T
he Ukraine war is having a multitude of disastrous effects around the world. The consequences for South America, however, are different; as the EU, the US and other jurisdictions abandon Russian imports of natural gas, crude and refined products, producing nations south of the border have the opportunity to pick up the slack.
Venezuela Venezuela has been the pariah of Latin America for several decades, following the rise of Hugo Chavez and the continuation of his regime under Nicolas Maduro. Production in the world’s largest crude reserves has fallen from over 3 million bpd in 2005 to approximately 500 000 bpd in 2020. But that may be about to change. For the last several years, the US has imposed tough sanctions on Venezuela in an attempt to topple the Maduro regime. The moves drove the country into the arms of China and Russia, which worked to help dodge the sanctions. After Russia invaded the Ukraine, the Biden administration announced it would ban the import of Russian oil, about 1 million bpd. Subsequently, the White House made overtures to Venezuela. While most USGC refineries are configured to use heavy crude and would benefit from a resumption of Venezuelan imports, the move is also seen as an attempt to drive a wedge between Russia’s and Venezuela’s geopolitical alliance. Steps to ease sanctions should have a positive impact on Venezuela’s oil and gas sector. Thanks to mismanagement of the economy and corruption, the infrastructure is in decrepit condition, with breakdowns and leaks from pipelines and storage facilities fouling the land and surrounding international waters. Estimates for repairing the entire sector’s infrastructure exceed US$200 billion.
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