Muscat — Manuel Quevedo, Venezuela's new oil minister, faces a daunting -- many would say impossible -- task of reversing his country's freefall in crude production, and achieving a presidential directive to boost output capacity by 1 million b/d in 2018.
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But that goal can be readily met by securing international investment to redevelop shut fields, incentivizing joint venture partners to increase production at existing projects, and restructuring debt owed to China and Russia, Quevedo said.
The result would be an increase in Venezuela's crude production capacity to 2.472 million b/d, from a 2017 low of just under 1.5 million b/d, he said Sunday.
Venezuela, which holds the world's largest crude reserves but has seen its oil industry decimated by mismanagement, corruption and a lack of investment, has not come close to hitting that level of output for more than 11 years, according to S&P Global Platts data.
"This is a number that we can easily manage for 2018," Quevedo told S&P Global Platts during an interview just before an OPEC/non-OPEC monitoring committee meeting in Oman.
Many international oil companies had expressed an interest in Venezuela's upstream potential, he said.
Besides Venezuela's typical partners from China and Russia, Quevedo cited French oil major Total as seeking opportunities to invest in the South American country.
"We recently held some conversations with Shell," he added.
"We have many mature fields that have been developed before and we expect to restart soon, especially in the west of the country and the Orinoco Belt," Quevedo said. "Also, it's necessary to consider that some joint ventures are not operating at 100%. Some are operating at 60%, 70%, [so] we have the capacity [to boost crude output by] 30-40% [from] these joint ventures. We could easily start to recover very soon."
Mounir Bouaziz, Shell's vice president for Africa and South America, met with Venezuela's OPEC delegation in Muscat on Saturday at the venue where the monitoring committee meeting was being held.
Shell, which holds a 40% stake in Petroregional del Lago, a joint venture with PDVSA that has produced up to 35,000 b/d at Maracaibo Lake, declined to comment on what Bouaziz discussed with the delegation.
Total, which has a 30.32% stake in Petrocedeno, a joint venture that produces about 107,000 b/d of extra heavy crude from the Orinoco Belt, and a 69.5% stake in the Yucal Placer gas field, could not be reached for comment.
GOOD NEWS FOR THE INDUSTRY
The vast majority of analysts remain skeptical of Venezuela's oil outlook as the country struggles with crippling debt, spiraling inflation, failing equipment and labor unrest -- on top of US sanctions that have hindered PDVSA's efforts to find new financing.
Production in the Orinoco Belt, where lie some of the world's largest oil deposits, is uneven as it relies on supplies of naphtha or light crude as a diluent, which PDVSA has not been able to consistently afford.
Elsewhere, infrastructure is badly damaged, many fields have been exhausted, and security is not tight enough with reports of pirates and thieves terrorizing workers and stealing assets.
Last week, PDVSA held a meeting with private entrepreneurs to drum up investment, but it was sparsely attended, sources said.
"Given Venezuela's astonishing debt and deteriorating oil network, it is possible that declines this year will be even steeper than the 270,000 b/d drop in 2017," the International Energy Report said Friday in its monthly oil market report. "Chronic underinvestment and poor reservoir management have already wiped off 20% of supply over the past two years."
Venezuela reported December output of 1.621 million b/d, a plunge of 216,300 b/d from the previous month and the lowest level in decades.
The figure is actually lower than what OPEC's independent secondary sources have pegged as the country's December production, including S&P Global Platts, which estimated it at 1.7 million b/d.
That has led some analysts to speculate that Venezuela may be under-reporting its crude output to lower the bar for Quevedo, a former housing minister and brigadier general in the National Guard who has no apparent oil industry experience, to improve production.
Quevedo brushed off the criticism and said positive days were ahead for PDVSA and Venezuela after a tough 2017.
"Despite all the difficulties that we see in the market, we can say that Venezuela wants to have more development and also would like to defend all the rights of its workers," Quevedo said. "We are incentivizing investment in Venezuela, and we expect to have more partners. We have very good news for the industry because it's part of our plans, it's the socialist model, the socialist plan that we are implementing in Venezuela right now."
As for PDVSA's solvency, Quevedo said the company was in "full compliance regarding our debt service" in 2017.
The company reportedly owes close to $90 billion in debt, largely to Russia and China, and S&P Global Ratings in November declared PDVSA in "selective default" for missing interest payments.
Last year, Venezuela was able to restructure its loans with Russia on undisclosed terms, giving it some breathing room.
More restructuring will be needed this year, Quevedo conceded.
"We are interested in 2018 to promote restructuring the debt with the main objective of incentivizing investment in our country," he said. "We expect to have more productivity and also improve public finances. Our main interest is to extend all the deals, the deadlines, but for sure 2017 was a very productive year in this regard."