• 1 hour Why Alberta Will Win The War Over Trans Mountain
  • 24 mins How Lousy Shale Oil Economics Will Pull Down The U.S. Economy
  • 16 hours Russia attacks (again):Cyber Firms Warn On Suspected Russian Plan To Attack Ukraine
  • 4 hours Elon Musk Goes Full Conspiracy Theorist, Blames Big Oil for Tesla's Negative Media Coverage
  • 6 hours Psychological manipulation of oil prices.
  • 17 hours Hamburg Becomes First German City To Ban Diesel Vehicles
  • 17 hours Euro Zone Economy Slowdown Sharper Than Expected In May
  • 20 mins How Much Oil Could EVs Feasibly Displace by 2040?
  • 7 hours $5 per gallon in Manhattan
  • 5 hours Clean Energy Tech FAILURE says IEA
  • 18 hours Trump Oil
  • 19 hours API Inventory Data (Tuesdays)
  • 36 mins Water-Based Battery Claims Exceptional Scalability
  • 1 day Iran and sanctions
  • 1 day Uniper Converts Wind Power to Methane
  • 13 hours Trade war with China on hold
Alt Text

Norway’s Wealth Fund One Step Closer To Ditching Oil

Norway’s $1 trillion dollar sovereign…

Alt Text

Could Oil Hit $100?

Crude markets have seen a…

Alt Text

The Myth Of An Imminent Energy Transition

While wind and solar are…

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

Oil Majors Are Abandoning Venezuela

Oil rig venezuela

The crisis in Venezuela could enter a new phase, with the private companies operating in the country starting to panic.

Chevron said on Wednesday that it evacuated executives from Venezuela following the imprisonment of two of its workers last week. The assets of Chevron are increasingly in peril, and the company is showing signs that it might pull the plug.

In mid-April, Venezuelan authorities arrested two Chevron employees over refusing to sign contracts with PDVSA. The workers said that PDVSA was offering equipment at inflated prices, so they held off on signing the contracts. Insiders have told Reuters that the practice of jacking up the prices on equipment has been used in the past to siphon off money for personal gain.

But with PDVSA and the Venezuelan government turning on Chevron, a company that is a crucial joint venture partner in five important oil projects in the country, things could take a turn for the worse. Chevron reportedly evacuated company executives from Venezuela and told workers remaining there “to avoid the facilities of its joint venture” with PDVSA, according to Reuters.

For now, Chevron says it does not have plans to close down operations and withdraw from the country, although the evacuation of key executives is not exactly a vote of confidence for its remaining investments.

Sources within private sector firms operating in Venezuela told Reuters that they have no good options. The operating environment is becoming increasingly hostile, making it difficult to continue to work in the country. However, if they packed up and went home they would get almost nothing for their assets that they currently hold – who would be interested in buying them under these circumstances? Related: What Is A ‘Fair’ Price For Oil?

According to Reuters, Chevron earned $329 million in Venezuela in 2017, down 18 percent from a year earlier.

Notably, earlier this week Halliburton wrote off $312 million related to its Venezuela operations, a charge that comes after the oilfield services company took a $647 million write-down in 2017.

Taken together, the latest developments threaten one of the more resilient sources of Venezuela’s dwindling oil production. PDVSA’s operations are falling apart, with production in a nose dive. But over the last few years, oil production and refining at the joint ventures have held up. The joint ventures now account for more than half of the country’s oil production.

Increasingly desperate, however, Venezuela is lashing out at its private sector partners, which could undermine operations there. If Chevron is warning its personnel to stay away from certain facilities, that doesn’t bode well for the performance of those assets. Chevron says the removal of key personnel is temporary, and if talks between the company and PDVSA lead to a resolution, the executives could return.

Other companies are also facing hardships. Schlumberger wrote down $938 million in the fourth quarter. Total SA has withdrawn employees in recent years and significantly narrowed its spending in the country. “I can tell you it is difficult for our people because of lack of power, lack of water,” Total’s CEO Patrick Pouyanne said at a conference in Paris last week. Related: Hedge Funds Are Certain Oil Prices Will Head Higher

Venezuela’s oil production has declined to just 1.488 million barrels per day (mb/d) as of March, which is down more than 600,000 bpd from 2016 levels. But the declines have really accelerated in the past six months, with monthly losses routinely topping 50,000 bpd. The problem for Venezuela is that if it scares away the few remaining international companies, the joint venture projects could deteriorate at a faster rate than had already been the case.

The companies are sticking around, for now, in the hopes that the situation will improve. However, the odds are the economic crisis in the country grows worse, not better. President Nicolas Maduro has scheduled elections for May, an event widely seen as a sham. That could provoke a response from the U.S. in the form of sanctions, either on Venezuelan oil exports, or on U.S. diluent sold to Venezuela to help process PDVSA’s heavy oil.

Either option would likely contribute to further production losses.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:


x


Back to homepage

Trending Discussions


Leave a comment
  • Tom on April 25 2018 said:
    The disaster unfolding in Venezuela highlights the need for supply options. One option may be the long delayed Keystone XL Pipeline Project, to bring heavy oil down from Canada for our Gulf Coast, heavy oil refineries. API is busy playing "ethanol wars" over summertime sales of E15, while there are much bigger issues at stake. API please wake up! If the Midwesterners turn on Trump over ethanol, Oil is going to be the Biggest Loser of All.
  • Will on April 25 2018 said:
    Having worked for a major Investment Banker for years, the industry saying is;
    "Bulls & Bears play, pigs get slaughtered"
    Why did these 'pigs' continue to invest in Venezuela once the writing was on the wall? These multinationals deserve to lose big by such blind faith that a Socialist country with a Taxi Driver President could 'play ball' with the Gringos.
  • Kr55 on April 25 2018 said:
    Gotta be a crazy person to still work there if you have other options in life. Disgustingly irresponsible for any company to have been encouraging any of their workers to work in that hell hole the last year or so.
  • Badhairharry on April 28 2018 said:
    Venezuela needs to hit absolute bottom and all investments in this Marxist hellhole needs to be withdrawn. Till Maduro and his gang learn how to better manage the economy and the politics (them departing the scene) the chances for a positive investment is about the same as playing Russian roulette with five of the chambers containing ammo. Venezuela should become a pariah in South America for the economic crisis brought about by their jump to Marxism.

Leave a comment




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