NEW DELHI, December 5 —Venezuela has started shutting down oil wells as it runs out of space to store unsold crude, a direct result of a total U.S. export blockade. The move threatens the main revenue source for the interim government following the capture of former President Nicolás Maduro.
Why is Venezuela cutting production?
The U.S. has enforced a complete embargo on Venezuelan oil exports, part of its intervention following Maduro’s capture. With tankers blocked from leaving port, the country’s onshore storage is nearly half full. PDVSA is running out of both storage capacity and the diluents needed to prepare its heavy crude for shipment, forcing it to shut down wells.
Storage Capacity: Over 45% of its 48-million-barrel onshore storage is full.
Floating Storage: Over 17 million barrels are sitting in tankers unable to leave.
Exports: Shipments fell from 950,000 barrels per day (bpd) in November to roughly 500,000 bpd in December. Current exports are at a standstill.
Which operations are affected?
PDVSA has requested output cuts from its key joint ventures with international partners due to the crisis.
Sinovensa (CNPC): Workers prepared to disconnect up to 10 well clusters.
Petromonagas (formerly with Roszarubezhneft): Output was reduced last week.
Chevron’s Operations: While still operating under a U.S. license, its loaded vessels have not left Venezuelan waters since Thursday. The company stated it continues to operate in compliance with laws but faces limited storage.
Even cargoes bound for China, used for debt repayment, have stopped, with two Chinese supertankers halting their approach in late December.
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What does this mean for Venezuela’s government?
The production cuts pose a severe threat to the interim government led by Delcy Rodríguez. Government operations and domestic stability depend heavily on oil earnings. Additionally, the reduction can have a cascading impact that disrupts domestic gasoline supply and refining.
The crisis is compounded by a December cyberattack from which PDVSA has not fully recovered, and difficulties in receiving essential diluent imports from Russia due to the blockade.
FAQs
Q: What did President Trump say about the oil embargo?
A: On Saturday, announcing Maduro’s detention and a U.S.-overseen transition, President Trump stated that an “oil embargo” on Venezuela was in full force.
Q: Is any Venezuelan oil still being exported?
A: Currently, no. While Chevron had been moving cargoes under a U.S. license, shipping data shows even those vessels have not departed since last Thursday. The U.S. blockade has effectively reduced exports to zero.
Q: What are diluents and why are they important?
A: Diluents like naphtha are light oils needed to blend with Venezuela’s extra heavy crude so it can flow through pipelines and be loaded onto tankers. Shortages directly force production shutdowns.
Q: Can Venezuela quickly restart the shut-in wells?
A: According to sources, wells can be reconnected quickly if the storage and export situation improves. The shutdowns are a logistical necessity, not a permanent field closure.
