Wednesday, April 26, 2006

The death of Venezuelan oil industry has been greatly exaggerated 

To listen to the Venezuelan opposition all the oil companies were going to high-tail it out of Venezuela now that those dastardly Chavistas have forced them into more equitable contracts. Maybe they would maintain their current investments, the thinking went, but they certainly wouldn't be engaging in any new activities in Venezuela. Apparently our opposition friends were wrong yet again:

By Peter Millard Of Dow Jones Newswires
CARACAS (MarketWatch) -- Venezuela's oil fields are seeing an increase in drilling activity as record oil revenues find their way back into everyday operations, according to oil executives and industry reports.
Venezuela has had difficulties maintaining oil production levels in recent years due to a lack of trained staff following a 2003 management purge and the diversion of oil money into social programs, but the tide appears to be turning.
"For the past two years we have been increasing investments in Venezuela," said Hatem Soliman, the head of Schlumberger Ltd.'s (SLB) operations for Venezuela and the Caribbean.
Soliman, speaking to reporters at an industry event this week, said all nine of Schlumberger's Venezuelan rigs are operational, and the company could bring in additional rigs if new opportunities arise.
Schlumberger is not alone. According to a March rig count by Baker Hughes, a competing oil services company, Venezuela had a total of 81 drilling rigs in operation, up two from the previous month and up 15 from March of 2005.
And more rigs are on their way. Ensco (ESV) is scheduled to move an offshore rig from the Gulf of Mexico to ConocoPhillips' (COP) Corocoro field off of Venezuela's eastern coast in May. The platform for the site is already in place, state-owned oil giant Petroleos de Venezuela, or PdVSA (PVZ.YY), has said.
Royal Dutch Shell Plc. (RDSB.LN) will resume drilling at its Urdaneta West field in July with a Maersk rig. Oil firms that underwent an overhaul of conventional oil field contracts signed in the 1990s suspended drilling operations last year amid tough negotiations. Now that a new business model is set up with PdVSA holding majority ownership - which is the case with Shell's Urdaneta field - companies are ready to invest again.
Schlumberger's Soliman said he was working with "all of the mixed companies" on investment plans, referring to the new business model for the PdVSA-dominated oil fields. The new mixed companies pump around a fifth of Venezuela's total oil production, estimated at around 2.6 million barrels a day. [this is a bogus number, see here. If even the dumbasses at the CIA can figure it out you would think the Dow Jones reporters could too! - OW]
Activity will also increase in natural gas drilling. Norway's Statoil ASA (STO) hopes to have a Transocean rig drilling in the offshore Delatana natural gas deposits this year.

Interesting. They are paying higher taxes and higher royalties and they have had to surrender operational control to Venezuela. Yet they keep investing. I guess they must still be making money. Thank god. I was so concerned about companies like Shell and Chevron not making any money on their Venezuelan operations I almost couldn't sleep at night.

Anyways, its good to know the rumors of Venezuela's oil industry dying have been greatly exagerated.


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