The power supply crisis in Venezuela is highly likely to continue in the coming months, affecting everyday life and paralyzing oil production in the country sitting on top of the world’s largest oil reserves, IHS Markit said in a commentary on Thursday.
The major power outage in March this year disrupted severely the already crumbling Venezuelan oil production and threatened its oil exports. The massive outages in March may have made the headlines, but Venezuela continues to suffer to this day from frequent significant disruptions to the power supply for the capital Caracas, major cities, and oil processing sites.
Outages in Caracas continue to occur at least several times a week, while other parts of the country, including the oil-rich state Zulia, experience blackouts practically every day, said Etienne Gabel, Senior Director, Gas, Power and Energy Futures, at IHS Markit, and Carlos Cardenas, IHS Markit’s Director, Latin America Country Risk.
Venezuela is unlikely to restore sustainable power supply any time soon, because it lacks money for spare parts and skilled personnel to do the repairs. Technicians have left state power firm Corpoelec and the country’s power system is now in the hands of the military, IHS Markit’s experts say.
“Realistically, the system cannot recover fully without investments and skilled labor from foreign entities—something that appears unlikely under the current economic and political environment,” IHS Markit said. Related: The U.S. Just Doubled Its Natural Gas Exports
The recurrent blackouts further cripple Venezuela’s declining oil production and state revenues. Massive power outages are paralyzing the oil industry, along with the U.S. sanctions on Venezuela, the total economic collapse, and the protracted political power struggle.
Venezuela’s oil production plunged by 82,000 bpd from August to stand at just 644,000 bpd in September, according to OPEC’s latest figures.
Unlike Venezuela’s expectations that it would recover its oil production by the end of 2019, as expressed by its oil minister Manuel Quevedo, IHS Markit said in July that output could drop to below 500,000 bpd next year. According to IHS Markit, Venezuela’s oil industry has deteriorated so much since 2014 that any recovery would be a long time coming.
By Tsvetana Paraskova for Oilprice.com
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