PDVSA permits JV partners to take over day-to-day oilfield operations

Venezuelan state oil company PDVSA has begun letting some joint venture partners take over the day-to-day operation of oilfields, reports Reuters. PDVSA’s own capacity had dwindled due to sanctions and a lack of cash and staff, according to a former oil minister, an opposition lawmaker and industry sources.

Crude production by PDVSA and its joint ventures had fallen to about a third of the levels of 20 years ago, when it was at its peak. In 2017 military officials with no oil industry experience took over PDVSA’s management, and then in 2019 the US imposed sanctions on the state-run company as part of its bid to oust the Venezuelan president Nicolas Maduro.

Rafael Ramirez, an adviser to some international energy firms that have recently worked in Venezuela, told Reuters that PDVSA had been reduced to little more than an administrator of contracts with oil companies.

Ramirez, a former oil minister and PDVSA president who left office after clashing with President Maduro in 2014, said the company had already effectively handed control to joint venture partners even though an agreement had not yet been formally reached.

“PDVSA is no longer producing. It’s signing contracts for others to produce in a de facto privatization,” Ramirez said.

Oil exports, Venezuela’s main source of export revenue, fell 32% to an annual average of 956,000 barrels per day through November, according to Refinitiv Eikon. Ramirez blamed the collapse on Maduro’s decision to place the military in charge of PDVSA.

In 2017 Maduro jailed two former PDVSA presidents on corruption charges. He then appointed Manuel Quevedo, a major general from the National Guard with no experience in the energy sector, as PDVSA’s head and oil minister.

Maduro and Quevedo promised to add 1m bpd to Venezuela’s output, but instead crude production and refining have slid to their lowest levels in almost 75 years.

Ramirez claimed that about 30,000 employees had left PDVSA in recent years.

Ramirez named Russia’s Rosneft and China’s CNPC among the companies helping to keep PDVSA alive by operating joint oilfields or injecting cash to the state company by buying larger stakes in some ventures.

Luis Stefanelli, an opposition lawmaker and member of Congress’ energy commission, said the government and PDVSA have been using formulas originally proposed by the opposition to allow private partners to take more responsibilities in joint ventures, but in an illegal way.

Jose Ignacio Hernandez, an overseas legal representative appointed by Congress’ head, Juan Guaido, said on Twitter that “under the Hydrocarbon Law, every agreement for PDVSA to cede exploration and production rights is illegal and unconstitutional. Maduro’s regime is insisting in the oil industry’s de-facto privatization, which is aggravating its collapse”.

Ramirez was the longest-serving minister in Chavez’s cabinet, supervising Venezuela’s oil industry for more than a decade, before clashing with Maduro, who has accused Ramirez of corruption. Ramirez in turn has said that he and other PDVSA executives are victims of a political witch hunt.