June 2019

First oil

U.S. EIA sees continued woes for Venezuelan oil output
Kurt Abraham / World Oil

In late May, the U.S. Energy Information Administration (EIA) released a short-term study that did an excellent job of diagnosing and further predicting Venezuela’s oil production collapse. In April 2019, said EIA, Venezuela's oil production averaged 830,000 bpd, down from 1.2 MMbpd at the beginning of the year. The EIA study said that widespread power outages, mismanagement of the country's oil industry, and U.S sanctions directed at Venezuela's energy sector and state firm PdVSA, have all contributed to the decline.

Venezuelan oil production declines accelerated in 2018, decreasing by an average 33,000 bopd each month in 2018. The rate of decline increased to an average 135,000+ bopd/month during first-quarter 2019. The number of active drilling rigs also fell from nearly 70 in first-quarter 2016 to 24 in first-quarter 2019.

EIA expects Venezuelan oil production to continue decreasing during 2019, and “declines may accelerate as sanctions-related deadlines pass,” said the agency. “These deadlines include provisions that third-party entities using the U.S. financial system stop transactions with PdVSA by April 28, and that U.S. companies, including oil service companies, involved in the oil sector must cease operations in Venezuela by July 27.”

EIA mentions that a series of ongoing nationwide power outages in Venezuela—which began on March 7—cut electricity to the country's oil-producing areas, “likely damaging the reservoirs and associated infrastructure.” In the Orinoco Oil Belt, Venezuela produces extra-heavy crude oil that requires dilution with condensate or other light oils before being sent by pipeline to domestic refineries or export terminals. EIA says that Venezuela’s upgraders for this extra-heavy crude were shut down in March during the power outages.

“If Venezuelan crude or upgraded oil cannot flow as a result of a lack of power to the pumping infrastructure,” observed EIA, “heavier molecules sink and form a tar-like layer in the pipelines that can hinder the flow from resuming, even after the power outages are resolved.”

New Mexico follows Colorado’s messy lead. In the U.S., the media continue to fawn over freshman Rep. Alexandria Ocasio-Cortez (Dem. – NY), better known as “AOC,” and her Green New Deal. But they have failed to report on a new strategy employed by hard-core environmental groups to get their way: pass a variant of Green New Deal, one state at a time.

“It’s a smart tactic,” said Daniel Turner in a recent op-ed piece. Turner is executive director of Power The Future, a national non-profit organization that advocates for American energy jobs. “They get friendly, left-leaning state legislators and governors, most of whom they financially backed in the past election, to do their dirty work,” explained Turner.

“Their latest attempt was in New Mexico, and unfortunately, it succeeded,” said Turner. “Newly-elected Democrat Governor Michelle Lujan Grisham signed the ‘Energy Transition Act’ in March. This law requires that New Mexico move to 100% carbon-free energy—the same long-term goal as the ‘Green New Deal.’”

Turner calls this measure a “destructive law” that is really a hidden carbon tax and “will threaten the jobs of thousands of energy workers, raise utility rates, cut state revenue, and make green energy companies rich at the taxpayers’ expense.” Contributing Editor David Blackmon will have more on New Mexico’s situation, as well as Colorado’s mess, in our July issue.

75 years later. Earlier this month, it was refreshing to see a number of world leaders gathered together in unity, to celebrate the 75th anniversary of the D-Day invasion of June 6, 1944, which began the liberation of mainland Europe in World War II. The events at Portsmouth and Normandy served as poignant reminders that the world needs to continue to work against a repetition of that war. The occasion also reminded us that D-Day could not have been staged without the Allies’ superior supplies of hydrocarbon energy.

About the Authors
Kurt Abraham
World Oil
Kurt Abraham kurt.abraham@worldoil.com
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