Venezuelan oil production dropped 5.5% last year to an average of 2.56 million barrels a day, the largest drop of any Latin American oil producer, according to estimates released this week by the Paris-based International Energy Agency.
The IEA put Venezuela's spare production capacity at 210,000 b/d on paper, but said it will be tough for the country to win back lost ground in production. It said Venezuela - along with fellow OPEC members Iraq, Nigeria and Indonesia - has "impediments to raising actual production" that "render this portion of spare capacity inaccessible."
Violence has curbed output in Iraq and Nigeria, while Indonesia suffers from dwindling oil reserves.
In Venezuela, it is contract uncertainty that has hurt oil production. The Hugo Chavez government has been hiking taxes and taking majority stakes in private output, causing delays in needed investments. Furthermore, state-run Petroleos de Venezuela S.A. transferred around $10 billion last year into social spending programs and government savings accounts that do not finance oil and gas operations, compromising the company's ability to pump more oil.
The IEA said a contract overhaul hitting four extra-heavy oil projects in the Orinoco river basin, which produce around a fifth of the country's production, will reduce the scope for expansion projects.
"The moves are widely seen as threatening existing plans to expand capacity at the four units," said the IEA.
In Latin America, only Mexico, where international oil majors are prohibited by law from exploring for and producing oil, also registered a significant output decline, of 80,000 b/d. In Ecuador, Colombia and Argentina, output remained mainly flat, while Brazil's output grew 110,000 b/d last year.
For January the IEA put Venezuela's output even lower at 2.49 million b/d after the country applied OPEC-related output cuts to the Orinoco projects.
Venezuela refutes industry estimates such as the IEA's that show declining production, and claims to have pumped 3.2 million b/d last year, in line with the country's OPEC quota.
(Dow Jones Newswires, 14/02/2007)