Oil production was off 5.3 percent in 2007 from the previous year and contributed $3.14 billion to the country's gross domestic product, down from both 2006 and 2005 when the sector accounted for a reported $3.38 billion.

The reduction in oil output in South America's No. 1 petroleum producer coincided with a marked increase in the price per barrel produced by Venezuela in 2007, up to $65.13 per barrel last year from $56.35 per barrel in 2006.

While analysts and critics of Venezuelan President Hugo Chavez consider the bank's news a harbinger of hard times to come for the country's state-owned PDVSA, the national bank did note the country's economy grew significantly in 2007.

Venezuela's economy grew by 8.4 percent, reported the bank, noting other non-petroleum sectors showed positive growth during the year.

Many contend that the additional strains placed on PDVSA in 2007 were the cause of production shortfalls last year. Chavez last spring implemented a wide-reaching agenda calling for the restructuring of contracts with private-sector oil companies operating in Venezuela, whereby PDVSA would assume a majority share of current projects and subsequent projects.

However, instead of reinvesting that money into the sector, Chavez has opted to spend it on social programs at home and discounted oil for neighboring countries that share his political agenda.

At the same time, Chavez has made clear his intention to reduce his country's dependency on the United States as a petroleum customer by actively courting other countries like China, whose energy needs are expected to increase exponentially in the next decade.

Venezuela supplies about 12 percent of the oil imported by the United States, making it Venezuela's largest customer. It is the No. 4 U.S. supplier.

But analysts like David Pumphrey, deputy director and senior fellow for the energy program at the Center for Strategic & International Studies in Washington, said the reduction of U.S. exports was more likely the result of production shortcomings and not political rhetoric.

"I don't think we have direct evidence that relations (between Venezuela and the United States) have anything to do with it," Pumphrey told United Press International Tuesday.

In July, Luis Vierma, exploration and production vice president at PDVSA, said Venezuelan oil faces a "significant operational emergency" if it does not increase the number of rigs operating in the country and that the state firm fell short of its 2007 goal of getting 191 rigs online in 2007 and producing some 3.3 million bpd.

So far, he said, 112 rigs were online as of July, and by the end of the year their numbers would only likely increase to 120. "Venezuela is moving toward technological independence, but it will take a long time," said Vierma.

PDVSA's independence could take even longer considering Venezuela's oil output is believed to have slipped by more than 250,000 bpd from a year ago, according to the Paris-based International Energy Agency. Production has reportedly decreased from 2.6 million bpd to 2.37 million bpd.

Some opposition lawmakers have accused Oil Minister Rafael Ramirez and others in PDVSA of corruption.

Hoping to counter the production shortfall, PDVSA announced recently it was investing $3.5 billion in new oil rigs.