PetroCarabobo stalled on PdV cash squeeze: partner

OREANDA-NEWS. August 26, 2015. Drilling has been scaled back at one of Venezuelan state-owned PdV?s extra-heavy crude joint ventures in the Orinoco oil belt, an executive with one of PdV?s minority partners tells Argus.

"PetroCarabobo's crude output growth has slowed because PdV's cash crunch has forced the suspension of drilling and exploration activities needed to increase production," the executive said. "PetroCarabobo cannot ramp up production if it doesn't invest significantly more in drilling production wells."

PetroCarabobo currently produces 16,000 b/d of 8.5°API crude, less than 20pc of the 90,000 b/d of first-stage production that was expected by 2015, the executive added. The project is designed to produce a peak of 400,000 b/d.

PdV said PetroCarabobo output should climb to 30,000 b/d by end-2015.

The company has been hard-pressed to hold up its majority share of investment in the ambitious joint ventures, particularly as the global oil price dive erodes revenue. The freefalling local currency and spiraling inflation are also undermining its projects.

PetroCarabobo is one of seven new Orinoco upstream joint ventures PdV launched since 2010 to develop up to 2.54mn b/d of new extra-heavy crude production in the oil belt. PdV holds a 71pc stake in PetroCarabobo. Spain's Repsol and ONGC Videsh hold 11pc each, while Indian Oil and Oil India hold a combined 7pc.

The energy ministry acknowledged PdV could miss this production growth target if its average export price continues falling and Venezuela's battered currency depreciates more rapidly.

PdV's average oil export price closed last week at slightly over \\$39/bl, and declined by over \\$1/bl today, the energy ministry said.

PetroCarabobo's minority stakeholders have urged PdV to fast-track development by setting up an overseas escrow account to manage hard currency revenue generated by preliminary production. All export revenues generated by PetroCarabobo would be deposited in the offshore account, ensuring sufficient cash reserves to contract oil services companies that have shown reluctance to enter into new contracts with PdV this year without written guarantees of prompt payment in hard currency, the foreign executive said.

PetroCarabobo's foreign shareholders committed in 2010 to invest a combined \\$3.51bn from 2011-15, of which ONGC and Repsol each would commit \\$1.33bn, and India Oil and Oil India committing \\$424mn apiece, according to the energy ministry.

The foreign partners have fulfilled their capital commitments to date, the executive said. But PdV lacks cash to cover its 71pc share of PetroCarabobo's total planned capital expenditures of almost \\$20bn to reach peak production of 400,000 b/d.

Deteriorating economic conditions bode ill for the Orinoco projects, which require steady drilling to maintain output. The black market exchange rate for Venezuelan currency was about Bs735/\\$ on the Venezuelan-Colombian border yesterday compared with the government's official tiered exchange rates of Bs6.30/\\$, Bs11/\\$ and almost Bs200/\\$.

President Nicolas Maduro closed the border with Colombia late last week for at least 60 days and suspended constitutional guarantees in six Tachira state municipalities.

Tachira is a stronghold of Venezuela?s political opposition that is preparing to challenge the government in national assembly elections on 6 December.