Enough Already!...Again

 It seems that a lot of people do not follow the work of your humble correspondent. If they did, what is big news recently would be nothing. I have a few pieces that, when combined, will make my point.

 First we have Argus media reporting that Venezuela oil production in September was 653,000 bpd (barrels per day) according to PdV (government-owned oil company) documents. Usually their numbers are a bit high but for now we’ll take them at face value. The same report listed August production for 2022 at 759,000 bpd. although, as we said, most reliable sources put it at under 650,000 bpd. The report also stated that 17 0f 43 oil producing subsidiaries and/or joint ventures reported no oil production in September.

 They went on to list a slew of issues and problems that will challenge increasing production by 100,000 bpd this year. They say an increase of 100,000 bpd is their goal for 2022 but maybe somebody should tell Nicolas Maduro who has said repeatedly that Venezuela will produce 2 million bpd by the end of the year.

 Next up we have Reuters reporting that Venezuela oil exports in September were 710,000 bpd, according to PDVSA (PdV) documents. I know it’s higher than production numbers but we have to consider oil storage and Iranian imports. (Don’t get me started on why the country sitting on top of the world’s largest proven oil reserves is importing oil)

 79% of Venezuela exports are through intermediaries with no track record in crude trading. For perspective, quarterly exports this year look like this : Q3 – 691,000 bpd …Q2 – 595,000 bpd …Q1 – 574,000 bpd. We also have exports to Cuba coming in at 36,000 bpd for September, down from 81,000 the previous month.

 Now that we have a good look at the current state of oil production and exporting in Venezuela let’s get to the big story. It’s been everywhere in the last day or so. Oilprice.com tells us that the Wall Street Journal reports the US is considering easing sanctions on Venezuela in order to increase the flow of Venezuelan oil to the US and Europe. (Uhh…increase? I thought it was currently zero?) This comes after OPEC+ (Oil Producing and Exporting Countries, of which Venezuela is a founding member) announced oil production cuts of two million bpd.

 The sanctions relief is aimed at Chevron, which still has a license for operating in Venezuela but not for oil exports from Venezuela. According to WSJ sources, the Maduro regime would have to resume talks with the Venezuelan opposition (we already made this deal with them 6 months ago) for free and fair elections in 2024. In return, the US would unfreeze some state assets held in US banks which would be used for food, medicine, and equipment for Venezuela’s electric grid and water supply. (Does anybody really believe the Chavistas would actually use the money for the benefit of the Venezuelan people?) A spokeswoman for the National Security Council said “There are no plans to change our sanctions policy without constructive steps from the Maduro regime.”

 When the Biden administration said that the last time (remember, it was only 6 months ago) the Maduro regime said, “OK…sure…we’ll talk to the opposition.” The US subsequently eased sanctions to allow PDVSA to ship oil to Europe to be received by Eni (Italy) and Repsol (Spain) in exchange for debt reduction. After the first shipment to each PDVSA said there would be no more oil for debt reduction…cash only. And then they backed out of talks with the opposition (as they’ve done five times before, so this is nothing new)

 Enough already with this foolishness! Aside from the fact that, as we’ve said many times, the Chavistas have screwed basically every country and every company on basically every deal they’ve ever made (Even China and Russia have backed away from their joint ventures with Venezuela), let’s talk about the most important issue  that makes even thinking about an oil deal with the Maduro regime absurd.

 Let me say this clearly… Venezuela Has No Spare Oil Production Capacity! …to sell anything to the US…do the math! It’s very simple…

 Note : Before we get into the numbers let me remind you that oil production is not like turning on the lights in your house. You don’t just flip a switch and “voila!” Increasing production takes a lot of time and a lot of money.

 Here are the numbers…Venezuela oil production for September was 653,000 bpd (see previous article) so, after sending over 300,000 bpd to China (oil for loan deals), 36,000 bpd to Cuba (down from 81,000 bpd the previous month and generally in the 75,000 – 90,000 range), and domestic consumption (we’ll use a low number) of 270,000 bpd there’s basically nothing left!

 For some reason people seem to think the Venezuela of today, oil production-wise, is the Venezuela before 21st Century Bolivarian Socialism. As the saying goes, ” It just ain’t so.” We will have a Venezuela : Down The Rabbit Hole segment detailing Chavismo’s destruction of PDVSA coming up in the next few weeks but suffice to say, “This ain’t your Daddy’s PDVSA” They’re not still producing over 3 million bpd.

 Reliable analysts put Venezuela’s maximum production capacity, given current conditions, at approximately 850,000 bpd. (That’s maximum capacity without any setbacks and the Chavistas always have setbacks) They recently signed a deal with the Iranians to rebuild some of Venezuela’s refining and production capacity. I believe it was in the neighborhood of a billion dollars. Again, we have reliable analysts saying it will take over $10 billion per year for multiple years to restore Venezuela’s dilapidated infrastructure. Where will that money come from? The Chavistas are, for all intents and purposes, broke and have no credit anywhere with anybody having burned all those bridges. To think that Venezuela is anybody’s solution to oil supply problems is absolutely ridiculous. Oh, and FYI, Maduro has reiterated that Venezuela stands ready to supply the world’s gas and oil needs…. How comforting…

 That will do it for the week. We’ll be back Monday. Until then…Have a great weekend everybody!!!

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