Chavez: PDVSA should substitute foreign oil service companies

CARACAS
Petroleumworld.com, Mar 26, 2009

Venezuela President Hugo Chavez told Venezuelan oil company PDVSA Wednesday, to substitute the foreign oil service contractors.

"PDVSA continues to hire foreign service companies, privately owned companies. We need to create substitute companies," Chavez said on television.

The populist president insisted that if foreign service companies are that necessary let's get our own community-run oil service outfits to do it. And if importing additional oil industry equipment and training personnel becomes necessary to community-run oil service firms, he will support that.

The president's comments come at a time when a wave of pay-related protests by workers of oil services companies have hit PDVSA and thousands of oil workers are demanding new collective contracts. It could hit very seriously PDVSA productivity if they strike, or stop their services.

PDVSA's lack of cash money to paid for services it contracted last quarter, have come down to the point of some firms have stop working in response to the state-owned company's lack of payment. Tumbling oil prices are biting in PDVSA's depleting coffers.

Oil prices fell Wednesday as US crude reserves surged, indicating weak demand in the world's biggest energy consumer.

New York's main futures contract, light sweet crude for May, fell 1.22 dollars from the closing price on Tuesday to 52.77 dollars a barrel.

Venezuela's average price as of last Friday for this year on its crude basket is just $43.51.

In London trade, Brent North Sea crude for delivery in May slid 1.75 dollars to 51.75 dollars a barrel.

Sources in the industry have told Petroleumworld, PDVSA it is skipping payments to partners and service providers as weaker oil prices and heavy government social spending have cut its finances.

However, PDVSA said this week, that has now started a program to pay all outstanding debts while negotiating with contractors a better service rate in the name of low prices.

Helmerich & Payne Inc has idled four rigs in Venezuela so far this year due to lack of payment from PDVSA and expects all 11 rigs contracted by the state oil company to be idled by this summer, if payment is not forthcoming, the U.S. company's CEO told an investor conference on Monday.

About 50 services companies are now negotiating new contracts before they get paid, Rafael Ramirez, Oil Minister and PDVSA ' president said last week.

Some companies like Schlumberger have already agree with PDVSA to form Joint Ventures.

“We have a memorandum with Schlumberger to form a joint venture,” Ramirez said last in an interview in Vienna. PDVSA's unpaid invoices to Houston-based Schlumberger are “not a big problem,” he added.

Debts outstanding to Schlumberger and Halliburton Co. were a combined $800 million, Dow Jones Newswires reported on Jan. 16.

PDVSA is the making money machine of President Hugo Chavez's drive to bring is Bolivarian Socialist Revolution to the South American nation.

Oil output in Venezuela, a member of the Organization of Petroleum Exporting Countries, has dropped 31 percent since 2001 because of cuts in OPEC quotas.

Venezuela tried but failed to have the 12-member OPEC lower its output to put up prices at their Last meeting this month. The organization decide to keep the same quotas and crack down on member to comply with the establish production .

Venezuela said it produces 3.2 million barrels a day of oil. But according to OPEC and other international institutional sources and a Bloomberg News survey of oil companies and analysts, output has fallen to 2.15 million barrels daily.

Story by Elio Ohep, Petroleumworld Editor; +58-212 635-72532; editor@petroleumworld.com , Caracas.

Petroleumworld 03/26/2009 12:39