SCHLUMBERGER WON IN VENEZUELA
WSJ wrote, 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 Petróleos 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 Baker 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.
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