Tellechea’s arrest will expedite Venezuela’s decline

Venezuela’s President Nicolas Maduro arrested Pedro Tellechea, up until very recently the country’s oil minister and chief executive of PDVSA (held both those posts throughout the past 18 months). Initially the news was presented as Tellechea’s own resignation, citing health issues and bringing in Maduro longtime confidant Alex Saab. However, just a couple of days later, Venezuela’s Attorney General Tarek William Saab announced on Instagram that Tellechea was in fact arrested on suspicion of treason.

We believe that Tellechea’s arrest would be largely detrimental to Venezuela’s oil industry. First and foremost, his replacement in Alex Saab is hardly an industry veteran – investigated for money laundering, embezzlement and other crimes, he was evading an Interpol red notice for years until he was arrested at Cape Verde during a private jet fuel stop. Following several years in a US prison, the Colombian-born businessman was sent back to Venezuela in December 2023 in exchange for ten American prisoners. Second, Tellechea has been one of the most efficient top executives of PDVSA in recent years as he combined the post with his being at the helm of the Oil Ministry. Taking office in March 2023, Venezuela’s crude and condensate production stood at 740 kbd in his first month as minister, whilst by the time Tellechea was arrested the country’s output was above 900 kbd. Moreover, one could argue Tellechea’s previous three-year tenure as the head of petchem state firm Pequiven was also a relatively positive period, normalizing the relationship between Colombia and Venezuela as fertilizer maker Monomeros remains based in Barranquilla.

The sad reality of Nicolas Maduro’s 11-year reign in Venezuela is mirrored in the fate of the Latin American country’s oil ministers. With seven oil ministers working under him, the Maduro administration has arrested four top energy officials and sought to arrest Rafael Ramirez as well, with Italy refusing to extradite the refugee. For comparison, Hugo Chavez was president of Venezuela for 14 years and only had three energy ministers during his reign, Ali Rodriguez (1999-2000), Alvaro Silva (2000-2002) and the abovementioned Rafael Ramirez. Tellechea’s arrest is also sending a negative signal to all those Western majors that have started to adapt to the sanctions-restricted operations in Venezuela. Take Chevron, which as recently as early October announced that it would seek to invest at least $500 million/year in Venezuela for the next two decades, potentially eyeing output of 400 kbd from its three JVs in the country, Petropiar, Petroboscan and Petroindependencia. With Saab has notably stronger links to the Maduro family and administration than the largely military-technocratic Tellechea, the amount of political interference in day-to-day operations would inevitably increase over the upcoming months.

Venezuela’s crude and condensate production, kbd.

Source: Kpler.

It is very likely that details of Tellechea’s alleged crimes would be rendered public relatively soon. For the time being, he’s accused of passing technology related to PDVSA’s command and control system to US intelligence services, without naming which secret service specifically. Overall, we maintain our negative outlook for Venezuela, with production falling back to low 800 kbd readings by the end of 2025. A potential return of Donald Trump to the Oval Office could also result in a tightening of sanctions compliance, especially on the heels of higher incoming naphtha flows. In fact, the 81 kbd of US naphtha discharging in Venezuela in August is the highest monthly reading since January 2019, a trade flow that could be easily curbed by US authorities to leave PDVSA with less diluent.

‍

Want access to Insights on a regular basis?

Through unbiased, expert-driven research and news, you’ll receive valuable information on supply, demand, and market movements, enabling you to make informed trading and risk management decisions.

Unbiased. Precise. Essential.

Curious? Request access to Kpler Insight today.