Swedish oil firm Maha Energy gains rights in Venezuelan project following sanctions relief

Fabiola Zerpa and Nicolle Yapur, Bloomberg November 02, 2023

(Bloomberg) – A Swedish oil firm is making a bold move into Venezuela after the U.S. eased sanctions, signaling the potential for more of the country’s crude oil to reach global markets.

Stockholm-based Maha Energy has gained rights to a stake in the PetroUrdaneta project that belongs to Brazilian industrial conglomerate Novonor, Kjetil Solbraekke, the Swedish firm’s chief executive officer, told Bloomberg. Maha could eventually take over all of Novonor’s 40% stake in the joint venture with state-owned Petroleos de Venezuela if the project pans out, he said.

“It will be challenging,” he said in an interview in Caracas, without disclosing how much it plans to pay Novonor. “We don’t intend to make big announcements, but just to to boost gradually and bring competence and capital.”

Maha’s move into Venezuela follows a decision by the U.S. on Oct. 18 to ease sanctions for six months in exchange for greater political freedom in the once-mighty oil producer. Venezuela is expected to both expand its output and steer more of its existing production to refineries in the U.S., a development that could help contain U.S. gasoline prices ahead of the 2024 presidential campaign.

Maha is making a bet that Venezuela won’t go back to being as geopolitically isolated as it was in recent years. The U.S. could reimpose sanctions if Maduro doesn’t follow through on a deal to renew political talks with the opposition and allow its candidates to compete in free and fair elections.

Nicolas Maduro’s government stands to get more revenue from its main export product. The oil ministry and PDVSA, as Venezuela’s state-owned oil company is known, didn’t immediately respond to a request for comment. Novonor declined to comment on the deal, which Venezuela’s oil ministry would have to approve. 

The project is expected to increase from 1,000 bpd to between 20,000 to 40,000 bpd in two to three years, after signing a contract with the Maduro administration. Maha will focus on quickly ramping up dormant wells through low-cost interventions. It is on the western coast of Lake Maracaibo, a region that was the birthplace of the country’s oil industry and still delivers about a fifth of the country’s production.

Solbraekke made clear his company will steer clear of the graft that has pervaded the industry. 

“There will be zero tolerance with corruption,” he said.

More deals. Maha could be the first in a wave of deals in Venezuela’s oil patch as PDVSA’s long-standing partners like Novonor take advantage of the political opening to exit joint ventures they have with PDVSA. Novonor is under pressure to sell assets to pay off creditors in Brazil.

PDVSA has more than 40 oil partnerships with foreign and local companies, some of whom have suspended activity due to the difficult business climate. Before aiming for Petrourdaneta, comprised of three onshore oil fields, Maha looked into several other ventures.

Maha, which has operations in Oman, the U.S. and Brazil, will pay Novonor 4.6 million euros to have exclusive rights for nine months to conduct due diligence and confirm operational feasibility, and the same amount for an additional 12-month extension, according to a statement.

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