By: Staff Writer
July 15, 2022
Venezuela does not have the capacity to honour a revived PetroCaribe over the short to medium term says a regional energy analyst.
Jeremy Martin, Vice President, Energy & Sustainability at the Institute of The Americas, told Caribbean Magazine Plus that Caribbean leaders have “wishful thinking” if they believe Venezuela under the Nicolas Maduro regime will have enough capacity to supply the region with oil under a revived PetroCaribe arrangement.
Crippling sanctions imposed by the United States have put a choke hold on Venezuelan oil exports over the last three years. Sanctions were first imposed by US President Barack Obama in, 2014, but were only geared towards curtailing human rights abuses and did not target the country’s oil production or exportation.
However, Human Rights observers arguing that these sanctions did not go far enough, beginning in January 2019, during the Venezuelan presidential crisis, urged the US to apply additional economic sanctions in the petroleum, gold, mining, food and banking industries.
Venezuelan oil exports took a nose dive as any US company that did business with them were immediately halted, with further rippling effects around the global network as oil supply chains recoiled and companies that did business with American companies that did business with Venezuela began to look elsewhere. Even prior to the sanctions, Venezuela was suffering from depreciating assets as most of their tankers were barely seaworthy and their equipment to drill for oil was outdated.
The Organization of the Petroleum Exporting Countries (OPEC) said in a March statement that Venezuelan oil production is ramping up as the US sanctions begin to lose its effect and the Maduro regime has found ways to export oil. The oil cartel said that Venezuela produced an average of 788,000 barrels per day in February of 2022, accounting for an increase of 33,000 barrels per day compared to January’s report. Production slid back to 725,000 barrels per day in June, which is still a ways away from the July 2021 lows of 614,000 barrels a day and nowhere near the 2.5m barrels a day volume at the onset of the original PetroCaribe arrangement signed in 2005.
Mr Martin added: “Back in the day, there was a lot more excess capacity, there were a lot more production. But it would make sense where nations would want the PetroCaribe because everyone’s trying to manage the supply and demand balance right now.”
Venezuelan supply coming back to full strength would be welcomed right now as the price of oil per barrel is over US$90 and has gone as high as US$119 in the last three months, making a COVID-19 rebound more difficult as it has exacerbated inflation pressures causing prices to go sky-high at not only the gasoline pump, but also in the stores as everything is affected by the price of oil.
Mr Martin also said: “If Caribbean nations can get Venezuela to re-up with the good deal that they had with the PetroCaribe the by all means. I just have my doubts whether in the near term, six months to a year, there’s even the capacity for Venezuela -even if they sign a deal on agreement- to deliver on any oil.”
With the sanctions imposed by the US now along with the precipitous drop in oil production brought on by it, plus there are still outstanding matters of who would be allowed to receive oil from Venezuela to ship to Caribbean countries if the PetroCaribe deal were to go ahead. “You still have restrictions on Chevron and even some of the foreign companies are still severely restricted.
“What Venezuela can do is send cargo to Europe directly. To alleviate that crisis and what’s going on there. So it’s just hard to see, it’s like threading a needle. To get PetroCaribe re-started and having meaningful recommendations in the Caribbean and Central America, it would be threading the needle. It would be getting production back up as quickly as possible, which will require some more than easing of the sanctions and a lot of investment. There needs to be a lot of investment.”
In short, the Biden administration needs to lift the sanctions on Venezuela, something CARICOM leaders have asked for at the Summit of the Americas in June when Venezuela was not invited to attend. “The Biden administration has talked about it here and there, but I haven’t seen it gone much further than just discussions at the outset. I think they still want some hostages released.”
The Citgo 6 are employees of Houston-based Citgo refining company, which is owned by Venezuela’s state oil company, Petróleos de Venezuela, S.A (PDVSA). They had been lured to Venezuela in 2017 for a business meeting and were found guilty of corruption charges in 2020.
Five of the men, Gustavo Cárdenas, Jorge Toledo, Jose Luis Zambrano and Alirio Zambrano, and Tomeu Vadell, all U.S. citizens, were sentenced to eight years and 10 months. Jose Pereira, a permanent resident of the U.S., received 13 years.
“It’s one of the many issues the Biden administration is hoping to be a part of the sanctions relief to get that in return,” Mr Martin said. Another issue is now allowing the US oil giant Chevron to be able to operate in Venezuela again as the company has invested billions into the country, which is part of a “thorny” issue because it is the last US company still in Venezuela with any sizeable assets of note. He continued, “The US also still has this crazy situation where we recognized Juan Guaidó several years ago and we said Maduro was not going to be president. But now we’re negotiating with Maduro which makes him legitimate now. So we are seeing these kinds of things happening. Chevron has not been able to so far in getting the US to deploy operators in their operations and their stakes there.”