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Venezuela’s PDVSA and China’s Sinopec settled a five-year dispute just a week after the legal proceedings became public, according to a new report by The Financial Times.
State-run PDVSA filed a document to a U.S. district court in Houston on Tuesday that said the company had agreed to pay the defendant $21.5 million “without implying acknowledgment of fault or responsibility but for the sole purpose of ending the controversy [between Sinopec USA and PDVSA].” The contract to supply $43.5 million worth of steel rebar, which Sinopec said had only been half paid off, had been signed in May 2012. The lawsuit accused PDVSA of pursuing in “intentional misrepresentations, deceit, and concealment of material facts” to survive a “willful deception” and conspiracy amongst its subsidiaries.
The total amount will be paid out in the Chinese currency renminbi in two installments, one on December 14th and another on January 15th, 2018.
“That’s how cash poor and badly run PDVSA is,” said Russ Dallen of boutique investment bank Caracas Capital, who first made the dispute public. “They are sitting on top of the biggest oil reserves in the world and they can’t even write a check for $21.5m dollars.”
Venezuela has been struggling to rein in the decline of its crude oil production resulting from underinvestment, mismanagement, and, most recently, U.S. sanctions. In October, crude oil production fell to the lowest in nearly 30 years, as PDVSA is unable to pay for services rendered by oilfield service providers, who are now refusing to continue working with it.
Exports are also falling: in October, PDVSA exported 475,165 bpd to the United States, which was down 12 percent on September and 36 percent on October 2016. That’s the lowest daily export rate for the last 14 years.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…