Repsol does not want to leave Venezuela. It expects to continue operations there for at least 20 more years. That is the phrase that company Chairman Antonio Brufau has been repeating, despite the fact that production at its joint venture with PDVSA averaged just 50,000 barrels per day in 2019. According to its most recent results.
The disappointing results in Venezuela do not reflect Repsol’s performance worldwide. The company’s global production reached 709,000 barrels of oil equivalent per day in 2019, in line with the 715,000 barrels produced in 2018.
This year, it added barrels from the Marcellus (United States), Duvernay (Canada), and Akacias (Colombia) fields. In addition to the acquisition of Mikkel (Norway) and Equinor’s share in Eagle Ford (United States). It also began production at the Buckskin field, in the Gulf of Mexico. With this, it has been able to compensate for the output disruptions in Libya.
La guerra de precios del crudo entre potencias petroleras reduce drásticamente el margen financiero de Venezuela, un miembro de OPEP en crisis por las sanciones de EE.UU. y un menor bombeo, justo cuando enfrenta la pandemia del Covid-19 https://t.co/mOVrbWX2wM (Vía @ReutersVzla) pic.twitter.com/GxCdUyDqvh
— Ecoanalítica (@ecoanalitica) April 6, 2020
By late 2018, the 8 blocks operated by Repsol in Venezuela had a total production of 62,059 barrels of oil equivalent, down from 2017, when it reached 77,054 barrels. Stockpiles averaged 514 million barrels of oil equivalent.
The production decline adds to the complex sociopolitical landscape and U.S. sanctions. But even so, there are reasons to continue operations in Venezuela: Repsol does not want out from the world’s largest crude reserve.
El mayor productor de petróleo de #Rusia, Rosneft, anunció la culminación de sus operaciones en #Venezuela y la venta de sus activos relacionados con el país suramericano a una empresa rusa de propiedad estatal.
Más detalles en este artículo:https://t.co/p8JOHQi7DN
— Cambio16 (@Cambio16) March 29, 2020
The Spanish company first arrived in Venezuela with great ambitions in 1993, right as the country began its oil opening process. Between 2006 and 2007, it became one of the first oil companies to accept the rules of the game, migrating its operating agreement with the Venezuelan state to mixed companies, which increased the royalties’ tax burden, as well as the income tax.
In 2005, Repsol controlled the Cardón IV block, part of the Rafael Urdaneta project, in a 50/50 consortium with Italian ENI. The well, drilled in 2011 and called Perla IX, was the largest gas discovery for both the country and the company. The field’s proved reserves amount to nearly 17 trillion cubic feet.
Currently, production at the Perla field stands at 534 million cubic feet per day (mmpcd). If the initial plans had continued, gas extraction could be at around 1,200 mmpcd and it would be maintained until the end of the contract in 2036.
Repsol also holds a 40% share in mixed company Petroquirique (with three blocks, all in force until 2031); 11% in Petrocarabobo until 2035; and a 60% share in Quiriche Gas until 2027. Finally, it owns a 15% share of Yucal Placer, a non-associated gas license.
With a view on the U.S.
The sanctions endanger not only Repsol’s businesses in Venezuela. Executive orders authorize Washington to ban U.S. operations of companies that violate the sanctions. The Spanish company produces 113,539 barrels per day in U.S. territory. This includes the Marcellus Shale, one of the world’s largest gas fields.
Repsol’s directive took risk-reducing measures, adopting changes to decrease equity exposure in Venezuela; which it reduced from €1.4 billion in 2017 to a little over €350 million in late 2019.
An uncertain future in Venezuela
Beyond Repsol’s presence, the oil scenario in Venezuela reveals a bleak picture. Local consulting firm Ecoanalítica once again revised down its 2020 forecast and estimates exports will be around 380,000 barrels per day.
#LaFraseEcoanalitica @palmapedroa: El precio promedio de la cesta petrolera venezolana en la semana del #30Mar al #3Abr fue $ 13,74, una reducción de $ 2,18 (-13,7%) con respecto a la semana pasada. Ese precio es menor que el promedio de 1971, expresándolo en dólares de ese año. pic.twitter.com/mpLhdCKN9K
— Ecoanalítica (@ecoanalitica) April 6, 2020
Rosneft’s recent exit from Venezuela and Chevron’s need to receive a license from the Department of the Treasury every three months in order to continue its operations in the country constitute a serious threat for oil activities in Venezuela, one of the oil producing nations that is most vulnerable to low oil prices: its production cost exceeds $18 per barrel, while its crude basket is valued at $17.
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