Plagued with financial instability and a divided government faced with a collapsing economy, Venezuela is finally considering the refinement of foreign crude oil for the first time. According to planning documents seen by Reuters, the decision is the result of Venezuela’s efforts to honour its foreign commitments in crude oil refinement.
According to a Reuters report, Venezuela’s state-owned oil company PDVSA has purchased close to $440 million worth of foreign crude oil and shipped it directly to Cuba on friendly credit terms, often at a loss.
Venezuela is a major oil producer and one that would expect to ship oil to Cuba from its own reserves rather than buying them on the world market. Also the countryy is on the brink of collapse and needs all the help it can get from its allies rather than effectively subsidising them by selling imported crude at cheap prices.
Venezuela will have to produce enough oil to fulfil the needs of its allies, China, Russia and other partners. State-run oil company PDVSA will have to increase oil production in June to up to 57,000 barrels per day (bpd) of foreign crude according to a monthly refining plan seen by Reuters.
Given the current economic scenario in the country, PDVSA suffers from shortage of spare parts, decrease in volumes of lighter crudes to refine as well as poor maintenance. All these factors have taken their toll on oil production in the oil rich country.