Venezuela oil output may slide on cash woes

CARACAS (Reuters) – Venezuela faces a growing risk of falling crude production in the coming months as oil service companies show signs they may halt key activities over a huge buildup in unpaid bills sparked by tumbling crude prices.

A major oil sector slowdown would devastate the OPEC nation’s economy and force cuts in billions of dollars in social programs that keep leftist President Hugo Chavez popular among Venezuela’s poor majority.

Some service providers have idled operations as they await payment while local firms are struggling to keep workers paid, foreshadowing a slowdown in critical oil field services required to maintain output.

The problems may balloon in the coming weeks because top officials at state oil company PDVSA are focused on campaigning for a February 15 referendum on amending the constitution to allow Chavez to stay in office after his term ends in 2013.

“Venezuela’s energy policy has been to capture oil revenues at the expense of sustaining production levels,” said Antoine Halff, analyst with Newedge brokerage in New York.

Reuters