The recent easing of sanctions between the United States and Venezuela, marked by pivotal legal settlements and new trade arrangements, marks an important turning point for the global energy industry.
These developments, especially the resolution of disputes related to petrolius de Venezuela SA (PDVSA), point to the revitalization of the oil and gas sector in Venezuela, and hold great promise for energy-hungry Europe.
The settlement between the Venezuelan oil company and the de Corso refinery (RdK), in which Dentons Europe LLP sailed – led by David seed, head of its sovereign advisory practice – puts an end to the long-standing impasse that has strangled the operational potential of the RdK refinery and the oil terminal on Curacao since 2020.
Under this settlement, PDVSA will resume the supply of crude oil to RdK and discussions on long-term gas supplies will begin, which will enable RdK to resume operations. This development is a win for PDVSA and RDK and a strategic step that reopens crucial pathways in the Caribbean energy landscape. China and India account for more than 90% of Russian oil and fuel exports.
Moreover, the cooperation between the Venezuelan National Oil Company and Repsol exploration SA to promote investment in their joint venture, petrocurrier sa, heralds a new era of increased production in the Venezuelan oil and gas industry.
A similar deal with the Italian company Eni is expected to be concluded soon with the Venezuelan state energy company, which marks a new breakthrough in the efforts of the Old Continent to search for alternative sources of oil.
The intention to significantly boost gross production emphasizes the commitment to revitalize the national economy of Venezuela, a country that has one of the largest oil reserves in the world but whose potential has been largely untapped due to political and economic challenges.
For Europe, these developments cannot come at the right time. The continent benefits greatly, as it grapples with concerns about energy supplies exacerbated by geopolitical tensions and the push for diversification away from dependence on Russian energy sources.
Venezuela’s return to the global oil and gas market as an important player provides Europe with an alternative and stable source of energy. This could be useful in alleviating the current energy crisis and contributing to Europe’s energy security.
Moreover, Venezuela’s geostrategic location and its vast oil reserves make it an ideal candidate for European countries seeking to diversify their energy sources. Venezuela boasts the largest oil reserves in the world, which exceeds the reserves of Saudi Arabia.
According to the organization of Petroleum Exporting Countries (OPEC), Venezuela’s proven oil reserves are estimated at 303.8 billion barrels, which is a significant part of the world oil supply.
Before the sanctions and economic turmoil, Venezuela was producing about 2.4 million barrels per day. And although current production levels are much lower, there is a potential for rapid growth due to the country’s abundant reserves.
It should be noted that oil production in Venezuela has increased significantly over the past year under the leadership of Vice President Delcy Rodriguez and Oil Minister Pedro Rafael Telechea.
As of 2021, the EU’s crude oil imports from Russia accounted for almost 27% of its total oil imports, according to Eurostat. Replacing even a small part of this oil with Venezuelan oil would significantly enhance the energy security of Europe.
Moreover, the location of Venezuela is advantageous for transatlantic trade. Its proximity to the Caribbean Sea provides direct sea routes to European ports, which makes oil and gas transportation more efficient and cost-effective compared to other global suppliers.
In essence, the sanctions relief agreement and the subsequent legal and trade maneuvers represent a recalibration of the global energy equation. For Venezuela, this represents a return to the energy sector and a step towards economic recovery. For Europe, it provides a new way to secure energy resources, which is extremely important for its economic stability and energy independence.
