The Venezuelan government and its political opposition found limited areas of agreement during a second round of negotiations in Mexico, but the talks remain the best opportunity for achieving broad US sanctions relief, according to S&P Global Platts Analytics.
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Platts Analytics continues to assume the Biden administration will grant only modest sanctions relief, such as allowing the restart of crude-for-diesel swaps. That would allow Venezuelan production to increase to 600,000 b/d by December 2022.
"Otherwise, more declines are likely," said Paul Sheldon, chief geopolitical adviser.
Platts Analytics estimates Venezuelan oil supply averaging 433,000 b/d in the third quarter of 2021, down from 540,000 b/d in Q2.
The latest round of talks, held September 3-6 in Mexico City, came days after the Venezuelan opposition announced it would participate in the country's Nov. 21 elections.
The sides agreed to ratify Venezuela's rights over Guayana Esequiba, the resource-rich area in western Guyana that has long been in dispute. Since 2018, Guyana has rapidly advanced intense oil exploration and production activity in areas that are in territorial dispute.
"We will call on Guyana to resume the path of negotiations in order to reach an agreement on the territory," said Jorge Rodríguez, representative of Venezuelan President Nicolas Maduro, in a Sept. 6 statement to journalists.
The opposition representative, Gerardo Blyde, announced that there will be a third round of negotiations to deal with the issue of the justice system in Venezuela. He did not give details of the date or place of this next meeting.
"Only with an independent justice system will it be possible to build a lasting peace and the foundations for a new democracy," Blyde said in a press release.
"We do not want to sell false expectations. Agreements and decisions may come little by little. We will arrive in Venezuela to make the pertinent consultations to move forward," Blyde added.
The US, EU and Canada said in July that they were "willing to review sanctions policies" against Maduro if the talks make meaningful progress to restore the democratic process.
"A time-bound and comprehensive negotiation process should restore the country's institutions and allow for all Venezuelans to express themselves politically through credible, inclusive and transparent local, parliamentary, and presidential elections," the governments said in a joint statement.
Venezuela pumped 2.4 million b/d in 2015, before sanctions, mismanagement and widespread power outages decimated its oil sector.
The US Treasury Department took modest action July 12 to ease the US sanctions, allowing US LPG producers to export supplies to Venezuela, where propane shortages have forced consumers to cook on wood stoves.