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By Kevin Crowley
Venezuelan officials were in full sales mode when they visited Texas this week, negotiating deals with oil-hungry American executives.
“We’re in the right place in this historic moment,” said Jovanny Martinez, vice president of state-owned Petroleos de Venezuela SA, at an event in Houston yesterday. The country is focused on “clear-cut” participation contracts with foreign companies, he said.
The push to bring US oil companies back to Venezuela is beginning to show signs of momentum. Oilfield-service giant SLB Ltd. and independent producer Hunt Oil Co. signed contracts with the Venezuelan government, while several others including Pacific Coast Energy Co. have recently indicated they’re close to putting pen to paper.
But details are scarce, and the process is opaque. There’s no competitive bidding, and companies are negotiating on a bilateral basis with the Venezuelan government. Key questions remain over how the contracts will be written and what bodies will govern their enforcement in the case of a dispute.
For the next round of oil concessions, Venezuela should consider a process that is “done in a published manner” on a fixed time schedule and following a “set criteria,” said Danny Jimenez, managing partner of Selten Group, an investment firm.
For now, this does not appear to be putting off US investors, many of whom made their money in shale.
“For us, it just screened as you can’t find a better situation,” said Blake London, who founded Formentera Partners with Texas oilman Bryan Sheffield. “US inventory is going away, other international exploration has dwindled, the majors are not focused. It’s kind of just the perfect time, perfect place as we see it for the Venezuela oil and gas opportunity.”
While that gives the country an opening, it may take more to keep momentum going. The shale boom that began in the US in the late 2000s was underpinned by a predictable legal and regulatory environment, with clear rules around taxes, royalties and access to acreage.
Venezuela has rarely offered investors that kind of certainty, and may want to take note of that success.
“With exception of a few brief periods, Venezuela and its investors in the oil and gas industry have been at odds almost for a century,” said Carlos Bellorin, executive vice president of Welligence Energy Analytics. “This may be our last shot.”
—Kevin Crowley, Bloomberg News
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