(Adds comments, details)
By Alexandra Ulmer, Marianna Parraga and Girish Gupta
CARACAS/HOUSTON, Sept 21 Venezuela's state oil
company PDVSA said on Wednesday it has awarded $3.2 billion in
contracts to drill wells in the Orinoco Belt, although sources
close to the matter said some foreign partners had complaints
the tender was rushed and there were structural problems that
could hinder projects.
The fresh discontent comes after Reuters reported in July
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. (reut.rs/2aqQFyr)
In a rare rebellion, foreign companies protested to PDVSA
that Trenaco was vastly underqualified, leading to the
cancellation of the $4.5 billion deal amid concerns about
transparency and political favoritism.
In a similar tender renewed this year, Schlumberger NV
, Oklahoma-based Horizontal Well Drillers and Venezuelan
contractor Y&V won contracts to drill a total of 480 wells at
three joint ventures between PDVSA and foreign
The projects are designed to add 250,000 barrels per day
(bpd) in 30 months, PDVSA said, as the crisis-hit OPEC country's
production slips due to low investment, maintenance problems,
limited diluent imports, theft, and a brain drain.
"Investment amounts to $3.2 billion, which demonstrates the
strength of PDVSA and shows trust in the national oil company,"
PDVSA said in a statement.
But some of PDVSA's foreign partners are questioning or
outright protesting over how the deals were conducted, according
to interviews with half a dozen sources at foreign oil companies
and service firms.
"We're going to fight this," said a source at a foreign
The sources declined to be identified to avoid compromising
business in Venezuela. PDVSA did not respond to a request for
comment about the complaints.
Sources said PDVSA failed to provide enough details on the
contracts, which in some cases were only approved by PDVSA's
simple majority in the joint ventures.
Hurt by low oil prices and a steep recession at home, PDVSA
asked bidders to provide financing themselves and be repaid in
future oil production, according to PDVSA documents seen by
Reuters, but the winners include relatively small service
Some of the foreign partners also deemed the cost per well,
at around $6.5 million dollars, too high, sources said.
Other sources questioned why PDVSA would boost extra-heavy
crude output when it does not have sufficient blending
components or infrastructure to turn tar-like Orinoco oil into
lighter crude that can be easily sold on global markets.
PDVSA's cash-flow problems have at times left it unable to
pay for sufficient diluent.
The joint ventures' early production for this is expected to
come online for mid-2017.
After the Trenaco episode caused friction with partners,
PDVSA revived the sunk deal but separated it into six four-year
contracts of around 100 wells each.
Schlumberger and Y&V won the two contracts to drill some 200
wells at the Petrovictoria joint venture, where Russia's Rosneft
has a 40 percent stake, one source said.
A separate source said Schlumberger, the world's largest oil
services company, has scaled back Venezuelan operations because
PDVSA owes it money, and is securing external financing for the
In an e-mail to Reuters, Schlumberger confirmed the deal to
construct 80 wells, adding "the details for the commercial terms
including the collections assurance mechanism are still under
Horizontal Well Drillers won some $1.29 billion worth of
contracts to drill 191 wells at Petroindependencia, whose
minority partners include Chevron Corp, Venezuela's
Suelopetrol, and Japanese companies Mitsubishi Corp
and Inpex Corp, a PDVSA document shows.
Horizontal Well Drillers has a 48-month credit line from
Canada's Callidus Capital for $350 million to finance the
project, the document shows.
Callidus Capital, which describes itself as offering
"creative funding solutions to companies that cannot access
traditional lending sources," did not respond to an email
In an email to Reuters, Horizontal Well Drillers said it won
the contract "in large part because the shallow Venezuelan
formations are ideally suited for the company's rigs."
Y&V won one contract worth $647 million to drill 100 wells
at Petrocarabobo, which includes Spain's Repsol SA and
India's ONGC Videsh, a separate PDVSA document shows.
PDVSA's joint venture partners did not respond to requests
The contractors "will have the support and operational
expertise of Halliburton and Baker Hughes for specific project
activities; 18 drilling rigs will be available," PDVSA added in
The second of two contracts at Petrocarabobo was not awarded
because no valid bid was received, two sources said.
Y&V has secured a credit line from commodities trader Burj
Petroleum Corporation for up to $250 million, according to the
Burj Petroleum, a crude and products trading company, did
not respond to a request for comment.
(Reporting by Alexandra Ulmer and Girish Gupta in Caracas and
Marianna Parraga in Houston; Editing by Brian Ellsworth,
Meredith Mazzilli and David Gregorio)