PDVSA’s Boost in Oil Well Spending Fails to Stem Output Declines

PDVSA’s Boost in Oil Well Spending Fails to Stem Output Declines

By Pietro Pitts / Bloomberg

3:41 PM BRT

April 27, 2015
A 62 percent increase in Petroleos de Venezuela SA’s 2014 exploration and development spending wasn’t enough to stem a near decade-long slide in crude output.

PDVSA, as the state oil company is known, spent $23 billion in 2014 on oil drilling and well development, reservoir recovery and exploration compared with $14.2 billion in 2013, according to a financial statement posted on the company’s website Sunday. The increase failed to prevent a drop in oil production, excluding natural gas liquids, of 3.8 percent.

“This is just a continuing trend of declining production due to under investment in the oil fields,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone.

Three quarters of the exploration and development budget went to conventional oil wells with the rest earmarked for heavy crude plays. Production declined in the Caracas-based company’s Eastern, Western and Orinoco heavy oil regions to 2.79 million barrels a day from 2.9 million in the prior year. PDVSA’s oil output has fallen in every year since 2008, according to company data.

At $50 a barrel, it may not be economic for the company to invest in heavy oil, Lipow said.

“It still may be difficult to focus on the heavy oil as it has the lowest price realization and net back,” Lipow said.

West Texas Intermediate crude, the U.S. benchmark, fell 0.82 percent to $56.68 a barrel at 1:55 p.m. in New York. Oil is down 47 percent since its June high.

Venezuela’s oil sector generates an estimated 95 percent of the country’s foreign currency. The oil price rout may make it harder for the country to attract foreign investment needed to boost production to PDVSA’s 6 million barrel a day target by 2019.

PDVSA also reported that total oil and refined product exports fell 2.9 percent, or 68,000 barrels a day, to 2.36 million barrels last year from 2.43 million the prior year.