Volatility and Uncertainty Dominate the Venezuelan LPG Market
The Venezuelan LPG market has entered a phase of extreme volatility following the capture of President Nicolás Maduro by the U.S. on Jan. 3., characterized by systemic supply failure and logistical paralysis.
According to market sources, the situation is extremely uncertain and there is currently an operational enigma with insufficient information for a reliable diagnosis of the circumstances.
According to Fabricio Duarte, Executive Director at the Ibero-American Association of Liquefied Petroleum Gas, any projection regarding LPG needs to start from the principle that simply increasing refinery output is not enough.
“To resume regular exports, the country would have to deliver continuous and predictable production, functional storage and shipping, reliable port logistics, and above all, a surplus over domestic consumption, which historically is in deficit and tends to push the government to prioritize the domestic market,” Duarte added.
With all the changes happening in the sector, the Venezuelan oil company PDVSA has been trying to maintain minimal operational continuity. The state-owned company is operating under crisis control. It produces enough for basic domestic needs and is awaiting the formalization of a new export corridor to refineries in the U.S. Gulf Coast, which should occur within the next weeks.
On Tuesday, the U.S. President Donald Trump stated that the interim government of Venezuela has agreed to deliver between 30 million and 50 million barrels of “high-quality” oil to the country. The announcement was made on social media.
Trump said the Venezuelan oil will be sold at market price. He also stated that he will be responsible for controlling the money obtained to ensure that the resources are used “for the benefit of the people of Venezuela and the United States.”
Although Trump has signaled a profitable reconstruction plan, the normalization of LPG production in Venezuela will take some time to return to normal.
“It would update to require 24-48 months even with a considerable investment package and stability and could extend to more than five years if restrictions, logistical failures, and technical erosion persist,” said Duarte.
“Today I see more questions than answers, and the country would first need to resolve the basics, such as a real diagnosis of infrastructure, governance, and investment conditions, in order to then test whether a recovery in production over a five-year horizon would actually be possible and what the effect of that would be on the market,” he added.
Reporting by Priscilla Antunes, pantunes@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com