Rosneft elbows PDVSA aside on Venezuela service contracts

Fabiola Zerpa December 06, 2019

CARACAS (Bloomberg) - A subsidiary of Rosneft has taken over some contract discussions with local service providers in Venezuela, stepping in for PDVSA on joint projects with the state-owned oil company, according to people familiar with the matter.

The move is a major turnabout for PDVSA, which in the past typically operated all aspects of the joint ventures, said the people, who asked not to be named because the talks with the service providers aren’t public.

It builds on previous small steps that have yielded key activities to Rosneft, and underscores Russia’s growing influence in Venezuela’s oil industry. PDVSA has been forced to cede more control amid an exodus of experienced workers, corruption and lack of investment that has driven production down to less than 800,000 bpd in October from more than 2.5 MMbpd in 2015.

The Russian oil company is stepping in to reinforce current assets and widen its presence in the country, even as some of Venezuela’s other partners such as China National Petroleum Corp. have signaled reluctance. Over the past months, CNPC’s affiliates have shied away from construction works and projects at oil facilities.

Rosneft and PDVSA declined to comment.

PDVSA and Rosneft plan to boost production at three of their five joint ventures -- Petromonagas, Petrovictoria and Petromiranda -- that were hit by power failures and U.S. sanctions, according to the people. Rosneft now trades much of Venezuela’s oil from an office in Panama staffed with former PDVSA employees.

Rosneft receives oil as part of its joint ventures with PDVSA, and also as repayment for loans. It’s not subject to U.S. sanctions that restrict American refiners from importing Venezuelan crude. Most international oil companies and trading houses have avoided buying oil from PDVSA since the sanctions were imposed.

Precision Drilling de Venezuela, previously owned by Weatherford International Plc and now wholly owned by Rosneft, is reaching out to some local companies including holding discussions on scope of work and potential payment in rubles, they said. Repeated attempts to reach Precision Drilling by phone in Anaco were unsuccessful.

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