More than half a year after the U.S. captured and extracted Nicolas Maduro from Venezuela, ExxonMobil and ConocoPhillips still haven't returned to the country's oilfields. Smaller U.S. players are moving faster, even as a new $2 billion ownership dispute exposes the risks of operating in Venezuela.
Chevron, which kept operating in Venezuela throughout Maduro's rule, continues extracting and exporting oil to the United States. But neither Exxon nor ConocoPhillips has come back, because negotiations led by state oil firm PDVSA are not progressing as fast as the U.S. administration probably thought in January, when it hailed a big U.S. return to the country's oil industry.
Smaller players sign where majors hesitate
Service providers and smaller American oil companies have moved first. Earlier this month, Venezuela signed deals with oilfield-services major SLB and Hunt Oil Co. to boost investment in its energy industry, according to oil minister Paula Henao. The SLB agreement follows earlier reports of a long-term deal to reverse a major decline in production and modernize the country's oil sector.
Hunt Oil said it was one of the first American companies to sign with PDVSA to help expand Venezuela's oil and gas output. Exxon and ConocoPhillips, by contrast, are taking their time.
Majors want better terms and more stability
Talks between the majors and PDVSA reportedly hit a snag in recent weeks. The Wall Street Journal reported at the end of July that U.S. firms are seeking the most lucrative fiscal terms for prized acreage in the Orinoco Belt, while PDVSA isn't in a position to guarantee political and fiscal stability going forward.
California-based Pacific Coast Energy, backed by European investors, is also pursuing a piece of Venezuela's oil industry. The company has raised $800 million in equity, debt, and trade finance to fund initial operations and is finalizing an agreement with PDVSA and the government under acting president Delcy Rodríguez.
A nationalization dispute complicates the return
Pacific Coast's deal has hit its own hurdle. The heirs of Oswaldo Cisneros, whose family built Venezuela's biggest business dynasty, are contesting ownership of some of the oilfields Pacific Coast is negotiating for. The Cisneroses claim $2 billion in losses after the government stripped their vehicle company, DP Delta Finance BV, of assets and operational control through what they call an arbitrary sanctioning process.
Disputes like this are exactly what Big Oil has faced through decades of nationalizations in Venezuela, and exactly what the majors want to avoid as they weigh a return to the country holding the world's largest oil reserves.
Source: Oilprice.com
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