Venezuela’s light crude habit soaks up US exports
HOUSTON - Venezuela’s thirst for light crude imports could play an interesting role in crimping as much as 300,000 b/d of its own crude exports. That would amount to a whopping 14% of Venezuela’s 2.12 million b/d production as of July.
The two are tied because of Venezuela’s rising dependence on imported light crudes and condensates for blending with its increasingly heavy domestic oil — a result of the government’s bet on heavy oil production and sharp declines in conventional output, according to Luisa Palacios, senior managing director at Medley Global Advisors and head of Latin America energy research at Columbia University’s Center on Global Energy Policy.
Palacios wrote in a report released Tuesday that Venezuela’s net crude exports could drop by 200,000-300,000 b/d if credit concerns prevent state-owned PDVSA from keeping those light crude imports flowing.
“As PDVSA evolves from a pure oil exporter to a significant light oil and products importer, the company faces increasingly problematic logistical bottlenecks,” Palacios wrote in the study. “The country’s oil infrastructure simply cannot handle that amount of oil imports.”
A US Energy Information Administration report out Tuesday showed those imports are going strong for the time being.
Curaçao was the largest and most consistent US crude oil export destination after top destination Canada in January-May. PDVSA operates the 335,000 b/d Isla refinery in Curaçao, where the US imports are likely being used as a diluent with heavy Venezuelan crude for either processing at Isla or re-export to PDVSA customers, the EIA said.
The US exported an average 54,000 b/d of crude to Curaçao in January-May, according to the EIA. That put it ahead of the Netherlands (39,000 b/d), Japan (17,000 b/d) and Italy (15,000 b/d).
According to the EIA, Venezuela’s crude production has held steady at 2.4 million b/d over 2012-2015 before starting to fall this year — to 2.3 million b/d in January, 2.2 million b/d in May, 2.18 million b/d in June and 2.12 million b/d in July.
Palacios argues that the worst oil market disruptions from Venezuela’s economic and political turmoil could be ahead— given that its exports have not dropped as steadily as its production, largely a result of collapsing domestic oil demand brought on by the country’s economic crisis.
“This means that the impact of Venezuela’s production declines on global markets has in fact been more limited than the headline risk suggests,” she said.