20 January 2018, News Wires – Venezuela’s crude oil production fell nearly 13 percent last year, according to figures released by OPEC, hitting a 28-year annual low that points to a deepening economic crisis and increased chances of a debt default.
The South American country produced 2.072 million barrels per day (bpd) in 2017 versus 2.373 million bpd the previous year, a nearly 300,000-bpd drop.
That was the biggest decline among the members of the Organization of the Petroleum Exporting Countries that have pledged to restrain production since the start of 2017 through 2018.
But unlike voluntary cuts by Saudi Arabia, Russia and others intended to stoke higher crude prices by draining a global glut, Venezuela has been unable to stop a now six-year-long production decline.
Insufficient investments, payment delays to suppliers, U.S. sanctions, and a brain drain have hammered Venezuela’s oil industry. The production fall has hit oil exports – its only major source of foreign currency to repay debt – and refining, creating intermittent fuel scarcity in the country and at some of its main allies, such as Cuba.
An alleged crackdown on oil graft in the last few months, seen by critics as an effort by President Nicolas Maduro to consolidate power, has sown panic across the energy industry and all but paralyzed state oil company PDVSA, according to people at the firm and in the sector. It is a remarkable downfall for the OPEC member home to the world’s biggest crude reserves.
“This is one of the worst collapses in history. It happened without an invasion like in Iraq, the breakup of a country like in the Soviet Union, or a civil war like in Libya,” said Francisco Monaldi, a fellow in Latin American Energy Policy from Rice University’s Baker Institute. Venezuela’s oil ministry and PDVSA [PDVSA.UL] did not respond to a request for comment.
The output drop is likely to worsen a bitter recession and hyperinflation that have poor Venezuelans skipping meals or eating from the garbage.
Opposition politicians say Venezuela’s inefficient state-led economic model and rampant corruption are to blame for the oil industry’s meltdown.
“This is the most irresponsible act against the Venezuelan people. They destroyed the industry that generates almost 96 percent of the country’s foreign revenue,” said opposition lawmaker Elias Matta.
Socialist Maduro retorts that U.S.-backed opposition supporters have sabotaged the oil sector.