CARACAS/HOUSTON (Reuters) - Venezuela’s state oil company PDVSA said on Wednesday it has awarded $3.2 billion in contracts to drill wells in the Orinoco Belt, although sources close to the matter said some foreign partners had complaints the tender was rushed and there were structural problems that could hinder projects.
The fresh discontent comes after Reuters reported in July that tiny Colombian trucking firm Trenaco, whose management was close to Venezuelan President Nicolas Maduro, won a multibillion-dollar contract to carry out similar work despite having no relevant experience.
In a rare rebellion, foreign companies protested to PDVSA that Trenaco was vastly underqualified, leading to the cancellation of the $4.5 billion deal amid concerns about transparency and political favoritism.
In a similar tender renewed this year, Schlumberger NV, Oklahoma-based Horizontal Well Drillers and Venezuelan contractor Y&V won contracts to drill a total of 480 wells at three joint ventures between PDVSA [PDVSA.UL] and foreign partners.
The projects are designed to add 250,000 barrels per day (bpd) in 30 months, PDVSA said, as the crisis-hit OPEC country’s production slips due to low investment, maintenance problems, limited diluent imports, theft, and a brain drain.
“Investment amounts to $3.2 billion, which demonstrates the strength of PDVSA and shows trust in the national oil company,” PDVSA said in a statement.
But some of PDVSA’s foreign partners are questioning or outright protesting over how the deals were conducted, according to interviews with half a dozen sources at foreign oil companies and service firms.
“We’re going to fight this,” said a source at a foreign company.
The sources declined to be identified to avoid compromising business in Venezuela. PDVSA did not respond to a request for comment about the complaints.
Sources said PDVSA failed to provide enough details on the contracts, which in some cases were only approved by PDVSA’s simple majority in the joint ventures.
Hurt by low oil prices and a steep recession at home, PDVSA asked bidders to provide financing themselves and be repaid in future oil production, according to PDVSA documents seen by Reuters, but the winners include relatively small service companies.
Some of the foreign partners also deemed the cost per well, at around $6.5 million dollars, too high, sources said.
Other sources questioned why PDVSA would boost extra-heavy crude output when it does not have sufficient blending components or infrastructure to turn tar-like Orinoco oil into lighter crude that can be easily sold on global markets.
PDVSA’s cash-flow problems have at times left it unable to pay for sufficient diluent.
The joint ventures’ early production for this is expected to come online for mid-2017.
After the Trenaco episode caused friction with partners, PDVSA revived the sunk deal but separated it into six four-year contracts of around 100 wells each.
Schlumberger and Y&V won the two contracts to drill some 200 wells at the Petrovictoria joint venture, where Russia’s Rosneft has a 40 percent stake, one source said.
A separate source said Schlumberger, the world’s largest oil services company, has scaled back Venezuelan operations because PDVSA owes it money, and is securing external financing for the project.
In an e-mail to Reuters, Schlumberger confirmed the deal to construct 80 wells, adding “the details for the commercial terms including the collections assurance mechanism are still under negotiation.”
Horizontal Well Drillers won some $1.29 billion worth of contracts to drill 191 wells at Petroindependencia, whose minority partners include Chevron Corp, Venezuela’s Suelopetrol, and Japanese companies Mitsubishi Corp and Inpex Corp, a PDVSA document shows.
Horizontal Well Drillers has a 48-month credit line from Canada’s Callidus Capital for $350 million to finance the project, the document shows.
Callidus Capital, which describes itself as offering “creative funding solutions to companies that cannot access traditional lending sources,” did not respond to an email seeking comment.
In an email to Reuters, Horizontal Well Drillers said it won the contract “in large part because the shallow Venezuelan formations are ideally suited for the company’s rigs.”
Y&V won one contract worth $647 million to drill 100 wells at Petrocarabobo, which includes Spain’s Repsol SA and India’s ONGC Videsh, a separate PDVSA document shows.
PDVSA’s joint venture partners did not respond to requests for comment.
The contractors “will have the support and operational expertise of Halliburton and Baker Hughes for specific project activities; 18 drilling rigs will be available,” PDVSA added in its statement.
The second of two contracts at Petrocarabobo was not awarded because no valid bid was received, two sources said.
Y&V has secured a credit line from commodities trader Burj Petroleum Corporation for up to $250 million, according to the PDVSA document.
Burj Petroleum, a crude and products trading company, did not respond to a request for comment.
Reporting by Alexandra Ulmer and Girish Gupta in Caracas and Marianna Parraga in Houston; Editing by Brian Ellsworth, Meredith Mazzilli and David Gregorio
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