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Secrecy And Confusion Surround Venezuela’s Latest Oil Deals

Oil

Venezuela’s newly created and military run oil and mining company Camimpeg has formed a joint venture with UK-based Southern Procurement Services (SPS) to reactivate shut-in wells in Lake Maracaibo in Zulia state.

The deal has raised eyebrows, given its scale and the relative inexperience of the parties involved. A source with knowledge of developments and who has operations in the lake told NewsBase the well count could approach 1,500.

Given their lack of experience, questions have been asked about whether the JV partners have the requisite personnel or capital to pull off the work. Indeed, the fact the companies have even been allowed to team up is startling.

SPS and Camimpeg, which was created in February to protect petroleum installations belonging to state-run PDVSA, recently formed Camimpeg-SPS to “improve the oil and gas production process for PDVSA,” the JV tweeted last week.

In the most recent of only three press releases available in the news section on its website, England-based SPS, which is part of the SCZ Group financial group, reported that it was engaged in activities to supply “electric submersible pumps” as part of trade initiatives “to ensure increased productivity at Venezuelan oilfields”. It went onto say the company has “the firm intention to continue providing quality service to PDVSA.” No other SPS press releases talk about its dealings in Venezuela or any other countries.

Camimpeg was also created in part to provide oilfield services to PDVSA, with a view to it replicating the activity of companies like Schlumberger, Halliburton or Weatherford. But Venezuelan President Nicolas Maduro is believed to have created the rookie company, which is run by the armed forces, to keep the military happy and loyal as Venezuela’s economy collapses.

Camimpeg-SPS also recently signed a deal to acquire a fleet of vehicles that will be used to maintain a constant presence over PDVSA’s operating areas.

Financing for both deals is likely to come from SCZ Group, which provides “special financing mechanism that allows customers to pay for purchases of oil products, petrochemical industries and basic industries,” according to statements on its website.

Related: Why Oil Markets Don’t Have To Worry About Libya

SCZ Group, which has offices in Panama City, Miami and Hong Kong, is apparently headed by Venezuelan Manuel Chinchilla, who is also SPS’ chief, according to data obtained from his LinkedIn page and PDVSA press releases.

SPS and PDVSA did not reply to emails seeking comment on the deal.

Debutant

The Camimpeg-SPS deal mirrors a similar agreement that was struck recently between PDVSA and US-based drilling contractor Horizontal Well Drillers (HWD). That deal saw the latter company make its debut in Venezuela, despite its lack of experience in hostile environments and insufficient cash flow to finance its activities without funding from another company.

The deals with both Camimpeg-SPS and HWD come as hundreds of companies there with years of operating experience in Venezuela are struggling to get paid by PDVSA. Many have pared back their operations, while others have simply given up and exited the country.

“We don’t sell a brand, we sell solutions,” said SPS’ Chinchilla in an optimistic press release from the Venezuelan government.

The secrecy and confusion surrounding the deals exemplify the state of Venezuela’s oil industry. The military’s heavy involvement is also telling, as rumours of a military coup circulate. The country has been at a tipping point for some time, and Maduro’s obduracy is almost admirable. But 2017 looks like being the year the Chavista revolution crosses the Rubicon and sinks like the country’s crude output.

By Piettro Donatello Pitts

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  • GregS on December 22 2016 said:
    Interesting, but I think the bigger news today is that Venezuela just mortgaged 49.9% of Citgo to Rosneft in return for a $1.5 Billion loan. This comes right after they used 50.1% of Citgo as collateral for a bond swap.

    It's only a matter of time before Venezuela implodes, it's just sad they don't default now instead of defaulting later and giving away their refineries.
  • gulag Pittsburgh on December 21 2016 said:
    Is SPS really a UK company, or just registered there? Do not be surprised if Russia is somehow involved, but cloaking its operations through this obscure offshore subsidiary. Chinchilla is a known Communist in Venezuela who sent his daughter to be educated in USSR.

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