• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 3 hours Here We Go: New York Lawmakers Pass Aggressive Law To Fight Climate Change
  • 2 hours Iran downs US drone. No military response . . Just Completely Destroy their Economy. Can Senator Kerry be tried for aiding enemy ?
  • 5 hours The Inconvenient Truth Of Electric Cars
  • 2 hours Oil Demand Needs to Halve: Equinor
  • 6 hours Ireland To Ban New Petrol And Diesel Vehicles From 2030
  • 7 hours NATO Article 5: Attack on one member is attack on all. Members all must come to defense . . . NOT facilitate financial transactions to circumvent and foil US Sanctions. Somebody please tell Angela.
  • 15 hours Green vs. Coal: Bavaria Seeks Fast-Track German Coal Exit in Snub to Merkel Plan
  • 15 hours Win Against Tyranny: Turkey's Opposition Strikes Blow To Erdogan With Istanbul Mayoral Win
  • 3 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 2 hours The Plastics Problem
  • 3 hours Hydrogen FTW... Some Day
  • 5 hours Is $60/Bbl WTI still considered a break even for Shale Oil
  • 10 mins Solar Panels at 26 cents per watt
  • 6 hours Wonders of Shale - Gas, bringing investments and jobs to the US
  • 1 hour Section 232 Uranium
Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Venezuela Announces $3.2 Billion In Oil Deals As Default Looms

Venezuela, teetering on the brink of utter economic collapse, is rushing through a tender for billions of dollars of drilling contracts to boost oil production in the Orinoco Belt.

Venezuela has seen its oil production fall slightly each year for more than a decade, but the declines have accelerated this year as scarce funds led to cutbacks by oilfield service companies. Venezuela’s oil production is down about 250,000 barrels per day so far this year, dropping to 2.33 million barrels per day as of August. That is also about 330,000 barrels down from the 2015 average.

The combined effect of low oil prices and falling production has pushed Venezuela to the brink.

In an effort to staunch the bleeding, Venezuela’s PDVSA said on Sept. 21 that it has awarded $3.2 billion in contracts to drill in the Orinoco Belt. The contracts, PDVSA says, will add 250,000 barrels per day within 30 months from about 480 wells to be drilled. The deal asks the drilling companies to pay for the cost of drilling and then receive compensation in future oil production. PDVSA described its drilling campaign as “one of the world’s largest drilling projects.”

“The project involves contracting integrated services for platform construction, drilling, completion and connection of wells for joint ventures Petrocarabobo, Petrovictoria and Petroindependencia located in the belt,” PDVSA said.

However, Reuters reports that some of the foreign companies involved are uncomfortable with the way the tender was rushed, and they also question how viable the contracts will be. A few of the winners have political connections to the president, and also have very little experience in oilfield services, raising questions about favoritism. Also, the cost estimates appear to be too high, a source from one company told Reuters.

Moreover, some companies are wondering why PDVSA is choosing to invest in heavy oil when it can no longer afford to import sufficient volumes of lighter blending fuels to blend the heavy crude into a marketable product. PDVSA does not have enough cash to import the diluents, which will make heavy oil production difficult. Oil tankers with diluent have arrived at Venezuelan ports this year, but many have been forced to sit idle offshore awaiting payment. Some have given up and left. Related: The Natural Gas War Burning Under Syria

Schlumberger Ltd., Horizontal Well Drillers LLC, and Venezuela’s Y&V Group won contracts for the new drilling campaign, and Halliburton and Baker Hughes will offer provide some services. Schlumberger was one company in particular that had reduced its activity in Venezuela after not receiving sufficient payment for its services. The oilfield services giant appears to be mollified, however, and is sticking around in the troubled South American nation.

Meanwhile, Venezuela and PDVSA are trying to convince creditors to accept a $7 billion bond swap to relieve the country of crippling debt payments falling due in the next two months. The proposal called for extending debt maturities out over the next few years, giving Venezuela some breathing space. Investors, according to Bloomberg, were not exactly warm to the idea, which offered nothing more than face value, plus PDVSA’s U.S. refining arm Citgo as collateral. Related: Market Update: Oil Crumbles After Saudis Pull The Plug

The value of PDVSA’s bonds sunk after the news. Bloomberg reported that the cost to insure PDVSA’s bonds against default jumped this week, and the price implies a slightly better than 50-50 chance that the company will default within the next year. “We think it’s fair for all those bondholders who have been with us and enjoyed excellent profits to keep that profit that is now even a bit better and with much better guarantees,” Venezuela’s oil minister Eulogio Del Pino said.

“PDVSA needed to get this right, and they didn’t,” Russ Dallen, managing partner at Caracas Capital, wrote in a note to investors, according to Bloomberg. “What this means for PDVSA is that default is ever more likely.”

Conditions for both Venezuela and PDVSA continue to deteriorate, as The New York Times detailed this week. PDVSA has tried to convince the financial markets and its creditors that it will bounce back, but that appears to be wishful thinking. As things grow worse, a default could trigger faster production declines.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News