CARACAS (Reuters) - Venezuela’s government and opposition have discussed allowing private companies in joint ventures with state oil company PDVSA to operate oil fields themselves, reversing a longstanding requirement that PDVSA control such operations, three people familiar with the talks said.
While a similar move last year letting little-known companies operate some fields wholly-owned by PDVSA has not helped increase production, the sources said this proposal was more promising since the joint ventures with oil majors like Chevron Corp, Russia’s Rosneft and state energy group China National Petroleum Corp (CNPC) control Venezuela’s largest oil fields. [nL2N1VT1GR]
The talks suggest President Nicolas Maduro’s government is seeking to mitigate the impact of U.S. sanctions by boosting crude production, after Venezuela increased oil exports for three straight months by sending more barrels to Asia, undermining Washington’s efforts to isolate the OPEC nation. [nL1N28C180]
The possibility was debated in Caracas over the past two months at meetings of the Boston Group, an informal gathering of government officials and opposition activists that began meeting with increasing frequency this year as Maduro, who has overseen an economic collapse, faced a challenge to his legitimacy by Juan Guaido, the head of the opposition-held National Assembly. [nL2N2621B5]
The talks centered around modifying the terms and conditions of the joint venture contracts to remove a clause preventing the JV from “transferring its function as an operator,” one of the sources said. It would not change a requirement that PDVSA retain a majority stake in the joint ventures, the sources said.
Private companies have argued that the requirement that PDVSA operate the fields - which involves procuring equipment, hiring contractors, and making drilling decisions - has created bottlenecks that limit production, which this year has languished near seven-decade lows.
Neither PDVSA nor the oil ministry responded to requests for comment.
Pedro Diaz Blum, a former legislator who coordinates the Boston Group, said he could not discuss the content of the group’s conversations. But he emphasized that the purpose of the group was to discuss ideas, not hold formal negotiations between the government and the opposition, and that any recommendations it makes are non-binding.
A similar proposal has been brought forward in the opposition-controlled National Assembly. [nL2N26U0Z3]
Maduro’s socialist government already has reduced state intervention in other areas of the economy, such as price controls and foreign exchange restrictions, in response to broad sanctions by the United States which recognizes Guaido as the legitimate president, that have complicated the government’s ability to transact overseas.
At least one joint venture is already weighing the possibility. Oswaldo Cisneros, a Venezuelan businessman whose Delta Petroleum has a 40% stake in the Petrodelta joint venture, said he was evaluating signing a deal with PDVSA that he said would “subcontract the operation of the field to us.”
“They (PDVSA) authorize us to develop the fields ourselves directly with the financing we are bringing,” Cisneros said on the sidelines of a conference in Caracas this week.
He said the company had secured $800 million from a financial institution in Dubai, which he declined to name, for the project. He aims to boost output at Petrodelta, which he described as currently “halted” due to sanctions, to 100,000 barrels-per-day (bpd) in three years.
To be sure, obstacles would still remain even if the contracts were modified. Companies would still have to contend with an exodus of qualified workers fleeing Venezuela’s economic crisis, rampant equipment theft in the fields, and unreliable electricity and transport infrastructure after years of underinvestment and mismanagement.
Writing by Luc Cohen; Editing by Marguerita Choy