Oil in Global Economy Series: Venezuela fails to meet supply contract despite biggest reserves

In an irony, Venezuela, which is the world’s most oil-rich country, is failing to meet its supply contracts and according to reports, in the latest move, the country’s state-owned oil giant Petróleos de Venezuela, S.A. (PDVSA) has told its eight foreign clients that it would be unable to supply the contracted volumes of crude oil. The sharp drop in crude prices that began back in 2014 has severely curtailed the company’s ability to make required investments in addition to the tough U.S. sanctions, which hampered credit line for the company, as well as Venezuela’s government. Here are the foreign companies that would be most affected by PDVSA announcement; Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil.

According to estimates by the U.S. Energy Information Administration (EIA), OPEC, and British Petroleum, Venezuela can boast biggest oil reserve in the world with 300 billion barrels of proven reserve, which 45 billion barrels more than the Saudi Arabia’s reserve. However, data from OPEC shows that Venezuela’s oil production has declined by almost 1.5 million barrels per day, since the second half of 2014. Experts say that years of mismanagement, corruption, and most recently a lack of investment money under the double weight of U.S. sanctions and lower oil prices, PDVSA has seen its production plummet over the last couple of years.