Venezuela renews drilling tender after earlier collapse - sources
Photo: Girish Gupta

Venezuela renews drilling tender after earlier collapse - sources

Girish Gupta, Alexandra Ulmer and Marianna Párraga
Reuters | Aug. 26, 2016 | Caracas, Venezuela

Venezuela's state oil company, PDVSA, has relaunched a large tender for the drilling of 600 oil wells in the world's largest crude reserves, sources with knowledge of the tender said this week, after a similar project collapsed last year amid concerns about transparency and political favoritism.

Reuters reported last month that tiny Colombian trucking firm Trenaco, whose management was close to Venezuelan President Nicolas Maduro, won a multibillion-dollar contract to carry out similar work despite having no relevant experience.

In a rare rebellion, foreign oil companies protested to PDVSA that Trenaco was vastly underqualified, leading to the cancellation of the $4.5 billion deal.

PDVSA has now revived a similar project but split it into six separate contracts of 100 wells each, three sources with knowledge of the tender told Reuters. The sources spoke on condition of anonymity because they did not want to jeopardize future business.

Three Orinoco Belt joint ventures - companies that are majority-owned by PDVSA with minority stakes held by foreign and local partners - are each offering two contracts for 100 wells each.

The joint ventures are Petrovictoria, which includes Russia's Rosneft; Petrocarabobo, which includes Spain's Repsol SA and India's ONGC Videsh; and Petroindependencia, which includes Chevron Corp, Venezuela's Suelopetrol, and Japanese companies Mitsubishi Corp and Inpex Corp.

Caracas-based PDVSA did not respond to a request for comment.

Five different oil services companies - one Venezuelan and four foreign - have submitted offers so far but PDVSA has not made a decision about awarding the contracts, according to one source. The state-run firm is asking potential providers to fully finance their projects.

Global oil services company Schlumberger NV, which has scaled back operations in Venezuela amid major payment delays, has submitted an offer to build 100 wells in Petrovictoria, according to one source.

The company said it could not discuss projects. Horizontal Well Drillers, an Oklahoma-based contractor specializing in drilling oil and gas wells in the United States and Mexico, has presented an offer, according to a representative.

It is unclear when a decision will be made. Meanwhile, Venezuela's crude output is on track this year to suffer its steepest decline in 14 years after a long period of underinvestment and low crude prices.

The Reuters investigation of the initial tender process found that Trenaco had access to details of the project months before it was publicly tendered. Trenaco had also planned to outsource much of the work to more qualified firms.

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Trenaco sources said the company was run by Colombian businessman Alex Saab, who they said was close to top figures in Maduro's government. Saab denied having ever been an employee or shareholder of the firm.

Shortly after the story's publication on July 26, PDVSA President Eulogio Del Pino said PDVSA had canceled the Trenaco deal after it realized the company was not capable of handling such a large project.

Cash-strapped PDVSA has suffered a slip in production due to maintenance problems, an energy squeeze, lower imports, theft and a brain drain. It has increasingly asked foreign companies to foot the bill for projects or operations.

But Venezuela is mired in a major economic crisis that has prompted mobs to loot supermarkets as inflation spirals into triple digits. Investing in the country, a member of the Organization of the Petroleum Exporting Countries, is viewed as risky.

PDVSA has accrued billions of dollars in debts to contractors. Payments to oil services companies have also been delayed, leading Halliburton Co, Schlumberger and other companies to scale back operations in Venezuela.

Reporting by Marianna Parraga in Houston and Girish Gupta and Alexandra Ulmer in Caracas. Editing by Mike Williams and Matthew Lewis.