LATEST IN BUSINESS : INDUSTRY LEADER
Industry Leaders|December 2020
LATEST IN BUSINESS : INDUSTRY LEADER

VENEZUELA OIL INDUSTRY FACING NEAR COLLAPSE, INVENTORIES GO UP BY 84%

Venezuela, a founding member of OPEC and at one time the largest oil-producing nation of Latin America, has seen this vital industry see a near-collapse triggering an economic and humanitarian crisis in the country.

Adding to the woes are the US sanctions, which have led to an 84% increase in its stockpiles as buyers are keeping away. This means that the state-run PDSVA refinery will have to shut production again, harming the fragile economy more.

The storage facility at the Jose terminal and nearby facilities have almost doubled to 10.6 million barrels since the end of September. The country now has no more storage facilities and the state-owned Petroleos de Venezuela SA might have to shut wells. The last fuel loading was done on October 16 at the Jose terminal, a sharp contrast from a loading a day.

Venezuela was producing an average of 345,000 barrels of crude daily in July which has just marginally gone up to 383,000 barrels daily now. According to the Baker Hughes

According to the Baker Hughes September 2020 rig count, there are no operational drilling rigs in Venezuela.

September 2020 rig count, there are no operational drilling rigs in Venezuela. The stoppage of drilling activity and no new investments means that oil production could come to a complete standstill soon. Venezuela oil exports brought in only $22.5 billion in 2019 and it is sure to be much lesser in 2020.

Years of mismanagement, a tremendous lack of capital, and the steady outflow of skilled oil industry labor mean that the oil drilling infrastructure is collapsing.

Additionally, there are fears of an environmental disaster waiting to happen in the Gulf of Paria off the Caribbean coast, where floating storage and offloading facility jointly operated by PDVSA and Italian energy giant Eni is tilted and may sink any time soon.

The newly discovered crude is devoid of sulfur, which makes it easier to refine and will now be the preferred choice of Asian refineries. Venezuela crude is not so clean and carries a fair amount of sulfur.

SAUDI ARAMCO Q3 PROFITS TAKE A SHARP DIVE

Saudi’s national oil company Saudi Aramco’s financial results for Q3 2020 were lower than expected. Aramco Q3 2020 profits decreased by 44.6% to Riyal 44.21 billion ($11.79 billion), a steep year on year decline from Riyal 79.84 billion ($21.29 billion) for Q3 2019.

The Saudi giant is valued at around $2 trillion. It is expected the pandemic will further escalate the downslide for the oil giant in the coming quarter and the outlook for 2021.

Aramco has declared that it will maintain its dividend payments of $18.75 billion for the quarter. CEO Amin Nasser stated Nasser stated, “We maintained our commitment to shareholder value by declaring a dividend of $18.75 billion for the third quarter.”

But it seems a difficult number for the company to give out as its free cash flow is $12.4 billion in the third quarter, falling short of its dividend commitment. The current dividend position is, however, based on Aramco’s IPO statement that it will issue $75 billion in dividend annually for five years.

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