Seemingly resigned to the reality that the Biden administration in Washington is not about to perform a volte face from the economic sanctions that have strangled international oil sales and effected a serious body blow to his country’s economy, President Nicolas Maduro is in the process of embracing China as a key ally in a broader quest to attract investment to Venezuela’s oil industry and hopefully open the door to a share of a global market.
Reports from Caracas indicate that engineers from the China National Petroleum Corporation (CNPC), no strangers to the Venezuelan oil industry, along with Chinese commercial staff will returning there reportedly to oversee maintenance on Venezuelan oil infrastructure and also to join forces with the state-owned oil company, PDVSA in an effort to raise production level.
There appears to be no clear indication as to just what the overall Caracas/Beijing game plan is, though indications that the Chinese might be returning to Venezuela after two years of virtually having stayed away altogether amount to an important sign. A return to Caracas by the CNPC will likely to go a long way towards Venezuela’s efforts to triple its crude oil production by the end of 2021, a target, which if reached, would mark a considerable recovery from the devastating losses the country’s economy has suffered on account of the sanctions imposed on crude exports by the US.
The Maduro administration is reportedly focusing on increasing current output estimated to be as little as a sixth of peak production ten years ago.
Up to around five years ago, CNPC was a major foreign player in Venezuela’s oil industry at which time PDVSA data suggested that production had been up to around 170,000 barrels per day. Once US sanctions made it progressively harder for the country to do business with international buyers funding to adequately sustain the country’s oil industry dried up dramatically.
With the Maduro administration now completely occupied with circumnavigating the US sanctions, the country’s National Assembly is in the process of drafting an energy law that will clear the way for foreign companies to secure controlling interests in joint venture initiatives with the state-run PDVSA.
CNPC’s input could see the company return to around 100,000 barrels per day and almost all of its production is likely to be returned to China to help repay Venezuela’s loans to that country estimated to be in the region of US$60 billion borrowed since around 2008.
