Venezuela’s state-owned oil company confirmed this week that it was set to receive its first shipment of light crude oil from Algeria. This marks the first-ever import of oil for Venezuela, which has the largest oil reserves in the world and is the ninth-biggest oil producer.
Venezuela's exports of oil extracted by state-owned Petroleos de Venezuela S.A. (PDVSA) make up the government’s largest source of revenue. But oil production has declined over the years, exacerbating the country’s problems with a limited foreign currency supply, and critics say mismanagement of PDVSA is largely to blame. Meanwhile, global oil prices have slipped by more than 25 percent since June.
Venezuela produces mostly a type of oil known as extra heavy crude, which necessitates the addition of light crude to make it more exportable. Venezuela had been buying naphtha as a diluent in recent years, as domestic stocks of light and medium crude oil have dwindled. But PDVSA began considering using imported crude as a cheaper alternative to buying naphtha at its current high prices. The imported light crude form Algeria will be used as a diluent instead, PDVSA said.
Then-energy minister Rafael Ramirez said earlier this year that importing crude would be a “last resort.”
The 2 million-barrel shipment from Algeria is due to arrive on October 26. But PDVSA has also reportedly purchased two cargoes of Russian light crude from a unit of Petrochina that will be delivered in November, according to Reuters.