OPINION: With President Nicolas Maduro holding grimly on to power despite economic collapse in Venezuela, opposition confidence about ousting him has sagged.
A return to liberal democracy, if it had happened, would probably have been underpinned by measures designed to attract investments to a devastated oil sector, but regime change has not materialised.
Venezuelan oil production has fallen from 2.1 million barrels per day in 2017 to less than 500,000 barrels per day, according to estimates by Wood Mackenzie.
Time is running out to reverse a decline that has left many reservoirs in a parlous state, and this could take years to repair.
Economically hamstrung by US sanctions, Maduro’s administration is trying to stir up fresh interest in the oil sector.
The regime arguably received some encouragement from a US decision to extend authorisations for Chevron — and others — to continue their upstream operations in the country, rather than risk losing their assets.
A proposed new Venezuelan anti-blockade law could open up unprecedented access to oil resources and allow existing joint venture partners to take over from PDVSA as majority operating partner, research firm Verisk Maplecroft noted in a recent report.
But will demand for Venezuela’s oil still be there?
The report warned that towering environmental remediation costs on established fields mean that the Venezuelan oil sector may simply never recover to its previous status, pointing to the growing impact of energy transition on such calculations.
The extra-heavy oil fields of the Orinoco basin have also become a less attractive destination for new investments in an industry that now prizes value over volume.
It is hard to imagine a new wave of multi-billion dollar investments in crude upgraders.
A world entering into energy transition might be more interested in Venezuela’s prodigious free gas reserves than heavy oil, but the Maduro regime seems to be missing a pithier point.
With environmental, social and governance risks weighing heavier on investment decisions now, Maduro’s plan to exempt investments from all legislative or judicial oversight offers investors opacity rather than transparency as a stimulus.
This is surely a huge step in the wrong direction.
(This is an Upstream opinion article.)