(Bloomberg) - Venezuela’s oil output, already the lowest since 2009, is set to slide further this year as contractors scale back drilling after the cash-strapped country fell more than $1 billion behind in payments.
The Latin American nation’s oil production, which generates 95 percent of export revenue, will decline by about 11 percent to 2.1 million barrels a day by the end of the year, Barclays Plc estimates. Output is falling largely because oil-services companies aren’t being paid, according to the International Energy Agency.
Venezuela’s economy has been in crisis since crude prices slumped, with sporadic looting as the desperate population fights for food and other essentials. President Nicolas Maduro has pledged to continue payments to bondholders, while the partners of state-run oil company Petroleos de Venezuela SA, known as PDVSA, aren’t paid. Further output decline in the OPEC nation, combined with disruptions in fellow members Nigeria and Libya, could leave the oil market short of supply next year.
“The situation is becoming more and more difficult for oil services in Venezuela,” Baptiste Lebacq, an analyst at Natixis SA in Paris, said by phone. As long as oil prices are at current levels, it’ll be “very difficult” for PDVSA to pay the contractors, he said.
Schlumberger Ltd., the world’s largest oil-services company by market value, was owed $1.2 billion by PDVSA as of March 31, according to an April 27 filing. Halliburton Co. said last month the amount it was owed rose 7.4 percent in the first quarter to $756 million.
The number of rigs drilling for oil in Venezuela fell by 10 to 59 in May, the lowest level in more than a year, according to Baker Hughes Inc.
Schlumberger has reduced activity in line with the drop in payments, the company’s president, Patrick Schorn, told investors last week at the Wells Fargo West Coast Energy Conference. It still works in the country and could boost operations if “new payments models” are implemented, he said.
Italy’s Saipem SpA declined to comment on its operations in Venezuela. The company referred back to comments from Chief Executive Officer Stefano Cao, who said in April that it had idled all but 3 of 28 rigs in the country.
Halliburton declined to comment.
While Oil Minister Eulogio Del Pino declined to say whether PDVSA has delayed payments to contractors, he said the companies would remain in Venezuela.
“They have been operating in the country for more than 100 years,” Del Pino said. “They are not going to leave.”
Venezuela is preparing to take over some of the functions of the oil-services providers with the creation of Camimpeg, a new state enterprise under the control of the military. This is unlikely to solve the problem, according to consulting firms Energy Aspects Ltd. and FGE.
“You’ll get more natural declines at a steeper rate” because these local providers don’t have the experience needed to maintain production levels at the country’s aging wells, said FGE analyst Thomas Olney.
Supply reductions in Venezuela, combined with a political stalemate in Libya and militant attacks on oil infrastructure in Nigeria, helped curb an oversupply in the oil market this year. The surplus could turn into a shortfall in 2017 if the Organization of Petroleum Exporting Countries can’t pump an extra 650,000 barrels a day, according to Bloomberg calculations based on IEA data.
View Full Article
Copyright 2016 Bloomberg News.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles