PDVSA set to start $3.2-billion drilling program

By Nathan Crooks on 9/21/2016

CARACAS, Venezuela (Bloomberg) -- Petroleos de Venezuela is getting ready to start what it’s dubbed “one of the world’s largest drilling projects” in the Orinoco heavy crude belt with investment totaling $3.2 billion even as its president, Eulogio Del Pino, says the global oil market is oversupplied.

“The project involves contracting integrated services for platform construction, drilling, completion and connection of wells for joint ventures Petrocarabobo, Petrovictoria and Petroindependencia located in the belt,” the company said Wednesday, adding that 18 rigs would be available.

PDVSA, as the Caracas-based company is known, will drill 480 wells to add 250,000 bpd of new oil output over the next 30 months, according to an emailed statement. Schlumberger, Horizontal Well Drillers, and Venezuela’s Y&V Group were selected after a worldwide tender, with Halliburton and Baker Hughes providing support for specific project activities.

Del Pino on Monday alluded to the deal and said companies that had previously threatened to reduce activity in the country were now presenting plans to increase output and would be paid once new production started to flow. That same day, he said that oil prices should be around $70/bbl and that global output needed to decline about 10% in order to get there.

“We are working very hard to build a consensus,” Del Pino said on Tuesday, referring to informal talks with OPEC members scheduled next week in Algeria. “We are in the decisive week.”

Oil output has slumped in Venezuela as service companies pulled back amid more than $1 billion in unpaid bills, adding to the country’s fiscal woes during the two-year slump in oil prices. Schlumberger and Halliburton announced plans earlier this year to cut back activity to better deal with customer missed payments in Venezuela. Baker Hughes has said it has a limited presence there.

Starting in May, PDVSA began to issue three-year notes with quarterly amortizations and an annual interest rate of 6.5% totaling $1.15 billion to some suppliers including Halliburton, the company said in a bond prospectus last week.

Venezuela’s oil production fell to 2.33 MMbpd in August, the country’s oil ministry said earlier this month, 226,000 bpd higher than OPEC’s estimate of the country’s August output of 2.1 MMbpd, based on secondary sources. The country has lost over 250,000 bpd of output from levels seen last year, according to the oil cartel.

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