Oil partners leave Venezuela, mostly empty-handed

Venezuela is allowing partners in joint ventures established with state oil company PDVSA to leave, selling their shares to others or giving them back, as long as they forgo payment of outstanding debts and unpaid dividends, four people familiar with the matter said.

Having to record losses or waive unpaid debts hasn’t stopped companies like TotalEnergies, Equinor or Inpex. His departure illustrates how the sanctions imposed by the United States on the Venezuelan energy sector have made the operation in the country unsustainable, leaving inactive fields in their wake.

Eight foreign companies of the 44 joint ventures that PDVSA had have transferred or ceded stakes since 2018. Another seven smaller firms no longer have a presence in Venezuela and 15 projects are inactive, although their partners technically remain, showed an internal PDVSA document seen by Reuters.

“None of those holdings are recoverable at book value,” said an oil executive whose firm exited Venezuela by selling its assets to another company last year. “Much less can a partner expect PDVSA to recognize pending dividends or commercial debt.”

More than three years of harsh US sanctions on PDVSA have restricted access to capital and cash flow, also limiting the markets that receive Venezuelan oil, which has hit minority shareholders, mostly foreigners, its operations and workers.

Since TotalEnergies TTEF.PA and Equinor EQNR.OL exited one of Venezuela’s flagship oil upgrading projects, Petrocedeño, in 2021, smaller companies have followed suit.

The French company reported a loss of 1,380 million dollars for the transfer of its 30% stake to a subsidiary of PDVSA. He received “a symbolic amount” for his assets, Chief Executive Patrick Pouyanné said at the time.

The transfer freed Total of past and future liabilities from its projects in Venezuela, but dividends and debts Petrocedeño owed to minority partners were also cancelled, two people familiar with the matter said.

Japanese oil company Inpex Corp 1605.T sold stakes in two Venezuelan projects last year to private equity firm Sucre Energy Group and returned a stake in a third joint venture to PDVSA.

Accounts receivable and dividends due were transferred to Sucre as part of the transaction at a discount, a person involved in the transaction said.

The exits highlight the risks of doing business with PDVSA, which faces severe liquidity problems, and the few legal avenues available to companies that have been unable to collect.

Equinor declined to disclose details of the transaction, but confirmed in an email that the company has no remaining business in the country. Inpex, Total and PDVSA did not respond to requests for comment.

WHAT ABOUT THE WORKERS?

Some companies that have lost staff in Venezuela or face labor claims, including Venezuela’s Suelopetrol and GPB Global Resources, have found that PDVSA has appointed new managers to their joint ventures or taken over operations.

GPB Global Resources, a partner in the Petrozamora joint venture, lost field operational control of its projects in September, although it was not notified of a takeover or received compensation from PDVSA, the company said.

“There is a very substantial debt by the Petrozamora joint venture to a subsidiary of GPB Global Resources,” the company said in a statement, adding that it intends to pursue “all available avenues of recourse” against PDVSA, Venezuela or any third party acquiring the shares or assets.

A Petrozamora worker who asked not to be identified said the joint venture’s staff have not been fully compensated. “Twenty days ago a minister from Caracas arrived to tell us that there was a breach of contract,” he said.

Suelopetrol declined to comment on the talks with PDVSA, but said the company remains committed to Venezuela, with assets and personnel on site.

Amid the almost massive departure of companies and workers, the abandonment of the oil fields is visible near Lake Maracaibo, one of the oldest producing regions in Venezuela. Their output continues to drop, blackouts and incidents have become routine, and some workers are on the verge of starvation.

“A month ago they put a small drill into operation and when it started to rain it caused an explosion (…) the oil ended up inside the houses,” said a resident of the Cabimas field, on the eastern shore of Lake Maracaibo. , with oil-stained feet.

From more than 110,000 workers a decade ago, PDVSA’s workforce has shrunk to about 60,000 people, said Daniel Delgado, a union leader at the Tía Juana oil field.

Between 2019 and 2021, PDVSA delivered shipments of oil to various partners to reduce outstanding debt. Eni ENI.MI and Repsol REP.MC this summer received 3.6 million barrels in a temporary resumption of oil debt payments, but there have been no new shipments.

Chevron CVX.N is proposing to the US government that it allow it to recover debt through an expanded license, still pending.

“The companies are not receiving payments and the debts remain as accounts receivable,” said an oil industry representative, who asked not to be identified.

The exits have hit service providers and contractors even harder, said the Venezuelan Chamber of Petroleum, whose membership has shrunk from 500 to 300 in the last four years.

Venezuela fell short of its 2021 crude extraction goal and so far this year production has stalled at around 725,000 barrels per day (bpd), below its year-end target of 2 million bpd.

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