Venezuelan Oil Sector Faces Stagnation Under Third Maduro Term

(Bloomberg) -- Nicolás Maduro’s declaration of victory in Venezuela’s presidential race bodes ill for the nascent recovery in the nation’s oil production.

The two-term president’s claim of a narrow 51.2%-44.2% win over challenger Edmundo González has cast doubt on Venezuela’s ability to significantly raise crude output amid growing international concern about the veracity of the vote tally. Bonds of state-owned oil company Petroleos Venezuela SA dropped, along with the country’s sovereign debt, as the specter of a return to global isolation looms.

Venezuela, a founding member of OPEC and once a major force in worldwide crude markets, has seen oil output plunge by more than 70% since the earliest years of the 21st century as the socialist policies of Maduro and his predecessor and mentor Hugo Chavez gutted investment in oilfield technology and maintenance work.

The nationalization of assets long held by the likes of Exxon Mobil Corp. and ConocoPhillips more than a decade ago deepened the nation’s isolation, scared off some foreign investors and accelerated the decline of the Venezuelan oil sector. Any chance of reviving crude production in the country’s vast fields hinges on financial and technical lifelines from abroad.

“This throws Maduro’s plan of achieving recognition for the normalizing of relations with the US and Europe overboard,” said Francisco Monaldi, director of Latin American energy policy at Rice University’s Baker Institute for Public Policy. “That’s dead for the moment.”

Monaldi sees Venezuela raising daily crude output by 200,000 barrels by the end of 2025, which would represent a 24% increase from June’s figure of 851,000.

PDVSA’s declining oilfields and derelict refineries need urgent, sustained overhauls. As of last month, the national was exporting just 654,000 barrels a day, half of what it shipped abroad before the US imposed sanctions on Venezuela’s oil sector in 2019.

“Venezuela has a dynamic of stagnation that only allows for limited growth,” said Adrian Lara, an analyst at Wood Mackenzie Ltd.

--With assistance from Lucia Kassai.