Venezuela oil outlook shows few grounds for optimism

Subject

Venezuela's crumbling oil sector.

Significance

Venezuela’s oil revenues account for some 95% of the country’s export income. Since the late President Hugo Chavez’s election in 1998 these revenues have funded the Bolivarian Revolution’s controversial domestic and international policy and activity. It is therefore ironic that oil could perhaps finally precipitate the collapse of Chavismo.

Impacts

• A combination of under-investment, inadequate maintenance and unpaid debts is increasingly biting.
• With operations struggling, incidents increasingly risk becoming crises.
• The choice for PDVSA may be between steadily deteriorating performance and major collapse.
• Venezuela may continue reducing discounted oil shipments to allies; shipments to Cuba were down 13% year-on-year in the first half.