OREANDA-NEWS. Venezuelan state-owned PdV is seeking to refinance its overseas debt and reduce its majority stake in strategic joint ventures in the Orinoco extra-heavy oil belt as a way to recover its financial footing and avoid default, Venezuelan officials and financial sector executives say.

The dual approach is taking shape in the wake of a stillborn Opec/non-Opec deal pressed by Caracas to cut production to revive prices.

"We are interested in refinancing our debt if a good deal can be negotiated, but we're not going to publicly reveal the conditions we?re seeking," energy minister and PdV chief executive Eulogio Del Pino said yesterday.

He did not indicate how much debt the firm wants to refinance and how quickly it hopes to reach a deal. But PdV, wholly owned by the Venezuelan government, is widely perceived as a high-risk bet in part because most of its revenue is routinely funneled to non-oil social programs.

Financial sector executives say PdV is seeking to refinance around $9bn of bond debt that matures in 2016 and 2017. The company is working with its longtime financial advisor Lazard on brokering a refinancing deal with bondholders.

The refinancing effort is part of a strategy to restructure the company's finances and slash operating costs by at least 30pc in 2016, Del Pino said earlier this month.

Venezuela's government and PdV have combined scheduled debt payments of over $10bn in 2016 and another $10bn in 2017, with PdV accounting for some 50pc of the debt coming due in each year. PdV?s next major obligation is more than $1bn due in October 2016.

One option would involve swapping bonds that mature in 2016-17 for new bonds that mature from 2019, but the interest rate would have to be considerable to reach a deal. Investors could also demand that PdV open an offshore escrow account into which some oil export proceeds would be deposited to cover interest and principal payments on the new bonds. Putting up gold reserves as collateral is another option that could appeal to investors.

The refinancing effort is running parallel to PdV?s consideration of selling down its majority stake in Orinoco joint ventures that underpin Venezuela?s elusive crude production growth plans. Most of the ventures are based on a 60:40 structure, exceeding PdV?s minimum legal mandate to hold more than a 50pc stake.

Russian?s state-controlled Rosneft over the weekend agreed to pay $500mn to increase its stake in the PetroMonagas venture to 40pc from 16.7pc.

Energy ministry officials say the agreement gives Rosneft operational control of the 130,000 b/d PetroMonagas upgrader that is tied to Orinoco production. The deal also allows the Russian company to directly export its share of synthetic crude production, with the proceeds banked abroad and PdV's share remitted back to Venezuela, replacing a longstanding practice of centralizing exports and collections through PdV.

Rosneft was not available to comment.

It is not immediately clear if PdV?s other active Orinoco partners, including US major Chevron, France?s Total, Norway?s Statoil and China?s state-owned CNPC, are willing to increase their exposure in light of the country?s volatile economic and political climate, and slim capital budgets. But foreign oil executives have long sought to secure operational control over the ventures that have deteriorated from a lack of maintenance. Nonetheless, PdV?s possible offer runs up against a prevailing lack of trust among investors that Caracas can follow through its end of the projects, no matter what degree of participation PdV would ultimately retain.

Although four existing Orinoco upgrading ventures and a blending facility remain active, new ventures such as PetroCarabobo with main Spanish partner Repsol are producing little if any extra heavy crude.

The capital intensive Orinoco ventures require naphtha diluent for crude transport and upgrading or blending with light crude to produce a marketable grade.

PdV declined to comment on its offer to reduce its majority Orinoco stakes.