Venezuela’s oil giant is struggling in Caribbean Sea
CARACAS - The misfortunes of Venezuela’s state-owned oil company are now roiling the clear waters of the Caribbean Sea.Once the region’s driving force, Petroleos de Venezuela SA, or PDVSA, as it is known, faces the prospect of losing its footprint in the Caribbean over unpaid bills and the inability to deliver on its promise to supply cheap crude oil and fuel to its partners in the PetroCaribe program, Bloomberg reported.
PDVSA lost a stake in a Cuban refinery and a storage-tank lease in the Bahamas in the past year. Now it faces losing shares in refineries from Jamaica to Curacao, and storage tanks from St. Eustatius to Bonaire. That is a turnaround from a decade ago, when PDVSA picked up assets and friends across the region ahead of a planned boost to its production that never happened.
Plagued by a heavy debt load and crippled by US sanctions, Venezuela has seen its oil output slump to below 2 million barrels daily from more than 3 million barrels in 2013, leaving behind a trail of underutilized refineries, broken promises, unpaid bills and overdue facilities maintenance. Recent events seem to indicate PDVSA will “involuntarily” exit the Caribbean, said Mara Roberts Duque, a New York-based analyst at BMI Research.
“If they are not able to keep these Caribbean assets in good condition, they will have major implications down the supply chain,” as the assets complement those in Venezuela, Duque said by phone. “They can’t do it with their domestic assets. They also need facilities in the Caribbean to supplement their domestic output of refined products.”
The “insurmountable” wall of debt due in the next seven years will eventually force a hard default on Venezuela, Thomas Onley, an analyst with Facts Global Energy, said.
If China and Russia relax terms on the oil-for-cash agreements to allow the Latin American country to postpone loan payments and sell oil for hard currency, it could help Venezuela to buy more time.
“Voluntarily or involuntarily getting rid of assets in the Caribbean won’t solve their problems,” Onley said by phone from London. “There are many things that need to happen, and one of them is, oil needs to reach $80 before things start looking good for them.”