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🇻🇪 Venezuela /Energy & Infrastructure

Venezuela: Oil Production Boost Could Worsen Electricity Crisis, Warns Expert

From El Nacional · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Venezuela's oil production increase could worsen the country's electricity crisis without new generation capacity, warns economist José Toro Hardy.
  • Hardy noted that the oil industry now heavily relies on the national grid, unlike before 2007, meaning increased production would strain existing power resources.
  • He suggested resolving the electricity sector's structural issues is crucial before aiming for sustained oil output growth, despite international interest in Venezuelan oil.

Economist and former Petróleos de Venezuela director José Toro Hardy has issued a stark warning: any attempt to boost Venezuela's oil production could exacerbate the nation's already critical electricity crisis. Speaking on Unión Radio, Hardy explained that the oil industry's current dependence on the national power grid, a stark contrast to its pre-2007 self-sufficiency in power generation, means increased oil output would inevitably divert electricity from other sectors.

Today, any increase in oil production requires a great consumption of electricity, but since additional electricity is not being generated, it will be taken from someone.

— José Toro HardyExplaining the link between increased oil production and the strain on the national electricity grid.

Hardy's comments come in response to a proposed regulation for the Hydrocarbons Law reform, which would require new oil projects to generate their own electricity. He argues that this is a step backward, recalling how PDVSA once generated its own power before the national grid's collapse during the Hugo Chávez era. "It is desirable that this be separated as it always was until 2007," he stated, emphasizing the need to restore the industry's energy independence.

It is desirable that this be separated as it always was until 2007.

— José Toro HardyAdvocating for the oil industry to regain its energy self-sufficiency.

The economist stressed that Venezuela must first tackle the deep-seated problems plaguing its electrical system if it hopes to achieve sustainable growth in crude oil production. While acknowledging a renewed international interest in Venezuelan oil due to global geopolitical tensions, Hardy cautioned that the recent modifications to the Hydrocarbons Law lack sufficient guarantees to attract significant investment. He pointed out that many incentives, such as royalty and tax reductions, are subject to the arbitrary decisions of public officials, creating legal uncertainty for potential investors. "Investors have a lot of interest because we have a lot of oil, but they must have absolute legal certainty," he asserted, referencing past international arbitrations against Venezuela following contract modifications during the nationalization process.

Investors have a lot of interest because we have a lot of oil, but they must have absolute legal certainty.

— José Toro HardyHighlighting the need for legal security to attract foreign investment.
DistantNews Editorial

Originally published by El Nacional in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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