The U.S. Energy Information Administration (EIA) has released a report forecasting that Venezuela’s oil production will grow by only 200,000 barrels per day by the end of 2024, despite the recent easing of U.S. sanctions on the country.
The recent easing of U.S. sanctions on Venezuela's oil sector is a significant development. The sanctions were imposed in 2019 in an effort to pressure President Nicolás Maduro to step down. However, the sanctions have also had a devastating impact on the Venezuelan economy and have exacerbated the country's humanitarian crisis. The sanctions relief is focused on allowing U.S. companies to export liquefied natural gas (LNG) to Venezuela and to invest in the country's oil sector. This is expected to help Venezuela to increase its oil production and to generate much-needed revenue.
In their report, the EIA cites a number of factors that will limit Venezuela’s oil production growth: (1) years of underinvestment and mismanagement of the country’s energy sector; (2) damage to oil infrastructure caused by years of neglect; (3) a shortage of skilled labor; (4) the ongoing economic crisis in Venezuela.
Venezuela's oil industry has been in decline for many years, due to a lack of investment and mismanagement by the state-owned oil company, PDVSA. This has led to a decline in oil production capacity and a shortage of skilled workers. Furthermore, Venezuela's oil infrastructure is in poor condition, due to years of neglect. This includes pipelines, refineries, and oil fields. Repairing this damage will take time and money. And lastly, Venezuela is experiencing a severe economic crisis, which has made it difficult for the government to invest in the oil sector. The crisis has also led to hyperinflation, which has made it difficult for PDVSA to purchase the equipment and supplies it needs.
The EIA also notes that the recent easing of U.S. sanctions is unlikely to have a significant impact on Venezuela's oil production in the short term. The sanctions relief is focused on allowing U.S. companies to export liquefied natural gas (LNG) to Venezuela and to invest in the country's oil sector. However, it will take time for these investments to have a positive impact on oil production.
The EIA's forecast is in line with other recent assessments of Venezuela's oil production potential. For example, the International Energy Agency (IEA) has forecast that Venezuela's oil production will reach 700,000 b/d by the end of 2023, and 850,000 b/d by the end of 2024. Some commodity experts even claim that total crude oil production could grow about 900,000 bdp by the end of 2024.
Overall, the EIA's report suggests that Venezuela will continue to face significant challenges in reviving its oil industry. The country's oil production is likely to remain well below its pre-crisis levels for the foreseeable future.