How Iran is helping Venezuela produce oil despite US sanctions

In 1998, before Hugo Chavez came to power, Venezuela produced about 3.12 million barrels a day, according to the Organization of the Petroleum Exporting Countries (OPEC).

After a sharp decline during the 2002-2003 oil tanker strike, production returned to 3 million barrels in 2004, before beginning a slow decline to reach 2.6 million barrels in 2015.

From there, the decline accelerated until it reached 1.14 million barrels a day in November 2018.

Two months later, in the wake of Maduro’s re-election, the US government imposed sanctions on the Venezuelan oil industry – calling for “the restoration of democracy, free and fair elections, the release of political prisoners and an end to repression.” , Which helped to destroy the already declining production.

Although many experts question the number of barrels announced by Maduro, they acknowledge that by 2021 Venezuela will be able to recover a portion of its oil production – and that Iran will play a key role in this process.

“What’s happening is that Venezuela imports solvents from Iran – naphtha, condensates, light crude oil – which are mixed with Venezuela’s heavy crude oil from the Orinoco belt to increase production,” explains economist Jose Toro Hardy. Member of the Board of Directors of Venezuelan State Oil Company PDVSA.

He explains that the oil in this part of Venezuela is very heavy and loaded with sulfur – therefore, it is necessary to mix with these products to create more commercial oil.

He points out that Venezuela used to produce these rifles, but because of the many closed oil fields, the country’s refineries are operating at a low capacity.

Hardy points out that Venezuela will give Iran a portion of this medium-sized oil production in exchange for these dilute products.

“Like Venezuela, Iran is the target of US sanctions, and its oil production has dropped dramatically.

Tehran is also helping to send petrol to Venezuela to supply the Latin American domestic market, where the production of this by-product has been reduced due to problems at refineries.

Francisco Monaldi, director of the Latin American Energy Program at the Baker Institute at Rice University in the United States, says Venezuela’s crude oil production is returning to record highs in early 2020, before Russian oil company Rosneft exits Venezuela. Impact of Govit-19 infection.

“The PDVSA, with Iran’s help, was able to build an embargoed structure to replace Rosneft. In addition, Iran began to supply solvents that the Russians had previously brought in. All of this required money and transport costs for intermediaries,” Monaldi wrote on Twitter. .

The expert added that the decline in production in 2020 was not the result of a reduction in productivity, but rather of difficulties in selling oil at lower prices and the avoidance of sanctions.

Many oil industry analysts, including Hardy and Monaldi, are questioning the 1 million barrel production capacity announced by Maduro – and predicting limits on its future growth.

“It seems unlikely, because the government itself said we had 600,000 barrels in August,” Hardy said.

Throughout its history, the expert says, Venezuela has been able to maximize oil production, and in 1998 it was immersed in the ambitious oil opening program – which aims to increase production through partnerships with private capital. That year, that increased to 190,000 barrels a day.

“The government’s announcement indicates that in four months, production will have increased by 400,000 barrels a day. It seems unlikely,” he reiterated.

He also points out that Venezuela does not currently have active drilling rigs, indicating that the country has not opened new wells.

But he explains that PDVSA production can be increased by repairing existing wells.

“Venezuela has a lot of closed oil wells because if engines or other equipment are stolen and repaired, production can more or less cheaply increase, however, it is difficult to reach 400,000 barrels,” Hardy says.

Monaldi warned that the potential increase in oil pumping with current production capacity is small.

“Production will reach about 900,000 barrels a day, and additional production will require significant investment in new wells and infrastructure,” he wrote on Twitter.

Hardy acknowledges that under current conditions, Venezuela has limited space for manufacturing growth.

“Venezuela has huge oil reserves, but it takes huge investments to exploit them. Between investments and costs, it will take about $ 25 billion a year to restore production from 20 years ago to eight or ten years from now,” he says.

“Today it is very difficult for this amount to come from the investments of Iran, Russia or China, because in Venezuela, the lack of legal guarantees will affect them,” he explains.

So, at least according to these calculations, Maduro’s plans to increase production to 2 million barrels a day by 2022 are far from over.

Have you seen our new videos Web light? Subscribe to our channel!