2023 Marks Significant Progress in PDVSA’s Recovery

January 10, 2024 Hour: 10:14 pm

Petróleos de Venezuela S.A. (PDVSA) closed 2023 with significant progress in the management of the state-owned company amid an adverse scenario as part of the escalation of illegal sanctions in 2017.

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`During this year, the president of PDVSA and Minister of Petroleum, Pedro Rafael Tellechea, took over the management of the company through the strategies framed in the Comprehensive Productive Recovery Plan (PRIP) 2023.

In said plan, emphasis was placed on the promotion of internal capacities or “own effort,” in order to reduce the vulnerabilities generated by the dependence on foreign companies for PDVSA’s operational deployment.

On the other hand, PDVSA also managed to revitalize its links with international companies through the Licenses granted by the U.S. government in favor of Chevron, ENI, Repsol, Maurel & Prom, among others.

PDVSA’s prospects have diversified in the area of its international relations, in a policy mediated by the Venezuelan government’s actions in the political sphere to recover the industry’s international space and achieve the end of the blockade.

Ministro de Petróleo y presidente de PDVSA, Pedro Rafael Tellechea, sostuvo un encuentro de trabajo con el gobernador del estado Bolívar, Ángel Marcano, con el objetivo de realizar un balance de los logros y metas alcanzadas durante 2023 en materia de combustible. pic.twitter.com/m9ADno8W6N

— PDVSA (@PDVSA)
January 10, 2024

The tweet reads, “The Minister of Petroleum and President of PDVSA, Pedro Rafael Tellechea, held a working meeting with the Governor of the State of Bolivar, Angel Marcano, with the purpose of making a balance of the achievements and goals reached during 2023 regarding fuel.”

As a reference, at the end of 2023 PDVSA reached an important agreement with the state-owned National Gas Company (NGC) of Trinidad and Tobago in partnership with the Dutch company Shell, making this agreement a milestone that places Venezuelan gas fields in the international market.

At the end of last year, PDVSA held a working table and explored the possibility of agreements with the Mexican state-owned Pemex, which constitutes an important step towards feasible relations between two important Latin American energy companies.

At the end of October 2023, the U.S. government authorized through licenses the relationship of these companies with the Venezuelan oil company by means of temporary flexibilities limited for six months, taking into account the real impact of the coercive measures on Venezuela’s energy activity.

In addition, PDVSA improved its internal processes as part of its adaptation to the blockade. This year, Venezuela maintained a reduced but constant flow of crude oil sent to the international market in a furtive manner to the blockade. In addition, it strengthened its relationship with Iran to source technologies adaptable to its refining circuit, in view of the ban imposed on the import of essential components of U.S. origin.

The Venezuelan oil industry, historically the main source of foreign currency generation for the country, has been the central point on which the fate of the Venezuelan economy depends in the short term, and this explains the great emphasis of the policy of illegal sanctions as a mechanism of pressure on the Venezuelan government.

However, the measures against PDVSA have collateralized the functioning of the industry, public finances and the availability of crude oil derivatives, such as diesel, gasoline and gas, which have a great significance in the daily life of the population.

Hence, the challenging context in the management of PDVSA has imposed the need to develop an efficient management at all levels, to revive its core processes and to adapt to the conditions of blockage and limited and partial flexibilizations of the same.

During 2023, PDVSA has made positive progress in several operational cores on which its recovery depends:

1. Stabilization and increase in oil production.

Despite the adverse context imposed by the blockade, PDVSA managed to stabilize its crude oil production. The state-owned company recorded an average of 716 thousand barrels per day at the end of 2022, and has reached 801 thousand barrels per day by the end of November 2023, according to data from the Organization of Petroleum Exporting Countries (OPEC), based on direct communication with the Venezuelan Ministry of Petroleum.

This represents an overall increase of 10.7% in crude oil production.

On the other hand, PDVSA’s inter-monthly production record did not register relevant ups and downs. The company has been able to manage within the furtive framework of commercial relations imposed by the blockade, but it has also developed additional capacities for access to inputs for crude oil production, including the diluent that PDVSA needs to transport and market its heavy crude oil.

2. Stabilization in the production of fuels, gas and derivatives for the domestic market.

PDVSA executed several actions to stabilize the production of diesel, gasoline, domestic gas and other derivatives for the domestic market in 2023.

