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A fledgling U.S. company set up last year will help Venezuela turn around its falling oil production that has led to the country’s oil exports falling to the lowest in almost 30 years, Bloomberg reports, citing contractual documents.
According to the documents, Erepla Services LLC will provide the drilling rigs and crews necessary to increase crude oil production at the Tia Juana, Rosa Mediano, and Ayacucho 5 fields over a period of 25 years. In exchange, the U.S. company will buy all the oil produced at these fields and resell it, giving Venezuela’s PDVSA 50.1 percent of the proceeds and keeping 49.9 percent.
"The agreement gives U.S.-based Erepla enhanced managerial participation and an innovative payment structure designed to avoid the shortfalls that have plagued previous projects," an Erepla principal said in a statement, adding that without any U.S. companies taking aprt in Venezuela’s exploitation of crude oil resource would "create an opportunity for Russian and Chinese interests to access the Venezuelan oil reserve – an outcome that would be detrimental to U.S. interests."
Harry Sargeant III also said the contract has been drafted in accordance with U.S. sanctions against Caracas and that all work under its terms will also be in compliance with the sanctions.
U.S. supermajors with operations in the South American country left it after the forced nationalization of the oil industry by the late Hugo Chavez, while oilfield service providers have been forced to incur huge writedowns on their Venezuelan operations because Caracas cannot pay for their services: more than US$2 billion for Halliburton and Schlumberger together since the second quarter of 2017 alone.
China and Russia are Venezuela’s biggest creditors, with China leading the way having provided US$50 billion in loans already. Venezuela has undertaken to repay these with crude oil supplies but has struggled to fulfill its commitments because of falling production and lack of financial means to reverse the fall. Crude oil deliveries under oil-for-money deals with Russia’s Rosneft have also been delayed, deepening the urgency of arresting the production decline as quickly as possible.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.