Venezuela's oil production remains severely curtailed during the country's ongoing crisis, which is impacting the future of the national oil company, Petroleos de Venezuela SA (PDVSA). The national strike in Venezuela is also costing some of the largest international oil companies millions of dollars daily, according to two January reports by financial analysts.
"Regardless of the outcome of the current crisis, PDVSA is unlikely to retreat to its former (apolitical) role," said analysts at Fitch Ratings Ltd., New York.
"Venezuela's image as a reliable crude oil supplier has been undermined. Even when a semblance of normalcy is restored, the systemic roots of the current political crisis will make it difficult to quickly recover lost market confidence," Fitch analysts reported.
"As long as the underlying sovereign environment remains volatile, the risk of hydrocarbon production disruptions will continue unabashed," they warned.
International majors
In another report, analysts at Wood Mackenzie Ltd., Edinburgh, said the general strike, in its ninth week at presstime last week, is costing the 10 biggest international companies active in that country a whopping $6.7 million/day in combined lost revenue.
The general strike aimed at ousting Venezuelan President Hugo Chávez slashed Venezuela's total oil production to 500,000 b/d in mid-January from prestrike levels of 3.1 million b/d, Fitch analysts said last month.
Wood Mackenzie estimates the nation's current national production at 400,000-600,000 b/d, down from a 2003 projection in excess of 3 million b/d.
With the biggest exposure through its interests of 47% in the Sincor heavy oil project and 55% in Jusepín field, TotalFinaElf SA is projected to be losing $1.4 million/day as a result of the strike, Wood Mackenzie reported.
ConocoPhillips is next with an estimated loss of $1 million/day. Other projected daily losses include ENI SPA $870,000; ExxonMobil Corp. $770,000; ChevronTexaco Corp. $640,000; Royal Dutch/Shell Group $530,000; Statoil ASA $470,000; Repsol-YPF SA $380,000; BP PLC $310,000; and PetroCanada $290,000.
Analysts said it is more difficult to measure the cost of the strike to "the biggest loser of all"—state-owned PDVSA. "By the government's own admission," they reported, "the effects of the strike will cut national average annual production by 23% in 2003—a disaster for a country that relies on oil for around 25% of GDP, 80% of total exports, and 50% of government revenue."
They said, "In reality, production is likely to average much less than 2.3 million b/d in 2003."
Most of the Venezuelan fields in which the international majors are active were shut down in a controlled manner. "However, it is still possible that some reservoirs may have been damaged and that facilities on heavier or more waxy-crude producing fields may require significant cleaning, and wells may require stimulation," Wood Mackenzie noted.
Moreover, it said, "A shortage of gas is limiting reinjection for enhanced oil recovery, critical for pressure maintenance and a high proportion of Venezuelan output. Only upon the resumption of operations will the full implications for both near-term rehabilitation and longer-term reservoir management be known."
Assuming minimal damage to fields and facilities, Wood Mackenzie analysts said, "It is likely to take at least 1 or 2 months to ramp up production of light and medium crude from marginal fields to anything approaching normal levels."
They said, "Perhaps surprisingly, the four strategic association (extra-heavy oil) projects are capable of a quick return to preshutdown levels. The fields were shut in in a controlled manner and, theoretically, upstream operations could be restarted quickly and easily."
Conventional heavy oil fields, such as Boscán, will perhaps suffer the worst, they said. Boscán has been kept producing in order to keep its oil above the pour point and to avoid heat loss from facilities.
"However, with half of the wells on the field currently shut in and produced oil stored in (open) pits, it is possible that output will never recover to preshutdown levels," analysts said.
Fitch analysts said PDVSA will continue "over the medium term" to be an important player in global energy. "Sizeable proven reserves and geographic proximity to the North American market provide important competitive advantages that are difficult to undermine," they said.
"In the short term, however, the company's performance and reliability will remain casualties of a broader and unprecedented political confrontation," Fitch reported.
On Jan. 10, Fitch downgraded Venezuela's and PDVSA's long-term foreign currency ratings to CCC+ from B. In subsequent weeks, it issued the following downgrades: PDVSA Finance Ltd., BB– from BBB; Citgo Petroleum Corp., BB– from BBB–; PDV America Inc., B– from BB+; PDVSA's t heavy oil projects, B from BB+; and two PDVSA-related refinery projects, 58,000 b/d Mere Sweeny, BBB from BBB+; and the Hovensa LLC joint venture with Amerada Hess, rated BBB–.
