Schlumberger Wins Part of $3.2 Billion Drilling Project in Venezuela
September 21 2016 - 7:20PM
Dow Jones News
CARACAS, Venezuela—Schlumberger Ltd, the world's largest oil
driller by market value, said Wednesday it has won a large project
in Venezuela, just months after the company shut down some
operations and fired hundreds of workers because of payment delays
from the government.
The Houston-based company will drill 80 wells in an extra-heavy
oil field in the Orinoco Belt, said company spokesman Joao Felix.
Terms of the deal, which are still being negotiated, will ensure
payment from the government.
Schlumberger was the only large publicly traded company among
the three winners of a drilling tender for 480 Orinoco Belt wells,
which were announced by state-run Petró leos de Venezuela SA
earlier Wednesday. PdVSA, as the Venezuelan oil firm is also known,
said the project is worth some $3.2 billion.
The tender, which PdVSA calls "one of the world's largest
drilling projects," aims to halt an accelerating output decline
hammering Latin America's largest oil exporter. It comes as
Venezuela is going through rising social and political turmoil amid
severe food and medicine shortages.
The country's crude output fell 12% in the 12 months to August
to 2.3 million barrels a day, according to PdVSA, as drillers
halted work because of unpaid bills, while aging infrastructure
crumbled.
PdVSA said the drilling campaign will add 250,000 barrels a day
of output by early 2019. The tender is part of an operational and
financial overhaul, which includes an ambitious plan to roll over
some $7 billion in debt, said a company spokesman.
The new Orinoco project is an about-turn for Schlumberger, which
has spent the year warning investors of a "large-scale cutback" in
Venezuela due to worsening payment delays by PdVSA. The company has
written off more than $500 million in Venezuelan assets since 2014,
as the local currency depreciated sharply.
In June, Schlumberger stopped work at three rigs in the Northern
Monagas Basin before completing scheduled wells and fired around
150 workers, according to the national oil union and workers.
Hundreds more workers were fired and projects were abandoned across
the country earlier in the year.
The Schlumberger managers "gathered us and said they won't work
with PdVSA again because it doesn't pay," said Alejandro Barreto,
57, who was dismissed in Monagas state after 14 years in the
company.
Byron Pope, managing director of oil service research at Tudor,
Pickering, Holt & Co., said Schlumberger is taking the long
view on Venezuela, a country where it has worked for decades and
where it still sees strategic potential despite recent
problems.
"They've made clear to PdVSA that they're not going to work
indefinitely if they don't get paid," Mr. Pope said. "I think one
of the ways they were effective in getting the message to PdVSA was
in terms of starting to pull some resources and people out of the
country."
Mr. Felix, Schlumberger´ s spokesman, said the 80 new wells will
be drilled in the PetroVictoria joint venture run by PdVSA with
Russia's OAO Rosneft. Oil service industry executives and managers
in Venezuela have said that foreign drillers are abandoning
wholly-owned PdVSA projects in favor of joint ventures, as
international producers have better chances to meet payments.
The remaining 400 tendered wells will be roughly equally split
by the privately held, Oklahoma-based company Horizontal Well
Drillers, also known as HWD, and local engineering firm Y&V,
according to PdVSA.
HWD will use Halliburton Co.'s equipment, while Y&V will be
backed by Backer Hughes Inc., the PdVSA spokesman said. HWD lacks
heavy oil drilling experience and Y&V hasn't done any drilling,
according to the projects roster on the companies' website and
local industry executives.
HWD said in a statement that it has extensive experience and a
track record for the job. Y&V didn't respond to a request for
comment.
Halliburton and Baker Hughes declined to comment.
Erin Ailworth contributed to this article.
Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com
(END) Dow Jones Newswires
September 21, 2016 19:05 ET (23:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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