PDVSA alleviates export bottlenecks

“Recovering these Caribbean assets thanks to the agreement with Conoco, means PDVSA can load export cargoes at a faster pace and avoid bottlenecks that were already slowing down field production. Right now maximising the level of exports is key in securing any revenue Venezuela can receive. Even if these cargoes pay for previous loans or barter for refined products shipments not having any issues in exporting whatever volume is available is crucial.

“However this does not mean the production decline in the country will stop since the rig activity and the field services are practically at their minimum or non-existent in some fields. The increased need for diluent to blend Orinoco Belt crude has also increased the operating expenditure of producing each barrel; currently most assets have a barely positive or negative post-tax cash flow.

“Furthermore, even at lower levels of oil production, exports to Asia will surely need to continue due to previous agreements in paying for loans. Indeed this reduces the available volume that can be sent to the US gulf coast refineries where heavy crude, such as the diluted crude from the Orinoco Belt, not only has a constant demand but means actual cash payments for PDVSA.

“With decreasing Mexican heavy crude exports and Canadian heavy oil sands still having logistic restrictions, the gulf refineries are a safe outlet for Venezuelan crude, if PDVSA manages to deliver its diluted crude there instead of Asia, we can see a relative stable level of exports to the US. However, all this ultimately depends on stabilising the country’s decline which is proving to be very difficult.”