Venezuela Oil and Gas Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Venezuela Oil and Gas Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Venezuelan oil and gas market is expected to decline at a CAGR of less than 3.5% during the forecast period, 2020-2025. The reason behind the decline in the market studied is expected to be the Venezuelan government's effort to nationalize its oil and gas assets and the implementation of United States sanction that has been imposed in the response of the Venezuelan government and Venezuelan individuals. Nationalizing the asset reduces the capital expenditure of the foreign oil companies, resulting in a decrease in crude oil production from the country. Venezuelan oil comprises 95% of Venezuelan export and 25% of its gross domestic product (GDP). Declining crude oil import by the United States, on account of its sanction, has reduced Venezuela’s crude export from mid-2017, and it is expected to decrease further on account of the expansion of sanctions by the US government in January 2020.

Key Highlights

• The upstream sector is a prominent segment under the oil and gas sector. Despite the declining crude oil production during 2018, the country holds a significant position in global crude oil production.
• Venezuela has a massive potential for hydrocarbon resources, with a crude oil proven reserve of 2,975 billion barrels, and recoverable shale oil and gas reserves of nearly 13 billion barrels, and 167 trillion cubic feet, respectively. End to political turbulence in the country has the possibility of foreign player involvement and participation for oil and gas exploitation in the near future. Moreover, with environmental restrictions and low geologic potential, Europe is expected to have declined in gas production by 2038, which is expected to have new suppliers, like Mozambique, Tanzania, Venezuela, and Iran. Thus, the reserves and the possibility of LNG export to Europe are expected to create an opportunity for the studied market to grow in the near future.
• Decreased crude oil production, on account of lower capital investment, is expected to restrict the market growth during the forecast period.

Key Market TrendsUpstream Sector as a Prominent Market

• Venezuelan upstream includes the exploration and production of crude oil and natural gas from its Orinoco Oil Belt (OOB) in central Venezuela. Spread over nineteen thousand square miles, OOB has been divided into 36 blocks within four exploration areas: Boyaca, Junin, Ayachucho, and Carabobo. Venezuela allows foreign firms to invest, but the country requires PdVSA (state-owned oil & gas company) to hold at least 60% equity in joint ventures.
• The production of crude oil from Venezuela oil fields was majorly from joint venture projects, which had a significant growth until 2017. The crude oil production declined from 2017 when the foreign company reduces its participating interest on account of the conflict with the US government.
• Venezuela’s crude oil production decreased to nearly 1.4 million barrels per day (bpd), in May 2018, from 2.4 million bpd, in 2015. Despite the decrease in crude oil production, Venezuela is still the 12th largest producer of petroleum in the world in 2018.
• To attract foreign investment, Venezuela awarded 18 natural gas exploration and production licenses to private companies, but only five of those licensees have been operating during (including three in which PdVSA Gas serves as a minority partner). As of early 2018, these licenses accounted for 860 thousand cubic feet per day (Mcf/d) of natural gas production.

Decrease in Capital Expenditure Resist the Market Growth

• Venezuela oil production reached the highest during 1970 when the country produced nearly 3.8 million bpd. During 2017, the country nationalized its oil & gas industry and established Petróleos de Venezuela S.A as a state-owned oil & gas company in 1976. Later in 1997, it started to invite foreign players to start investing in its hydrocarbon resources.
• The capital expenditure decreased started after 2007; when crude oil price increased, and the Venezuela government increase its stakes to nearly 60% in the joint venture projects.
• The country is under financial debt, and there are limited foreign investors to invest capital in the oil & gas projects, resulted in declining production over the years and is expected to decrease further, with political instability within the country and United States sanctions on the country. During 2018, FDI was nearly 956 million USD, with negative FDI inflow in 2017.
• The sanctioned imposed on Venezuela includes Petróleos de Venezuela S.A (PdVSA), government, and central bank. As per the sanctions, the Venezuela government and PdVSA are prohibited from accessing the United States financial market. Moreover, the sanctions prohibited transactions with the Maduro government (Venezuela), thus leaving the country with limited investment.

Competitive Landscape

The Venezuelan oil and gas market is moderately consolidated. The key players include Petróleos de Venezuela S.A, Chevron Corporation, Total SA, NK Rosneft PAO, Repsol SA, Eni SpA, China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (Sinopec), ONGC Videsh Limited, and Belorusneft AZS, among others.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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