Venezuela Plans To Revive Its Oil Industry Despite U.S. Sanctions

Venezuela is ignoring U.S. sanctions with its plan to boost production to 1.5 million bpd by the end of the year, around three times the current output.

A document has been released showing that Venezuela has received delivery of condensate from the Rene supertanker in its Jose port. After national production broke down, Venezuela came to rely on condensate imports to thin its extra-heavy crude grades for processing.

Due to U.S. sanctions on the country, introduced in 2019 in response to the dictatorship, Venezuela has not been able to produce and export its normal quantities of oil, also finding it difficult to access oil-related products such as condensate, vital for production. 

New condensate imports reflect Venezuela’s eagerness to reinvigorate its oil industry. With nearly 300 billion barrels of proven oil reserves, Venezuela holds the most oil in the world, and pre-sanction production stood at around 2.4 million bpd, with room to grow. The country now needs to resume production if it hopes to stabilize the national economy and improve employment opportunities. 

The country has already managed to get around many restrictions with the help of intermediaries, through its strong partnership with China. China Concord Petroleum Co., Limited, CCPC, has long been tied to Iranian oil, much to the disdain of the USA. However, it seems that it is now also getting involved with Venezuelan oil. 

Despite threats from the U.S. that it will impose sanctions on any entity aiding the oil industries of sanctioned countries, such as Iran and Venezuela, CCPC started working with Venezuelan oil firms alongside independent Chinese refiners earlier in 2021, bringing 14 tankers within the last year to ship crude oil out of both Venezuela and Iran.

China has long opposed U.S. sanctions on oil. "China strongly opposes unilateral sanctions and urges the United States to remove the 'long-arm jurisdiction' on companies and individuals," stated a spokesman for China's foreign ministry.

In June, exports of oil from Venezuela rose significantly ahead of a new import taximposed by China, which raised import costs by around 40 percent, according to state-run oil firm PDVSA.

PDVSA and partners exported an average of 631,900 bpd of crude and refined products, up 6.5 percent in May and 66 percent from the same month last year. Most of these products were bound for Asia, with around 238,000 going to Malaysia for trans-shipping and mixing before reaching their final destination of China. Other export destinations included the UAE and Cuba. 

The question is whether the U.S. will continue to overlook Venezuela’s work with intermediaries to bolster its oil industry. Particularly after U.S. officials threatened new oil trade links between Iran and China with more sanctions, just last week. The leniency seen from the U.S. could come to an end at any moment should it decide to impose stricter sanctions on Venezuela and its partners. 

But exceptions to sanctions have already been made this year, with the U.S. agreeing to allow imports of liquefied petroleum gas (LPG) into Venezuela earlier this month. Such imports were not permitted under the Trump administration. President Biden acknowledged the need for LPG in the country, used as cooking fuel and currently in limited supply, driving people to burn wood.

So, just how far can Venezuela push the U.S. before more sanctions are imposed? Over the next few months, it will become clearer as to whether the huge oil nation will reach its goal of tripling production as it strives to reinvigorate its mammoth oil industry.