How badly decayed is Venezuela’s oil infrastructure?

Venezuela’s functional storage tanks are at roughly 80% of their fill capacity. Filling tanks beyond 80% capacity makes them difficult to operate, leaving very little spare capacity–if any–in practice.
Onshore storage capacity could be a limitation in Venezuela’s oil production. While legislative reforms open up the country’s oil sector to foreign companies, Venezuela will struggle to return to peak production levels without fixing its onshore storage facilities.
Foreign companies are reluctant to provide the investment necessary to repair or rebuild the country’s oil infrastructure. A key prerequisite for this investment is convincing oil companies of the stability of the Venezuelan leadership.

In the picture above, we see oil storage tanks that are rusted or empty (circled in red) at Puerto Miranda, despite sitting next to tanks that are nearly full. Puerto Miranda is the key export terminal for Lake Maricaibo production in the western part of Venezuela. Tanks that are severely rusted or dirty are often unusable due to the risk of leaks or contamination.
Examples of infrastructure decay can be seen in most of the other storage facilities in Venezuela, such as Puerto Jose, Amuay, and Puerto La Cruz.
The country’s operational crude storage tanks are currently around 80% utilization (excluding defunct storage tanks). This is quite a high figure and informs our view that dilapidated onshore stock infrastructure is severely constraining the country’s oil operations.

Trading companies that have taken on the task of marketing Venezuelan crude are using storage terminals in Caribbean islands to get around the onshore storage constraint.
We observe similar trends in other Caribbean storage facilities, such as Curacao and the Bahamas. All three countries have seen an increase in stock levels since the capture of Maduro in early January.

In the image above, we see the storage facilities in St. Lucia took in some Venezuelan crude following the deal between the US and Venezuela to market the country’s crude oil in January.
Venezuela will struggle to substantially increase production without adequate onshore storage.While there are hopes of a short-term surge in production as foreign companies return to Venezuela, a return to peak production will require substantial long-term investments and overcoming large hurdles.
PDVSA itself believes it would require $58 billion of investment to restore its oil production to 1998 levels, according to a leaked document from the state-run oil company. The US government hopes that American companies will invest in Venezuela, but they must be convinced that Venezuela will be politically stable.
Venezuela eased restrictions on foreign investment into its oil sector, but the same political party (PSUV) that nationalized its oil sector remains in power. Legislative reforms may come faster than investor confidence.

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