Venezuela’s state oil company PDVSA has launched a cost-cutting drive aimed at slashing expenses by half as the company continues to struggle with declining oil production and unpaid debts.
The company sent to all its divisions and joint ventures a list of reforms, declaring a “national economic emergency”. The reforms, however, must not affect daily oil production in any negative way, the memo circulated in the company said.
Some of the reforms involve suspending new projects that have not yet found financing and requiring joint venture partners to submit financing plans for the projects they develop. Videoconferencing will be encouraged, to replace costlier face-to-face staff meetings, and use of PDVSA airplanes and any other international transportation is to be reduced to a minimum.
The state of PDVSA is the same as the state of Venezuela: last week, Bloomberg reported, Venezuelan ambassadors and other diplomats were asked to renegotiate the rents of the embassy buildings or move to a cheaper location, as Caracas struggles with billions in unpaid debts and dwindling forex reserves that have shrunk imports and created shortages for many goods.
PDVSA, for its part, reported a 90-percent drop in its profit for 2016 and has been dealing with field and infrastructure mismanagement, huge debts of its own, and shortages in funds for basic operations such as field maintenance. The quality of its crude has also been worsening as a result of insufficient funds, with at least two cargoes of Venezuelan crude returned by U.S. clients because of unacceptable levels of water in the oil.
This year, daily crude production in Venezuela is set to fall by at least 250,000 barrels, and next year the pace of decline may accelerate, reaching 300,000 bpd. The monthly rate of decline this year has been 20,000 bpd. Last month, oil production fell to the lowest in almost three decades, and it looks like the trend will continue as state coffers empty and the recession deepens.
By Irina Slav for Oilprice.com