PDVSA to Revamp Oil Ventures with Foreign Partners

Maracaibo Lake Channel
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CARACAS (Dow Jones Newswires), Feb. 12, 2009

Venezuela's state oil company will combine almost two dozen joint ventures with foreign partners into as many as six large companies, hoping to reduce costs amid financial troubles.

The plan by Petroleos de Venezuela SA, PdVSA, aims to cut its operating budget anywhere between 30% and 40% this year, as the country faces depressed oil prices, Eulogio Del Pino, a PdVSA director, told Dow Jones Newswires in an interview Wednesday.

"We will combine joint ventures into roughly four or as many as six companies," Del Pino said. "The idea is to take advantage of operational synergies."

PdVSA operates 21 oil joint ventures with a host of foreign oil partners that include top companies such as Chevron Corp. and Royal Dutch Shell. The restructuring process for these ventures, Del Pino added, is expected to take place largely in the coming month.

In December, PdVSA initially combined three ventures in the Maracaibo region operated with Chevron, Colombia's Hocol and France's Perenco.

Once all the projects have been combined, one single company will comprise all the ventures that handle wells located in the Maracaibo lake. Two more would handle those west of the lake and another would run projects on the eastern side, Del Pino added. As many as two more firms may be created to run joint ventures in Venezuela's eastern oil region.

At the same time, PdVSA will continue talks with suppliers and service companies to reduce the rates charged for oil rigs and services at the well.

Del Pino insists that contractors raised rates for a host of services last year when oil prices stood above $100 a barrel, but those levels are now far too high. "We hope these service firms bring down those rates," the board member said.

PdVSA is facing a cash crunch following the dramatic decline of oil prices from record highs last summer. The Andean country's basket of crude and products now stands at $37.37 a barrel, a loss of more than $100 a barrel in seven months.

Lately, some drill firms stopped operating due to PdVSA's lack of payments spanning several months. The state-owned company is now in talks with those firms and has begun covering some overdue bills.

Despite the drive to cut down on operating costs, Del Pino noted that PdVSA will leave its investment budget at approximately $12 billion, roughly the same as 2008. Last year's total investment, however, fell below the $15.6 billion originally planned earlier in the year.

The company's social spending obligations for this year remain less clear. Del Pino notes that since the price for Venezuelan oil sits below the $60-a-barrel level projected in this year's government budget plan, by law PdVSA has ceased transferring funds to the Fonden development fund.

But going forward foreign partners and PdVSA will continue the policy of devoting 10% of the value of each project to social spending, among other such measures that target poor communities.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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