Venezuela has begun shutting wells that pump extra-heavy crude in the Orinoco Belt, as the U.S. blockade is squeezing shipments and filling up storage space, sources with knowledge of the plans of state oil firm PDVSA told Bloomberg.
PDVSA, the key handler of Venezuela’s crude exports, mostly to China, began disabling producing wells in the Orinoco Belt two days ago, following a decision taken on December 23, according to Bloomberg’s anonymous sources.
The state oil firm will look to shut in about 15% of Venezuela’s total oil production of around 1.1 million barrels per day (bpd), by slashing Orinoco Belt output by 25% to about 500,000 bpd, the sources told the publication.
Wells pumping extra heavy crude in the Orinoco Belt and Junin would be the first to be shut, with some wells in the Ayacucho and Carabobo regions coming up next. The latter produces less heavy crude.
The U.S. blockade is closing off Venezuela’s trade routes to ship crude on sanctioned vessels to China, resulting in overflowing storage capacity and inventories.
In addition, naphtha shipments to Venezuela have also come under scrutiny and blockade, reducing PDVSA’s capacity to dilute the extra-heavy crude and make it suitable to flow through pipelines for export.
While PDVSA is being gradually squeezed out of the export market, as the U.S. intends to slash revenues for Nicolas Maduro’s regime, U.S. supermajor Chevron continues to ship Venezuelan crude to the United States under a special license.
Chevron’s Venezuelan output is typically shipped to U.S. Gulf Coast refineries configured to process heavy sour crude, a segment of the market with limited replacement options. Access to those grades remains important for complex refiners, particularly as sanctions constrain supplies from other producers with similar crude qualities.
The Trump administration has prioritized enforcement and interdictions rather than announcing new sanctions, preserving Chevron’s license while narrowing pathways for unauthorized exports.
By Tsvetana Paraskova for Oilprice.com
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