On January 30, 2024, Turkey and Venezuela signed two separate memorandums of understanding in the fields of oil, natural gas and mining.[1] These agreements strengthened the predictions that cooperation between the two countries would increase. As it is known, 2024 is heading towards being a year of serious breakthroughs in the field of energy. Turkey has been developing its technical capability in this field by discovering new oil reserves in the Black Sea and the Mediterranean in recent years. The basis of the agreement with Venezuela was to ensure coordination between the two countries within the scope of technical and commercial advances in oil and natural gas.
Turkish Minister of Energy and Natural Resources Alparslan Bayraktar visited Caracas to strengthen energy cooperation with Venezuela in the fields of oil, natural gas and mining. Bayraktar first met with Venezuelan Petroleum Minister Pedro Rafael Tellechea Ruiz in the capital Karacas on Tuesday, January 30, 2024. Following the meeting between the delegations, a memorandum of understanding for oil and natural gas cooperation was signed between Venezuela and Turkey. Bayraktar also met with the Minister of Ecological Mining Development, William Serantes Pinto.[2] Bayraktar said that Turkish companies Eti Maden, MTA (General Directorate of Mineral Research and Exploration) and Turkish Petroleum International Company (TPIC) held consultations in areas where they could operate in Venezuela.
Venezuela ranks first in the world with 303 billion barrels of proven oil reserves. This amount corresponds to one-fourth of the total of the Organization of Petroleum Exporting Countries (OPEC) countries and one-fifth of the world total. 75% of the reserves in the extremely heavy class are located in the Orinoco basin, which covers an area of 55 thousand square kilometers. The Venezuelan economy, which is based on oil, is seriously affected by developments in oil production and prices.
Crude oil production in Venezuela, which was 3 million barrels/day in the early 2000s, decreased to 2 million barrels/day in 2017 and 1.4 million barrels/day in 2018 due to lack of investment. With the sanctions in 2019, production continued to fall sharply. The average production throughout the year was around 1 million barrels/day. The country’s oil production continues to decline.
When both official data and OPEC data are compared, it is seen that oil production decreased below 400 thousand barrels/day in the third quarter of 2020. After two subsidiaries of Russian Rosneft (Rosneft Trading S.A. and TNK Trading International S.A.), which intermediated approximately two-thirds of Venezuela’s oil exports in 2019, were placed on the US sanctions list in February and March, Rosneft announced that it transferred its active assets in Venezuela to the Russian government. In addition, the USA has increased its pressure on companies that trade oil with Venezuela, especially the Spanish company Repsol and the Indian company Reliance.
On the other hand, it was announced that some previously unknown Mexican companies purchased crude oil from Venezuela in exchange for food and fuel sales in the second quarter of the year, and they were also included in the US sanctions list. It is reported that in the third quarter of the year, Spanish Repsol, Italian ENI, Thai Tipco and Indian Reliance companies continued to buy oil from Venezuela. Considering that the normal sales price of Venezuelan oil is 10-15 dollars lower compared to Brent oil, and that Venezuela applies discounts of up to 25% due to American sanctions, the low level of international oil prices is a serious blow to the country’s exports. The country’s crude oil refinery capacity is 1.3 million barrels per day. However, since most of the refineries are out of production, current production is not at a level that can even meet domestic consumption. It is estimated that the country needs 350-400 thousand barrels/day of domestic consumption in normal periods and 150-200 thousand barrels/day during the pandemic period. Venezuela ranks seventh in the world with 6.4 trillion cubic meters of natural gas reserves. 60% of the reserves are located in traditional production regions. The country’s annual natural gas production is 37.5 billion cubic meters and all of it goes to domestic consumption. Approximately two-thirds of consumption is used in the field of petroleum and petrochemicals, while approximately one-tenth is used in power plants.
Venezuela has 10 billion tons of coal reserves. In Venezuela, which was the third largest producer in the region after Brazil and Colombia with 10 million tons of coal production in the early 2000s, production has decreased to 800 thousand tons in recent years. Approximately 2 million tons of petcoke is produced in the country. Venezuela has the highest per capita energy consumption among Latin American countries. The entire population has access to electricity. The extensive electrical energy network and the subsidization of energy and fuel fees by the state increase energy use. Approximately half of the country’s total electricity production is provided by fossil fuel power plants, while the rest is provided by hydroelectric power plants. Guri complex, one of the world’s leading hydroelectric dams, provides nearly half of the country’s electrical energy.[3]
It is known that relations between Türkiye and Venezuela are of serious importance. The transfer of technical capabilities and experience in the oil and natural gas sector will enable deep relations between the two countries to be built on even stronger foundations. However, the steps taken by Venezuela on the border in recent months have caused serious reactions in the region and signaled that new embargoes are on the way. In this context, the advancement of Turkey-Venezuela relations on technocratic foundations will secure the energy investments to be made between both countries.
[i] “Türkiye ve Venezuela Petrol Ve Doğal Gaz İşbirliği Yapacak.”, Enerji Günlüğü, https://www.enerjigunlugu.net/turkiye-ve-venezuela-petrol-ve-dogal-gaz-isbirligi-yapacak-57523h.htm, (Date of Accession: 31.01.2024).
[ii] “Turkish Energy Minister in Venezuela to Boost Ties in Oil, Gas and Mining.”, AA, https://www.aa.com.tr/en/turkiye/turkish-energy-minister-in-venezuela-to-boost-ties-in-oil-gas-and-mining/3124038, (Date of Accession: 31.01.2024).
[iii] “Venezuela Ülke Raporu Türkiye İçin Fırsatlar”, Türkiye’nin Karakas Büyükelçiliği Ticaret Müşavirliği, November 2020.
