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Protests Expected After PDVSA Awards Orinoco Drilling Contracts

PDVSA, the state oil company of Venezuela has awarded Schlumberger NV, Horizontal Well Drillers out of Oklahoma, and contractor Y&V from Venezuela $3.2 billion in contracts to drill wells in the Orinoco Belt. There will be three joint ventures in the Belt between PDVSA and foreign partners. PDVSA stated that the goal is to increase production by 250,000 barrels per day in the next 30 months.

Wednesday’s announcement was made amid a measure of discontent from some foreign partners. That unease comes on the heels of a July report by Reuters that stated that the Colombian trucking firm Trenaco was awarded a multi-billion-dollar contract for similar work despite a lack of oil production experience by the company. Suspicions were aroused by an apparent cozy relationship between Trenacos management and Venezuelan President Nicolas Maduro. The $4.5 billion-dollar deal was scrapped after protests by foreign companies.

With regard to the deal announced on Wednesday, some foreign partners are claiming that PDVSA rushed the tender and did not provide sufficient detail about the contracts. A source at one company stated plainly, “We’re going to fight this.” Some of the concerns include the fact that PDVSA, which is in a tight spot financially, requested that bidders provide their own financing; and the fact that the country has yet to find a solution to the problem of scant imports of the diluent, which is required to make the country’s extra-heavy crude into a state that can be transported.

Another concern cited by the foreign partners is the potential for bottlenecks, which could offset any boosts in oil production from the Orinoco Belt. The project is also an expensive one. The information about the objections came to light after interviews with approximately half a dozen sources. Those sources asked to remain anonymous so as not to compromise business in Venezuela.

PDVSA declined to comment about the objections.

Lincoln Brown for Oilprice.com

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