Venezuela's state oil company PDVSA said on Sept. 21 it has awarded $3.2 billion in contracts to drill wells in the Orinoco Belt, although some foreign partners are uncomfortable with the rushed tender and structural problems that could hinder the projects, according to sources close to the matter.
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.
In a rare rebellion, foreign oil companies protested to PDVSA that Trenaco was vastly underqualified, leading to the cancelation of the $4.5 billion deal amid concerns about transparency and political favoritism.
This time around, Schlumberger Ltd. (NYSE: SLB), Okla.-based contractor Horizontal Well Drillers and Venezuelan contractor Y&V won contracts to service three joint ventures (JV) between PDVSA and foreign partners, PDVSA said.
The major projects are designed to add some 250,000 barrels per day within 30 months, the Caracas-based company said, as the OPEC country's production skids due to low investment, maintenance problems, limited diluent imports, theft and a brain drain.
Some foreign partners at the JVs are questioning or outright protesting the deal, arguing that PDVSA rushed the tender and failed to provide enough details on the contracts, 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 company.
The partners have doubts about the fine print of the project's funding, as cash-strapped PDVSA requested bidders finance their own projects, and worries over it being too pricey, sources and PDVSA documents show.
On the structural front, foreign partners are also concerned because Venezuela has not resolved problems like paltry imports of diluent, needed to turn Venezuela's extra-heavy crude into an exportable blend, and bottlenecks, which could offset any increases in production in the Orinoco.
The sources declined to be identified to avoid compromising business in Venezuela. Caracas-based PDVSA did not respond to a request for comment about foreign partners' complaints.