After a devastating and permanent removal from the market of at least 250 million barrels during the strike, the country's oil production is now about 2.6 million barrels a day, compared with 3.4 million before the PDVSA strike. This partial rebound is misleading because 1 million barrels a day comes from foreign company "associations" in Venezuela and 800,000 barrels a day come from the giant North Monagas and El Furrial fields. These fields are now being produced at full throttle with many technical questions as to the long-term damage that this overproduction may cause. Decapitation of the engineering staff has led to a big drop in production from the more challenging fields. Such a decline will accelerate further and will become devastating next year and thereafter. It is not just the dearth of know-how; there will be no money to reinvest.
PDVSA today has the largest debt in its history. Service companies, oil carriers and suppliers are now owed probably $3 billion to $5 billion, accumulated over the last five months. Coupled with the fact that the Exim Bank has eliminated all credit guarantees for Venezuela and Chavez's own debt to his constituents, whose bribing will have to be manifested in increased welfare spending and giveaways, point toward a very turbulent time ahead. It will be interesting and somewhat breathtaking to watch the "show" by the new PDVSA delegation this week in Houston. ***