The Future of the Oil and Gas Industry in Venezuela in the Years to Come amidst a Challenging Environment of Economic Sanctions, World Recession, a Pandemic, and the Energy Transition
| DOI | 10.3366/gels.2020.0027 |
| Published date | 01 August 2020 |
| Date | 01 August 2020 |
| Pages | 194-199 |
| Author |
The immediate future of the Venezuelan oil and gas industry requires a necessary restructuring of the state-owned company Petróleos de Venezuela (PDVSA), and a much-needed large scale legal and tax reform, aimed at relaunching the industry. Such change will undoubtedly require strong political support to put Venezuela back on the oil map. PDVSA's negative financial and operational performance in the past two decades is linked to the unsuitable legal and tax framework, poor managerial and technical capacities, loss of qualified workforce, substantial indebtedness, lack of investments, non-compliance with best industry practices, development of non-core businesses, heavy subsidies on domestic fuels, and more recently the impact of U.S. economic sanctions. Due to these sanctions, PDVSA and other Venezuelan government agencies are not legally permitted to acquire goods, services, technology and financial assistance from U.S. citizens and residents.
Relaunching the Venezuelan oil industry must be done in this environment, along with international low oil prices and a world economic recession on the horizon. In contrast, oil demand is likely to continue remaining low because of the COVID-19 crisis and national lockdowns. This situation could accelerate the energy transition to a lower carbon economy, as some energy companies are now addressing. However, we do not see that coming in the short term, though, the oil will continue to be the first energy source for a considerable time and the driving force for Venezuela.
Once reforms are in place, the Venezuelan government has to execute a comprehensive upstream, midstream and downstream business plan, where the country's offshore upstream potential should be given a priority and with the private sector playing a central role alongside a lesser involvement of PDVSA. Any active participation of recognized private parties with knowledge, expertise, technology, and capital would be encouraging news to raise production and recover refining capacities.
In February 2020, the government inaugurated a new initiative for the recovery of the oil industry with a Presidential Commission. Two months later, new appointments were made in key industry positions including Petroleum Minister and PDVSA's President. Shortly after that, an aggressive restructuring plan came to surface. However, we have yet to confirm its...
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