Venezuela turns to oil companies to increase production

The Venezuelan state PDVSA is in talks with local and foreign oil contractors to employ equipment and services that will allow it to reactivate depressed production, sources said, after USA relax sanctions on the country.

In October, the Treasury Department authorized the production and export of Venezuelan crude oil, gas and fuels, the acquisition of goods and services, new investments and payments to PDVSA for six months, with few limitations regarding commercial partners.

The general license authorizing those activities is subject to compliance with a key electoral agreement between President Nicolás Maduro’s government and the opposition that outlines the path to a presidential election in 2024. Washington has said it could reverse the measures if the pact does not reach to good effect.

Venezuela has only one active drilling rig left versus more than 80 units that were operational in 2014, according to Baker Hughes figures, which experts say creates major obstacles to rapid production expansion.

As the risks of a license non-renewal increase, PDVSA’s priority is to find oil services companies that can reactivate equipment stored in Venezuela or that is idle due to lack of spare parts, the sources said.

America’s Chevron will also need at least two drilling rigs of up to 1,500 horsepower next year for a US-approved campaign to boost output at its joint ventures to about 200,000 barrels per day (bpd).

PDVSA plans to reactivate 27,966 wells – mostly located in Venezuela’s oldest producing region, in the state of Zulia – that could add 1.7 million bpd, according to a July presentation by the oil minister and PDVSA CEO. , Pedro Tellechea.

However, a production increase of such magnitude, from the 780,000 bpd being pumped this year, could require up to a decade of hard work and sustained investment by the state oil company and its partners, according to experts.

Among the companies that have idle equipment in Venezuela are SLB, Nabors Industries and Evertson International, two of the sources said.

SLB said in October it was working toward a quick return to Venezuela’s oil fields, where it was once PDVSA’s largest services partner. SLB did not immediately respond to a request for further comment. Nabors, Evertson and PDVSA also did not respond to requests for comment.

PDVSA is also negotiating specialized oil field equipment with companies in Turkey, whose President Tayyip Erdogan has met repeatedly with Maduro in recent years, another source said.

New formulas

Venezuelan officials have proposed to small private oil contractors to operate some fields to reverse low crude production, six sources familiar with the talks said.

Some companies that have approached PDVSA to revive business relationships have been referred to Camimpeg, an oil and mining services firm owned by the Venezuelan armed force, which has contracts with PDVSA and often subcontracts to specialized companies, according to two of the sources.

Venezuela’s hydrocarbon law requires PDVSA and its joint ventures to operate all crude oil fields, but in recent years the oil company has signed technical services agreements that delegate well intervention to specialized companies.

Before the relief of sanctions, PDVSA planned to recover wells and drills to boost its production, especially in the south of the Anzoátegui state, in eastern Venezuela.

The local operator Indioil, specialized in recovery and reconstruction of drills and which has a presence in Anzoátegui, is among the companies consulted by PDVSA to rescue damaged and looted equipment, said one of the sources.

Indioil and Camimpeg did not respond to requests for comment.

Source: Reuters