October 23, 2023
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO)
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) effectively lifted most U.S. sanctions on Venezuela’s energy sector on October 18 for six months, paving the way for additional exports of the heavy, sour crude oil the country produces. That type of crude oil has been in short supply and has had significant price increases in recent months. Still, years of underinvestment and mismanagement of Venezuela’s energy sector will likely limit crude oil production growth to less than 200,000 barrels per day (b/d) by the end of 2024, requiring more time and investment for additional growth.
U.S. crude oil imports from Venezuela stopped shortly after January 2019 when the United States imposed sanctions on state oil company Petróleos de Venezuela SA (PdVSA). The United States eased those sanctions in November 2022 when OFAC granted waivers to Chevron so it could resume exporting crude oil from its joint venture operations in Venezuela to U.S. Gulf Coast refineries, which restarted in January 2023.
Refineries on the U.S. Gulf Coast are well-suited to take the kind of heavy crude oil Venezuela produces. PdVSA’s subsidiary in the United States, Citgo, has three refineries—Lemont, Lake Charles, and Corpus Christi—which have a combined capacity of over 800,000 b/d and are designed to process heavy oil. These assets will change ownership later this month as the result of a scheduled October 23 sale of Citgo’s assets to satisfy creditor claims against Venezuela and PdVSA.
Venezuela’s crude oil production has fallen from about 3.2 million b/d in 2000 to 735,000 b/d in September 2023, making it the 10th-largest producer in OPEC despite its significant oil reserves. U.S. crude oil imports from Venezuela similarly declined, falling from 1.3 million b/d in 2001 to about 510,000 b/d in 2018. Imports halted in 2019 for four years before resuming under limited sanctions relief in January 2023 and increasing to 153,000 b/d in July 2023.
Venezuela’s crude oil production in September declined from the recent high of 790,000 b/d in July 2023. Shortages of diluent, which is necessary to process Venezuela’s heavy oil, reduced output. The lifting of sanctions will allow for increased diluent imports, which could boost production slightly. We expect the bulk of near-term production growth to come from Chevron’s joint ventures. The earlier exemption for Chevron led its share of production to increase to 135,000 b/d in 2023, and we expect Chevron’s output in Venezuela to increase to 200,000 b/d by the end of 2024.
Ventures operated by ENI, Repsol, and Maurel & Prom could increase production by an additional 50,000 b/d in the near term, according to IPD Latin America. As a result, we asses that these ventures could raise Venezuela’s total output to about 900,000 b/d by the end of 2024.
Further increases in Venezuela’s crude oil production will take longer. Much of Venezuela’s crude oil production capacity and infrastructure has suffered from prolonged lack of access to capital and regular maintenance The potential for further growth remains highly uncertain at this time because significant new investment would be required for additional production.
Principal contributors: Erik Kreil, Sean Hill
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) effectively lifted most U.S. sanctions on Venezuela’s energy sector on October 18 for six months, paving the way for additional exports of the heavy, sour crude oil the country produces. That type of crude oil has been in short supply and has had significant price increases in recent months. Still, years of underinvestment and mismanagement of Venezuela’s energy sector will likely limit crude oil production growth to less than 200,000 barrels per day (b/d) by the end of 2024, requiring more time and investment for additional growth.
