Oil production in Venezuela has reached its lowest level in decades, as output in the Opec nation has been severely hit by US sanctions, poor management of its giant resources and the impact of the Covid-19 pandemic on global demand.
Production in Venezuela tumbled to 392,000 barrels per day in July, down from 900,000 bpd earlier this year and as much as 2.5 million bpd in 2016, according to the latest data from Opec.
However, consultancy IHS Markit has estimated that production in Venezuela is already down to between 100,000 bpd and 200,000 bpd, and continues to fall.
“It is now conceivable that the country could soon be producing zero barrels, or very close to it,” IHS wrote in a report.
One of Opec’s founding members and home of the world’s largest proven oil reserves of about 300 billion barrels, Venezuela was once one of the top producing nations in the globe.
However, a lack of investment and long-running political turmoil that has led to heavy economic sanctions from the US have hammered production.
The US and some other global powers recognise opposition leader Juan Guaido, and not President Nicolas Maduro, as the country's legitimate leader.
“Never before has a former major oil-producing country seen output fall so low for so long. In Venezuela’s case, if there is any surprise it is that the disintegration did not happen fast,” wrote IHS vice president and head of oil markets Jim Burkhard.
IHS predicts Venezuela’s demise as an oil producer will have little to no impact on global markets, however, as there is ample production capacity around the world to satisfy a potential recovery in oil demand.
Given the size of Venezuela’s reserves, its production could potentially increase again in the future, but the chronic lack of investment will make any ramp-up difficult.
“Any recovery would take a considerable amount of time given the degree of dilapidation throughout the country’s energy infrastructure,” wrote IHS director of global oil supply Ha Nguyen.
“It looks like close-to-zero oil production is Venezuela’s new normal for the foreseeable future.”