22 August 2014, News Wires – Venezuela’s shipments of crude oil and fuel to its allies have fallen to a five-year low as a weak economy hits its ability to uphold accords that former President Hugo Chavez struck to lower energy costs for friends and expand his diplomatic clout.
Total shipments under cooperation deals with Latin American and Caribbean countries dropped 11% in 2013 to 243,000 barrels per day, the lowest level since 2007, according to recent data from Venezuela’s state-owned oil company PDVSA, Reuters reported.
Several factors are behind the decline: lower oil output and weak economic growth at home, a domestic refinery network that has not fully recovered from a severe accident in 2012, and financing agreements with China that divert much of the OPEC nation’s oil production to Asia.
Some of the beneficiaries of the cheap oil are now being forced to turn to other sources.
In the eight months through August, countries from Jamaica to Argentina that have supply pacts with Venezuela have bought 140 cargoes of crude, components and fuel for transport and power generation on the open market, according to tender information compiled by Reuters.
More than two thirds of those were for Ecuador, one of Venezuela’s closest allies.
The purchases, which have left tankers in short supply, are far costlier than oil obtained through long-term pacts.
Twenty-one countries are party to oil pacts managed by Venezuela, including Petrocaribe, the Caracas Energy Agreement and other bilateral deals.
But mounting economic problems in the South American country have strained the programmes. As far back as 2010, Venezuela had started buying fuels from third parties to meet quotas for the accords.
Venezuela now sends 485,000 barrels per day (bpd) of crude and fuels to China to service oil-for-loan deals, up 98% from 2010, as President Nicolas Maduro’s government has become increasingly reliant on Chinese financing.
That has left fewer barrels available for regional friends.
Dominica, Honduras, Paraguay and Bolivia did not receive a single barrel from Venezuela last year, PDVSA data released in late June showed.
Argentina, which emerged from a deep economic crisis following its 2002 debt default in part with the help of cheap Venezuelan fuel oil, saw shipments from Venezuela cut in half last year.
Oil Minister Rafael Ramirez has denied Venezuela is offering less to Petrocaribe partners, insisting that shipments fluctuate based on the needs of each country.
“These are monthly requests and the countries have quotas. Sometimes they ask for all of it, sometimes they don’t need to,” he told reporters in June. “It changes, and the countries know this.”
Not all countries have suffered declines, however. Shipments to Cuba and Nicaragua, two of Venezuela’s closest allies, have held strong – a combined 130,000 bpd in 2013, PDVSA says.