This was possible through investment and technology recovery processes in the national refining system, especially through international alliances and the adaptation and domestic manufacture of parts and spare parts subject to technological deprivation.

This year, the domestic demand for these products was fully satisfied with domestic production, as a result of PDVSA’s success in increasing its refining capacity to 300 thousand barrels per day.

3. Improvement of fuel distribution capabilities

PDVSA was able to acquire a total of 450 tankers through the Venezuela-China bilateral alliance, of which 100 units were delivered to Empresa Nacional de Transporte (ENT), a PDVSA subsidiary, in order to strengthen the fuel distribution network throughout the national territory.

The first batch of tanks, a total of 100, were destined to several states in the country where fuel transportation difficulties were most severe, thus improving the availability of these products.

Weaknesses in fuel availability are intermittent in various regions of the country. However, PDVSA implemented a policy of updating its tanker fleet to combine its distribution capacities with the recovery of fuel availability. This is a progressive and challenging effort to guarantee the supply and full availability of these products.

4. PDVSA is reinserted in the international gas market.

In 2023, PDVSA reached important agreements with companies such as Petroleum Company of Trinidad and Tobago Limited, ENI, Repsol, Gazprom, YPFB and Maurel & Prom S.A. in order to develop the national gas industry with projection to the international market. This is very relevant news for the long term.

The company announced that it is in the process of certifying gas reserves and Venezuela is projected as the fourth largest gas reserve in the world, betting on this strategic sector for the country’s development.

On December 22, PDVSA entered the international gas market through an agreement reached with the state-owned National Gas Company (NGC) of Trinidad and Tobago, in collaboration with Shell.

This agreement has a duration of 30 years and will produce in a first phase some 185 million cubic feet per day of gas that will be transported in gas pipelines to serve the petrochemical market and the gas plants in Trinidad and Tobago, as well as part of the requirements of the international market.

After six years of work and in spite of the hard pressures of the blockade of PDVSA, this project has been completed and favorable conditions have been consolidated. Executive Vice President Rodriguez described as “extraordinary” the terms of the agreement to advance the development of Venezuela and Trinidad and Tobago.

During 2023 and in spite of the blockade conditions, the Venezuelan government managed to maneuver conditions for PDVSA’s insertion in the avid international gas market, especially the European market, which has become vulnerable in terms of energy after the European Union applied sanctions against Russia, its main energy supplier.

PDVSA’s bet is to achieve long-term investments and, up to now, it has been able to re-promote its offshore gas fields, such as Perla and Dragon, which are key in the composition of the new commercial matrix of the industry.

Venezuela aspires to become a gas power and during 2023 it took giant steps in that direction.

5. Recovery of internal capacities

Since 2017, PDVSA accumulated a significant disinvestment in its facilities, especially due to the withdrawal of allied companies and due to drops in revenues. All these causes were directly linked to the blockade against the state-owned oil company.

As a result, the current management of the industry has proposed management methods for the development of its own capacities, to reduce the company’s vulnerability to the external blockade and to recover core processes that will allow the recovery of operations and production lines.

This year, PDVSA deployed relevant investment actions for the recovery of operational capacities in the main oil and gas facilities nationwide, in the areas of exploration, production, refining, industrial engineering, metal-mechanical engineering and others.

The wide range of actions includes the rehabilitation of vessels for lake and maritime operations, rehabilitation of infrastructure for the transportation of crude oil, rehabilitation of oil terminals, recovery of oil wells and wellheads, investment in science and technology, among other relevant actions.

These measures, implemented through the “own effort” policy, helped stabilize crude oil production and contribute to the recovery of key processes within the industry by 2023.

6. Internal and human talent management

In 2023, PDVSA’s management has emphasized quality management, transparency and motivation of its personnel.

The new management began with an internal audit process that was fully applied in the industry, revealing serious corruption cases that compromised PDVSA’s stability.

Additionally, the company has accelerated the evaluation processes of its personnel and has increased the criteria for the application of its procedure manuals in order to achieve more efficiency in the operational and administrative processes.

Actions have been developed for the dignification and moralization of the oil worker class, increasing salary income, but also implementing integral attention policies in the areas of food, health, professional improvement, credit delivery and quality of life management.

The company has focused on better attending to the needs of its work teams, understanding that its qualified personnel and their level of motivation will be key to recover operational capacities in the short and medium term.