(Bloomberg) -- All across the Americas, drilling rigs are being idled as oil prices hover near six-year lows. In Colombia, more than 57 percent have been pulled; in Mexico, 42 percent.
Then there’s Venezuela. Starved for hard currency needed to ease a crushing recession and struggling to shore up slumping output, the state oil giant known as PDVSA has been adding rigs at a furious pace to search for new sources of crude.
The number has climbed 19 percent this year, signaling a new push that comes at the same time the OPEC nation is urging its fellow members to cut output at Friday’s meeting to support prices. It’s a sacrifice that Venezuelan President Nicolas Maduro-- the successor to his mentor, the late Hugo Chavez -- isn’t willing to take in his own country, though, as a shortage of dollars fuels widespread shortages and runaway inflation and puts the opposition on the verge of taking control of congress in elections this weekend.
Petroleos de Venezuela SA’s drilling efforts are helping boost production from the Orinoco heavy oil belt, according to Medley Global Advisors. That extra-heavy oil can be mixed with lighter domestic grades to maintain the nation’s exports and bring in much-needed U.S. dollars.
The nation with the largest oil reserves in South America is more dependent than ever on petroleum revenues, which account for 95 percent of export earnings and almost half of government revenues, according to the country’s foreign ministry. Venezuela is facing an economic crisis after a global glut pushed prices down by two-thirds since last June. Oil may drop to the mid-$20s a barrel unless OPEC takes action, Venezuelan Oil Minister Eulogio Del Pino said.
Del Pino said a meeting this morning in Vienna with representatives from Iraq, Iran, Algeria and Ecuador was “very positive,” according to a statement posted to PDVSA’s website. OPEC’s official meeting will take place on Friday.
“It’s in Venezuela’s interest to have OPEC cut production, although it will probably not be able to afford to abide by any production cuts,” Luisa Palacios, managing director at New York- based consultant Medley, said in a Nov. 25 e-mailed response to questions. “In order for Orinoco oil to be a sustainable source of production increases, Venezuela has to convince others within OPEC, that can already produce competitively at these prices, to cut production.”
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Copyright 2016 Bloomberg News.
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