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Bloomberg
The outlook for declining oil production in Venezuela may get grimmer if the US bans supply of a key commodity used to help Venezuelan crude flow from oilfields to the coast.
Production in the Orinoco oil belt, which accounts for half of the country’s output, depends on heavy naphtha imported from the US to reach global markets. Naphtha is used as a diluent to reduce the viscosity of Venezuela’s tar-like extra-heavy oil, and help it flow through 62 miles of pipelines to the nation’s coast, where it can be either upgraded or exported.
Venezuela that once was South America’s largest oil producer has seen a steady decline in production amid lack of money for maintenance and exploration. Crude output may slump to a 29-year low this year. The US has already imposed sanctions on more than a dozen top Venezuelan officials and now may target oil trades. Venezuela imports about 2 million barrels of heavy naphtha per month, and all of it comes from US Gulf refiners, according to data compiled by Bloomberg.
“The impact of a naphtha shortage ultimately comes down to the operational integrity of the heavy oil upgraders in Venezuela,†Pablo Medina, vice president at Welligence Energy Analytics, said by email.