PdV promising to revive moribund joint ventures

Venezuela's state-owned PdV is aggressively promoting new and revamped joint ventures with mostly local partners in a campaign to restore oil production to 1.5mn b/d-2mn b/d in 2020.

Among the new ventures is PetroSur in which PdV subsidiary CVP will partner with Cyprus-based Inversiones Petroleras Iberoamericanas (IPI) to develop the Orinoco oil belt's Junin 10 block, which holds estimated extra-heavy crude reserves of 1.03bn bl. The government-controlled Supreme Court (TSJ) ratified the venture on 12 December.

IPI's chief partners include former Repsol chairman and chief executive office Alfonso Cortina, former Repsol legal affairs adviser Ramon Blanco Balin and Venezuelan investor Alejandro Betancourt, the senior partner in Derwick Associates, according to Venezuelan, Spanish, Dutch and Cypriot legal documents and internal PdV reports and correspondence obtained by Argus.

IPI will make a front-end $400mn payment to PdV for the Junin 10 development rights. A failed first attempt to launch PetroSur in August 2018 would have allowed this payment mainly in Venezuelan sovereign and PdV bonds held by the parties behind IPI, according to three ministry and PdV officials with direct knowledge of the planned venture.

Junin 10 was originally assigned in 2010 to a PdV joint venture with Chinese state-owned CNPC. CNPC withdrew in 2014 after PdV was unable to foot its share of capital investment.

PdV is working on another upstream partnership in eastern Venezuela, where its minority shareholder in the dormant PetroDelta project is proposing to spend $800mn over three years to produce 100,000 b/d of heavy crude in exchange for full operational control and marketing rights.

The 40pc stakeholder in PetroDelta is CT Energy, whose top executives are Venezuelan telecommunications magnate Oswaldo Cisneros and Panama-based Element Capital Advisors president Francisco D'Agostino, also Venezuelan.

PetroDelta encompasses six mature fields in Monagas and Delta Amacuro states. At the end of 2012 the fields held proved reserves of 107.8mn bl of mostly heavy crude ranging from 12°-22°API, plus associated gas, according to the oil ministry.

CT Energy acquired its PetroDelta stake from Houston-based Harvest Natural Resources in October 2016 for $122mn, including the write-off of $30mn in debt owed by Harvest to CT Energy.

At the 2016 deal signing with Harvest, Cisneros announced that CT Energy would invest $1bn over three years to raise PetroDelta production from 40,000 b/d to 100,000 b/d. But the project suspended operations in November 2018 due to unspecified operational and logistical problems.

On 14 December, the information and communications ministry reported that PdV in 2018 replaced the minority stakeholders in 11 obscure and largely dormant ventures.

The ministry specified five of the overhauled ventures as PetroCumarebo, Baripetrol, PetroOritupano, PetroGuarico and PetroUrdaneta, which produced only a combined 2,340 b/d at the end of 2018 compared with 7,300 b/d in 2017, the government says.

The changes were not communicated to the opposition-controlled National Assembly, which has a constitutional mandate to approve all oil joint ventures.

Venezuela's oil production has rebounded in recent months, reaching an average of 770,000 b/d in November, up from 650,000 b/d in September, according to Argus estimates. A further uptick is expected in the December average.