Industry Trend Analysis - Petrocaribe Will Not Be Revived - JUNE 2017

BMI View: The Petrocaribe crude allia nce is irrevocably broken. Continued production declines in Venezuela combined with a growing reliance on alternative sources within member states will prevent trade from recovering to previous levels.

The collapse of Venezuela's oil sector has fundamentally changed energy consumption trends in Central America and the Caribbean. National oil company (NOC) PdVSA provided upwards of 200,000b/d of crude and fuels at minimal cost across its 19 members as recently as 2015. However, the sharp fall in Venezuelan oil production over the past three years has significantly reduced exports as the NOC sends less available supplies to larger or more profitable markets, supporting our long-held view ( see ' Petrocaribe Nearing Its Final Days ' , January 11 2016).

Prolonged oil price weakness and OPEC-mandated production cuts will stymie upstream development in Venezuela over the remainder of the year. Moreover, PdVSA's USD3.43bn bond repayment in Q4 will force the NOC to store available funds, limiting investment into the sector. We therefore believe crude production will fall to record lows in 2017, averaging 1.95mn b/d compared to 2.2mn b/d in 2016 ( see ' Crude Production: No Upside In Sight ' April 18).

Connected In Name Only
Map of Petrocaribe Members
Source: D-Maps, BMI

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