JANUARY 2023 – @Mariana Vargas – 2023 begins and the easing of sanctions on the Venezuelan oil industry is beginning to be perceived. It is difficult to think of an oil industry completely free of sanctions. But if there is one thing that is certain, is that little by little Venezuelan oil is returning to the West, reducing volumes that were destined for Asia and reducing PDVSA’s income.
Those of us who make a living in this energy industry know that there is a temptation to sail on a sea of naïve optimism with these negotiations in Mexico and the measures taken by the US government with Chevron in Venezuela. Not because of a possible increase in production, which will be limited, nor because activities will be resumed in various areas of the sector, but because this could be an appetizer that leaves the government wanting more. Today more than ever, PDVSA needs investments and partners to help it. Perhaps that is the idea of easing sanctions. To show the government what it could be if it stays with the Mexican process by ensuring transparent elections in the near future.
In the world context, the demand for energy has increased and will remain so, considering that years ago there was a considerable flow of crude oil and gas that sustained Europe and in a matter of months this status changed. President Enmanuel Macron, in his New Year’s address to the French, speaks of the answer to high energy prices by reactivating nuclear power plants. The energy issue is a real problem that also ends up affecting the economic performances of the OECD economies.
These increases in gas demand, not only in Europe, but also in Latin America. In the presentation at the IESA-GELA anniversary forum, Alvaro Rios showed very interesting data. The first of these is that the region will require some 518 annual ships of 110 m3 of LNG by 2030. Much of that gas is purchased in the spot market. The second relevant fact is that assuming a price of $10 Mmbtu, that will represent a capital outflow of around $11 billion in 2030. This is a great opportunity for a country that has the largest gas reserves in Latin America and a distance of 95 km from the main LNG terminals such as Atlantic LNG. Are we aware of these opportunities we have in front of us?
The energy crisis that the world is going through has brought the subject of “Venezuela” back to the discussion of the boards of some oil and gas companies willing to take risks. It is impressive to see the number of companies asking for information and studies on Venezuela. Some of them have gone further and have even signed agreements with local authorities. All these companies know the risks of doing business with Venezuela today, but in spite of that these companies are betting on positioning themselves for when they can do business with greater freedoms.
It is also fair to mention that the oil Venezuela, the Venezuela of the Chavez bonanza, must change. Not only must we take advantage of the energy shortage momentum, we must also be proactive and seek consensus for a new hydrocarbons law that will allow us to compete with our neighbors in terms of taxes and royalties. In order to think about how big the Venezuelan energy industry can be, to supply all those markets mentioned above, it will not be enough to lift sanctions, we must discuss the role of private companies, private property, pricing system, generation of trust. To prepare the industry for the future.
These laws must also be approved by parliaments that are recognized by all, this helps the solidity of the institutions. 2023 and 2024 will be important years. In these years we will see the willingness of the Venezuelan government to follow Mexico’s path, to reach agreements to hold elections both to elect a new president and a new parliament recognized by all.
These changes are necessary to reposition Venezuela on the world energy scene.
