salaries, and what they called a sense of "abandonment" of some oilfields are continuing to hit production.

"I have never seen so much inefficiency in my 28 years in the oil industry," said a worker of a drilling firm hired by Petroboscan, a project with participation of U.S. Chevron that is one of more than 40 joint ventures by PDVSA and foreign firms.

Del Pino told local media last month that power outages and limited upgrading capacity to convert Venezuela's extra heavy oil into exportable crude has hampered production. It has forced PDVSA to import some 95,000 bpd of heavy naphtha and light crude to dilute its oil, Reuters trade flows data says.

These problems, occurring while oil services providers reduce operations in Venezuela, have analysts forecasting that production will not recover in the second half of the year, falling instead to its lowest level since a strike that brought output down to an average of 2.56 million bpd in 2003.

Venezuela's active rig count, a good indication of future production, fell to 49 in July according to Baker Hughes, the lowest since the end of 2011.