Venezuela's oil industry and the challenge of growth

More than ever, Venezuela depends on oil to obtain US dollars. Although Venezuela has large oil reserves and benefits from currently high oil prices, which are very favorable for the oil industry, the country must develop new areas as well as oil infrastructure, and streamline and expand installed oil capacity.

Venezuela's current oil output stands at 2.9 million barrels per day (bpd), a decline from 3.2 million bpd in 1998. Higher oil output, as provided in the Oil Sowing Plan, is expected to hit 4 million bpd by 2014 and 6 million bpd by 2019. In order to reach this goal, over USD 270 billion must be invested with participation of the private and public sectors. 

The stagnation of oil production comes in parallel with a downturn in exports caused by a rise in hydrocarbon domestic demand that Venezuelan state-owned company Pdvsa must meet by supplying diesel and fuel to the country's thermoelectric plants.

As for natural gas, major delays precluding the development of non-associated offshore natural gas have been reported in two Venezuelan large-scale and ambitious projects: Rafael Urdaneta and Mariscal Sucre.

In addition to such operation challenges, Pdvsa must afford the Government's social programs, which have led the company to take on a series of debts and allocate growing financial resources to the so-called social investment. Although the company's debt-to-equity ratio is somehow manageable, financial analysts warn about how fast the oil company is running up debts.

This year, Pdvsa along with its foreign partners is expected to obtain early oil production from the Orinoco Oil Belt, an achievement that determines not only the future of the company, but also of the domestic economy, heavily dependent on oil prices.

Translated by Jhean Cabrera