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Venezuela to Reform Energy Sector, Halt Sliding Crude Output

Venezuela boasts the world’s largest proven oil reserves of 300 billion barrels.Venezuela boasts the world’s largest proven oil reserves of 300 billion barrels.

Venezuelan President Nicolas Maduro has decreed extra powers to his oil czar Manuel Quevedo to try and halt sliding crude output in crisis-hit Venezuela, which has sunk to its lowest level since the 1950s.

Struggling with a deep economic recession, failed socialist policies, debt default and US financial sanctions, Venezuela’s crude production slipped to 1.58 million barrels per day in February, Reuters reported.

Maduro’s decree, seen by Reuters, gives Quevedo, a major general, powers to “create, annul or modify” deals involving state energy company PDVSA and its subsidiaries. The oil minister also heads PDVSA.

It was not immediately clear what that might mean for PDVSA’s joint ventures. But Quevedo met late on Friday with some foreign partners, including representatives of Total, Statoil, Chevron, Rosneft and China National Petroleum Corp.

In a statement, PDVSA said the new measure would enable a reorganization of operations and minimization of bureaucracy.

“We are going to work with PDVSA to implement the measures and increase production,” Rosneft representative Pavel Kamenets was quoted as saying in the PDVSA statement.

The decree creates a “special regime” in the sector until Dec. 31, with the possibility of a year’s extension. “The oil minister will be able to ... establish norms and special contract procedures for products, assets and services,” it said.

One clause ordered all specialized personnel, on national or international assignments, to return to original workplaces. Socialist leader Maduro has promised a vast anti-corruption purge to cleanse the oil industry of “mafias”.

At least 70 executives have been detained in recent months, panicking PDVSA workers, depriving the industry of much of its top brass and stalling decision-making in the company overseeing the world’s biggest crude reserves, insiders have said.

The doom and gloom forecasts for Venezuela’s oil production are about to get a bit gloomier. And since 95% of Venezuela’s export revenues come from oil, as things get more abysmal for its oil industry, things get more abysmal for the country as a whole.

In today’s Monthly Oil Market Report published by OPEC, according to secondary sources, Venezuela’s production fell by 55,000 barrels per day in March, to 1.48 million bpd.

According to the report, Venezuela’s self-reported production fell by a greater amount—77,000 bpd, from 1.58 million bpd in February to 1.50 million bpd in March.

While Venezuela boasts the world's largest proven oil reserves of 300 billion barrels, crude production in the state has been steadily declining in the past few years.

 

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