• 4 minutes THE GREAT OIL PRICE PREDICTION CHALLENGE OF 2018
  • 9 minutes Time For Reaction: Trump Presses OPEC to Reduce Prices as Crude Trades Near $80
  • 15 minutes Nothing new in Middle East? Iran Puts On 'Show Of Strength' Military Exercise In Gulf
  • 4 hours So oil touched $80! (WTI break $71 twice). What does the future hold?
  • 5 hours Global Hunger Continues to Grow Driven By Climate Change
  • 5 hours China Tariff Threatens U.S. LNG Boom
  • 7 hours Why Are the Maldives Still above Sea Level?
  • 5 hours Praise for Alberta
  • 9 hours Downloadable 3D Printed Gun Designs, Yay or Nay?
  • 13 hours Freedom Of Internet: Google Plans Censored Version Of Search Engine In China!
  • 2 days Transition Time: Volkswagen Announces "Electric for All" Campaign
  • 2 days Robots Roam the Seafloor Looking for Mineral Resources
  • 1 day Toyota Agreed To Add Android Auto To Its Vehicles
  • 12 hours Lack of Global Warming Messes with Russian Arctic LNG Plans
  • 2 days Permian already crested the productivity bell curve - downward now to Tier 2 geological locations
  • 2 hours Saudi Aramco IPO Seems Unlikely
  • 18 hours Regime For Regime: China Says Willing To Provide Venezuela With What Help It Can
  • 2 days Impeachment and stock market
Alt Text

Russian Oil Production Hits Post-Soviet Record

Russian oil production is reaching…

Alt Text

Investors Back Brent To Break $80

After a few weeks of…

Alt Text

Oil Nears $80 On Iran Concerns

Oil prices are once again…

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

PDVSA Settles With ConocoPhillips In Desperate Bid to Stop Decline

Cuba PDVSA

PDVSA settled with ConocoPhillips on Monday over an outstanding debt issue, a move that the Venezuelan oil company surely hopes will give it some breathing room even as the nation continues to crumble.

Earlier this year, Conoco won an international arbitration award resulting from the 2007 assets seizure by Venezuela. Conoco quickly moved to lay claim to PDVSA’s refining assets in the Dutch Caribbean, a devastating blow to Venezuela that compounded fiscal and operational problems. Without the processing facilities on the islands of Curacao and Aruba, PDVSA’s oil exports plunged deeper in the second quarter.

Venezuela’s revolutionary government has made it a point of pride to resist outside pressure, which makes the latest settlement all the more remarkable. PDVSA has agreed to pay ConocoPhillips an initial $500 million within 90 days, which will then be followed by quarterly payments over the next four and a half years.

The fact that PDVSA agreed to the settlement is a testament to how much of a crisis the company (and ultimately the Venezuelan government) finds itself in, and how important those Caribbean assets are to ongoing operations. Venezuela’s oil production continues to decline. In July, output fell to just 1.278 million barrels per day (mb/d), down 500,000 bpd from the fourth quarter of last year and down nearly 1 mb/d from two years ago. A growing number of analysts see output dipping below the 1-million-barrel-per-day mark by the end of 2018.

The deal comes as the U.S.-based subsidiary of PDVSA, Citgo, is also in the spotlight. A recent court ruling in a separate case exposed Citgo to asset seizure. Canadian miner Crystallex won a case just this month against PDVSA, arguing that Citgo, as a subsidiary of PDVSA, was essentially the same company as PDVSA, which means that Citgo was eligible for asset seizure. A U.S. federal judge agreed, putting Citgo in jeopardy. Citgo is appealing the decision.

PDVSA’s settlement with Conoco could get the American oil company of its back, so long as payments are forthcoming. That could potentially relieve some operational pressure. Presumably, PDVSA could regain control of the facilities on the Caribbean, which should allow for oil exports to resume at higher levels. Related: The Never-Ending Battle For Libya’s Oil Crescent

But the settlement does not mean that PDVSA is out of the woods, by any means. First, the payments will be painful and hard to meet. The $2 billion that PDVSA owes ConocoPhillips amounts to about a quarter of the cash reserves that Venezuela’s central bank still has left. If the Venezuelan oil company fails to meet the terms of the settlement, Conoco “can resume global enforcement actions,” Daren Beaudo, a Conoco spokesman, told Bloomberg in an email.

Second, it does little to assuage the long line of creditors who are not part of the deal. Indeed, they could begin to fight for the remaining crumbs as the country falls apart.

“Venezuela’s (President Nicolas) Maduro has short-term, patchwork approach to fixing problems. This means that whomever pressures or checkmates the government early enough, will get some cash as country spirals downward,” Raul Gallegos, associate director with consultancy Control Risks and author of Crude Nation, said in a tweet. In other words, the incentive for creditors could be to start grabbing as much as they can as they run the risk of getting nothing by hanging back.

Meanwhile, Venezuela is tearing apart at the seams. Over the weekend, President Nicolas Maduro introduced a raft of economic reforms that will almost certainly do little to solve the crisis, and could potentially increase hardship. He introduced a higher minimum wage, announced a plan to hike gasoline prices and devalued the currency by about 95 percent, one of the most painful devaluations in history. Inflation could top 1 million percent this year. Millions of people have fled the country.

The end result for the oil sector is the same as before: More losses. If PDVSA manages to regain control of its assets in the Caribbean, it could slow the decline. But it won’t be enough to pull the company or the country back from the brink.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Samir Abdula on August 21 2018 said:
    Apparently the author does not understand the difference between devaluation and redenomination. Merely mouthing Bloomberg's false statements has negative value. Please start getting it right.
  • Tommy on August 22 2018 said:
    Citgo refineries are free for the taking. A half dozen companies are lined up to take them.

Leave a comment




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