Big oil exporter Venezuela to import lighter crude oil in declining economy

Global Business

Oil-rich Venezuela will start importing light oil in order to treat its extra heavy crude oil production. This has raised a lot of eyebrows for a country that is one of the biggest oil exporters in the world. CCTV America’s Martin Markovits reports. 

Big oil exporter Venezuela to import lighter crude oil in declining economy

Oil-rich Venezuela will start importing light oil in order to treat its extra heavy crude oil production. This has raised a lot of eyebrows for a country that is one of the biggest oil exporters in the world. CCTV America's Martin Markovits reports.

Venezuela’s oil is mostly a heavy crude and needs to be treated before it can be exported. Until recently, Caracas had been importing light oil, known as ‘naphtha’, from the U.S. to do that. However, this has proven too costly. In a new deal with Algeria, Caracas will now import a light crude oil in order to dilute its extra heavy oil production.

“It looks like this will be the future, not only for Venezuela’s industry but also, for the whole oil world market,” said economics professor Pablo Jimenez from the University of Venezuela. “There is less and less light petrol every day so we’re going to have to depend more on this heavy crude, which is very expensive because it is very heavy to extract.”

As Venezuela’s economy has hit hard times, Caracas may have no choice but to increase imports of lighter oil.

A shortage of dollars and crumbling oil prices has made it harder to import the more expensive naphtha. The country’s state oil company, PDVSA, said Venezuela is behind in the construction of six upgrade facilities to treat the country’s heavy crude.

Starting with former President Hugo Chavez, too much of the revenue at Petróleos de Venezuela or PDVSA, a state-owned enterprise in Venezuela, was spent on social welfare programs instead of being reinvested back into the business, said former PDVSA official Jose Toro Hardy.

“When President Chavez came into power he changed the vision of the industry,” said Hardy. “He saw it more of a political instrument than a business to help finance the nation. Among other things, a lot of people got fired, investment stopped. PDVSA is no longer an oil company it now builds houses, funds health care. This was not the reason it was created.”

According to government officials, Venezuela will only occasionally import the light crude. Even so, with critical oil infrastructure projects delayed, this may well continue for the foreseeable future.