Many anticipated Venezuelan President Hugo Chavez's death from cancer. It still raised significant questions about what will happen next when it actually happened on Mar. 5.
Chief among these within the global oil community was how soon—or even whether—multinational oil companies that once worked in the South American nation might return, and whether those that are still there can, or will, remain.
James R. Schlesinger, the former US Defense and Energy secretary, said several years ago that continuity among national oil companies' midlevel executives can matter more in world oil trade than top government leadership.
The problem in Venezuela is that Chavez and his followers quickly began to use Petroleos de Venezuela SA to finance social reform. Seasoned PDVSA executives were among 18,000 employees fired in 2002 after nearly half the company's domestic employees walked off the job to protest Chavez's policies.
"In 2006, Chavez implemented the nationalization of oil exploration and production in Venezuela, mandating a renegotiation of a 60% minimum PDVSA share in projects," the US Energy Information Administration said in an Oct. 3, 2012, update of its report on the country.
"Sixteen firms, including Chevron and Shell, complied with new agreements, while Total and Eni were forcibly taken over," it continued. "Venezuela is also increasing pressure on foreign operators that remain in the country to increase investment to offset recent production declines."
EIA estimated that Venezuela produced 2.47 million b/d of crude, condensate, and natural gas liquids in 2011. The Maricaibo basin remains its most prolific area, representing slightly less than half of its total output.
Mature production
But many of the country's oil fields are very mature, requiring heavy investment to maintain current capacity, EIA continued. "Industry analysts estimate that PDVSA must spend some $3 billion each year just to maintain production levels at existing fields, given decline rates of at least 25%," it said.
While Venezuela's relatively close proximity has helped it remain among the top foreign crude suppliers to the US, imports from there have fallen in recent years, according to EIA.
"In 2011, the US imported 951,000 b/d of crude oil and products from Venezuela, just 8.3% of [its] total [petroleum] imports," it said. That does not include 186,000 b/d of US Virgin Islands products which almost exclusively come from Venezuelan crude, EIA added.
The country consequently has tried to diversify its petroleum export markets. China is one of its fastest growing foreign customers—from 19,000 b/d in 2005 to 230,000 b/d in 2011, EIA said. And PDVSA Pres. Rafael Ramirez said on Jan. 21 that the national oil company is exploring cooperation with Russian oil consortium Rosneft.