The rapid collapse of Venezuela’s oil industry triggered one of the world’s worst environmental disasters. This is exacerbated by Caracas’ drill at any cost mentality and strict U.S. sanctions, which amplified the intensity of the ecological catastrophe unfolding in the near-failed state. There are immense volumes of petroleum waste scattered across many sites, where it is leaching into the soil, waterways, and wetlands. With President Trump eagerly pushing U.S. drillers to invest the tens of billions of dollars required to rebuild Venezuela’s shattered oil industry, questions are arising as to whether a large-scale clean-up will be included in those efforts.
Crude oil is seeping from ramshackle petroleum infrastructure, including wellheads, pipelines, and storage tanks, into the environment at thousands of petroleum industry sites in Venezuela and has done so for decades. Over that period, the volume of leaks, spills, and hazardous emissions rapidly grew as infrastructure corrosion accelerated, with Caracas’s spending on essential maintenance and refurbishment spiraling ever lower. This worsened after the late-2014 oil price collapse, with the international Brent benchmark plunging to under $30 per barrel by January 2016, sharply impacting Venezuela’s economically crucial oil revenues.
As a result, many facilities operated by Venezuela’s national oil company, PDVSA, were incurring losses, notably those lifting extra-heavy crude in the Orinoco Belt, where 70% of the country’s oil is produced. Oil rents, which form over half of Caracas’ fiscal income, crashed, forcing the authoritarian government to slash spending, including crucial capital expenditures for maintaining and refurbishing hydrocarbon infrastructure. This precipitated an economic crisis that gave rise to countrywide protests and civil dissent, along with a mass exodus of Venezuelan refugees.
As spending was savagely cut, it created a vicious cycle where the breakdown of Venezuela’s oil industry gained momentum, causing production to spiral lower. The loss of tens of thousands of skilled oil industry professionals, who left after President Hugo Chavez’s crackdown on dissent in the early 2000s, accelerated the collapse. The situation was further aggravated by increasingly stricter U.S. sanctions, which limited Caracas’ access to international energy and financial markets. It is at this point that PDVSA resorted to cutting corners and discontinued environmental and safety regulations as part of efforts to boost economically crucial oil production.
The confluence of those events amplified operational hazards leading to a higher frequency and severity of oil spills, environmentally harmful emissions and other damaging practices. As Caracas’ finances deteriorated and the economic crisis deepened, the pressure to drill for oil grew, causing the number of environmentally damaging incidents to soar at a cataclysmic rate. The scale of the catastrophe is impossible to quantify because of the intensely secretive nature of the authoritarian socialist regime and the near collapse of state institutions, including the national oil company PDVSA.
Nonetheless, there is considerable evidence pointing to an immense decades-long ecological disaster. Satellite imagery from NASA, dating back to 2003, shows large-scale oil slicks and algal blooms on Lake Maracaibo, one of the oldest and largest bodies of water of its kind in the world. The lake, which sits at the heart of Venezuela’s oil industry, is crisscrossed by a complex network of thousands of miles of petroleum pipelines, storage facilities and derricks. Most of that energy infrastructure has degraded so severely it has been leaking hydrocarbons into the water body and its surroundings for decades.
This is turning Lake Maracaibo into a giant noxious pool of petroleum waste and toxic blue-green algae. There are fears that the long-running devastation is so catastrophic that it is now irreversible. Consequently, this immense environmental damage is severely impacting local communities. For decades, fishermen have complained of declining marine stocks with catches of fish and shrimp shrinking ever smaller. There are regular outbreaks of skin rashes and other hydrocarbon-related health complaints among fishermen and community members. The intensity of the pollution is fueling fears that water supplies are contaminated and people are ingesting petroleum residue through the food chain.
These problems are not simply confined to Lake Maracaibo and the state of Zulia; they are Venezuela-wide. There is evidence of considerable widespread pollution in the all-important 20,000 square mile wide Orinoco Belt. This region accounts for around 70% of Venezuela’s oil production and contains most of the country’s massive oil reserves, estimated by OPEC at 303 billion barrels. Indeed, oil extraction facilities in the Orinoco Belt are responsible for rampant deforestation and hydrocarbon spills.
The risk of oil spills and environmentally damaging emissions is magnified by the complex extraction methods, such as high-pressure drilling with long shaft extensions, used to lift the Orinoco Belt’s viscous, tar-like oil. Despite those sophisticated drilling practices, most of the extra-heavy crude can only be produced using enhanced recovery techniques such as waterflooding or gas injection. Diluents, such as naptha or condensate, must also be added to the highly viscous petroleum to enable it to flow through wells and pipelines; it cannot be processed or transported. This also multiplies the potential for environmental damage from spills and chemical emissions from already dilapidated facilities.
Decades of chronic oil spills and leaks from heavily corroded wellheads, pipelines and storage facilities are heavily contaminating the Orinoco River and the surrounding area. The impact on the local environment is exacerbated by industry-related chemical runoff and the fallout from constant flaring. This is not only threatening local fauna and flora and communities, but also impacting the ecologically heterogeneous Orinoco Delta, a globally recognized biodiversity hotspot on Venezuela’s east coast. The crisis is so severe that recent reports indicate that ecologically vital freshwater-marine systems along the length of the Orinoco River, including the delta, are severely damaged.
The extreme oil industry-related environmental catastrophe unfolding in Venezuela is not garnering the attention it urgently needs. Decades of ecologically damaging incidents have polluted vital waterways, food supplies and water sources. This is not only harming the flora and fauna but also causing disease and ill health in many communities. Clearly, the causes of this calamity, including the need to implement effective cleanup measures, must be addressed. There are fears that the White House is only interested in profiting from the extraction of Venezuelan oil, notably the Orinoco Belt’s extra-heavy petroleum and will fail to address the crippling environmental catastrophe unfolding in the country.
This is a very real risk due to the extreme costs of any cleanup. This will likely be tens of billions of dollars, with an estimated $2.5 billion required to remediate Lake Maracaibo alone, at a time when $100 billion is needed to rebuild Venezuela’s shattered oil infrastructure to lift production to 2 million barrels per day. It is difficult to see private energy companies investing billions of dollars in unprofitable environmental remediation if they are not compelled to do so by authorities in Venezuela or the United States. In the rush to attract foreign drillers by reforming Venezuela’s regulatory frameworks to boost production, there could well be further catastrophic environmental damage.
By Matthew Smith for Oilprice.com
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