Venezuela's PdVSA: Govt Requirements Leading to Rig Shortage

CARACAS Jul 19, 2007 (Dow Jones Newswires)

Petroleos de Venezuela has had a difficult time hiring enough rigs for the domestic oil industry as new social spending requirements complicate tenders, said a company director.

PdVSA needs the rigs to reverse declining oil production. The International Energy Agency claims Venezuelan oil output has fallen to 2.37 million barrels a day, down from 2.6 million barrels a day a year ago.

Speaking to the National Assembly's comptroller committee on Wednesday, PdVSA Director Luis Vierma said the country currently has 120 active rigs, 36% below the year's target of 191 rigs.

He said a 2006 tender was completely deserted by rig suppliers because they didn't include social programs in the bids - a new requirement by Venezuela's socialist government aimed to get foreign oil firms to help fund social development.

In a second bidding round in 2006, Vierma said only five of the 12 winning bidders delivered the rigs on time. He said the company is currently preparing a new bidding round for 53 rigs. Industry watchers say PdVSA's goal is far too optimistic considering the tight global market for oil services.

Many rig operators have moved rigs to other markets instead of complying with new social spending requirements in Venezuela.

Vierma said PdVSA is trying to mobilize its own rig fleet to avoid depending on transnational oil services firms.

"Venezuela is moving toward technological independence, but it will take a long time," he said.

Venezuela has struck a deal with China National Petroleum Corp. to begin assembling drilling rigs in Venezuela, a major part of PdVSA's plan to gain its own rig fleet.

Copyright (c) 2007 Dow Jones & Company, Inc.