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Maduro back in Moscow, hat in hand

2 Oct 2017, 9.32 pm GMT

Maduro back in Moscow, hat in hand

Caracas, 2 October (Argus) — Venezuelan president Nicolas Maduro is visiting to Moscow this week lobbying for a fresh financial lifeline in exchange for granting Russian investors significant stakes in Venezuelan energy assets.

Maduro will be accompanied by energy minister Eulogio Del Pino and the chief executive of state-owned oil company PdV, Nelson Martinez.

Maduro is officially a guest panelist at the Russian Energy Week 2017 forum on 4 October, Russian deputy energy minister Anton Iniutsin said in Moscow.

A Russian diplomat in Caracas said efforts are underway in Moscow to arrange a meeting "if possible" between Maduro and Russian president Vladimir Putin.

Presidential palace and foreign ministry officials in Caracas say Maduro's top priority is to personally ask Putin for more financial support for his nearly insolvent government and for PdV.

Maduro and his energy team want expanded Russian financial aid in the form of debt relief and new loans, offering in exchange increased Russian equity participation in rich Venezuelan upstream crude and gas assets that include three of the largest legacy oil fields on the east coast of Lake Maracaibo and three Orinoco heavy crude projects.

Venezuela's government and PdV have over $3.87bn in combined bond principal and interest maturities due before the end of this year, including $2.98bn in PdV bonds that must be paid during a one-week period from 27 October to 2 November.

The Venezuelan central bank's international reserves currently total $9.86bn, of which less than $1bn is cash.

PdV says it has sufficient funds in hand to honor the debt payments. But with oil production and exports shrinking at a faster clip than oil prices are rising, the company once again looks perilously close to a default.

Moscow already bailed out Caracas last year through a $2.5bn oil-backed loan from state-controlled Rosneft that is collateralized with a 49pc stake in PdV´s US downstream subsidiary Citgo. The Venezuelan company is repaying Rosneft with 70,000 b/d of crude diverted from Citgo, Venezuelan officials say.

It is unclear if Maduro will succeed in persuading Russian creditors to extend billions of dollars in fresh loans to Venezuela, and possibly reach an agreement to restructure current outstanding debt of almost $9bn.

Venezuela´s energy ministry is upbeat about Maduro's chances of negotiating new deals in Moscow in light of huge projects up for grabs.

Rosneft is interested in expanding its upstream operations in Venezuela, which currently include 40pc stakes in three Orinoco upstream joint ventures: 121,000 b/d PetroMonagas, 400,000 b/d PetroMiranda and 400,000 b/d PetroVictoria. PetroMonagas, formerly known as Cerro Negro when it was in the hands of PdV and ExxonMobil prior to a 2007 nationalization, is only partially operating because of a shortage of feedstock. The other two Orinoco projects, dating from 2010 and 2012 respectively, have only preliminary if any production.

Rosneft and PdV are also in talks on a joint venture to execute the second stage of PdV's 1.2bn ft3/d Mariscal Sucre offshore gas venture – which has been under development since 2010 but has not produced any gas commercially yet.

Still, Russian companies face some of the same challenges that have bedeviled their Western counterparts in the Opec country.

Among the local minefields is corruption. Rosneft rival Gazprombank holds a 40pc stake in the Lake Maracaibo upstream joint venture PetroZamora, which since end-August has been the epicenter of an over $500mn crude skimming scandal for which 13 senior PdV executives have been jailed.

Russian officials are expected to press Maduro and his senior energy chiefs to crack down on corruption within PdV.

Moscow insists that an increased Russian commitment in Venezuela, in terms of more financial support and equity investment, must be based on deals giving Russian partners operational control of their joint ventures with the right to directly market their share of production without going through PdV's marketing division, a Russian diplomat said.

Rosneft and other Russian investors are interested in putting down permanent roots in Venezuela, the diplomat said.

"Rosneft will never leave Venezuela," the company's chief executive Igor Sechin said earlier this year.


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