Venezuelan officials have met in recent months with small domestic oilfield contractors to propose letting them operate fields owned by state-owned PDVSA while pocketing part of the proceeds, according to six people with knowledge of the talks.
By Luc Cohen and Corina Pons / Reuters
The talks show President Nicolas Maduro, facing a collapse in crude output and U.S. sanctions aimed at ousting him, is seeking to attract investments to the OPEC nation by offering even sweeter terms than a 2018 plan that walked back elements of the country’s nationalist oil industry platform.
It was unclear whether any companies have actually signed the contracts under discussion. Any attempted opening to the private sector faces numerous obstacles including wariness about working with Petroleos de Venezuela after years of late payments, and concerns about Washington’s sanctions.
So far, companies showing interest in the new deals are relatively small, including S&B Terra Marine Services, based near Lake Maracaibo in western Venezuela, and Arco Services, based in eastern Monagas state, according to three of the people, who spoke on the condition of anonymity.
Neither company responded to requests for comment, and neither did PDVSA nor Venezuela’s oil ministry.
The government recently passed an “anti-blockade” law allowing oil deals to be signed confidentially, due to the risk of sanctions. In addition, members of the ruling socialist party – which recently gained control of the National Assembly in a disputed vote – have pledged to reform laws to allow greater private participation in the oil industry.
“We aim to increase production to 1.5 million barrels [per day] with new mechanisms of production, financing and commercialization,” Maduro said in a Tuesday evening annual address to the National Assembly, without providing details.
That would restore production to 2018 levels after it slumped to just 434,000 barrels per day (bpd) in November.
Vice President Delcy Rodriguez said in a Wednesday state television interview that “various agreements” had been reached for oil investment as part of the anti-blockade law, without providing details.
Plunging output
The OPEC nation’s crude output has plunged to the lowest level in decades due to years of underinvestment and mismanagement, as well as U.S. sanctions. The drop has exacerbated a humanitarian crisis in which some 5 million people have emigrated.
“Since the government is closed out of many channels, they want to delegate responsibility to private companies and justify that delegation through the sanctions, the blockade, and the humanitarian impact,” said one of the people.
While details of the proposed arrangements were not available, two of the people said they differed from the “joint services agreements” signed with a handful of little-known companies in 2018, allowing them to take charge of financing and equipment procurement. [reut.rs/3huB7dh]
Those companies, which only got paid if production increased, had little known oil industry experience, the people said.
The contracts now under discussion, with experienced PDVSA contractors, lack any output boost requirement, the people said.
Another key difference is that the current proposals would allow private companies to sell crude or refined products themselves as a form of compensation, three of the people said, adding the details were not yet clear. U.S. sanctions would likely complicate efforts by private companies to export oil.
The government has also been focusing on fields owned solely by PDVSA for the new arrangements, rather than its joint ventures with private companies, such as Chevron Corp and China National Petroleum Corp Ltd.
However, PDVSA has recently informally granted its minority partners at the joint ventures operational control of their fields.