PdV offers to reverse takeover of oil services

The Venezuelan government is offering to return expropriated oil services companies, an extraordinary shift in official state-oriented policy that has prevailed since late President Hugo Chavez took power in 1999.

Venezuela's 2009 nationalization of mostly domestic oil services companies in the Lake Maracaibo area was a mistake that must be reversed, energy minister and state-owned PdV chief executive Eulogio Del Pino told the Maracaibo oil chamber (CPV) this week.

"I believe that what was done in Lake Maracaibo had many errors," Del Pino said. "We must go to a new model with majority private ownership."

PdV has adopted a new policy of returning the expropriated assets to their original private-sector owners "if they want to continue working" with the company, Del Pino said.

The unusual remarks come at a time of falling crude production, particularly in PdV's legacy divisions such as Lake Maracaibo in western Venezuela, where the company produces light and medium-quality grades. PdV is struggling to check natural upstream decline, particularly after foreign oil services giants such as Schlumberger curbed their local operations this year because of a lack of payment by PdV.

The largely uncompensated takeover of the oil services industry was part of a wave of government seizures across the oil-based economy. Among the largest asset seizures were extra-heavy crude upgraders owned by ExxonMobil and ConocoPhillips.

CPV says the expropriated companies were worth up to a combined $3bn when Chavez nationalized the oil services sector during a dispute over an estimated $10bn in unpaid invoices. At the time, the energy ministry and PdV put the real value of the assets at about $1bn.

Lake Maracaibo's nationalized oil services companies absorbed by PdV in 2009 likely are currently worth "only a fraction of their former book value" because under PdV management they deteriorated as a result of poor management and neglected maintenance, a CPV official tells Argus.

Del Pino did not give details on how and when PdV expects to return the oil services assets to their original owners. But his remarks are the first public assertion by any government official that a strategic part of the nationalization campaign was misguided.

Del Pino's 27 July remarks at the CPV meeting in Maracaibo were well received by participants at the event. But two Venezuelan oil services executives whose companies were expropriated in 2009 cautioned that Del Pino may not have sufficient political authority, on his own, to restore the assets to their previous owners. No other Venezuelan government official has commented.